The City must follow US and give more back

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10 April 2012

As voters tighten their financial belts and the spending cuts bite, now is the time for corporate Britain and wealthy individuals to step forward and put more back into the society and communities in which they operate and from which they make their profits.

There is a "perfect storm" of challenges driving the need for this dramatic upscaling in big business giving. The anti-corporate, anti-wealth and anti-politics sentiments permeating the public mood in the wake of the financial crisis must not be ignored in the hope that they will simply evaporate.

The stark truth right now is that many of our country's richest and most profitable companies give away only a small proportion of their wealth to charitable good causes.

Statistics show that for too many years the corporate giving curve has been relentlessly flat-lining as turnover and profitability have grown.

There are some truly unpalatable facts behind corporate giving in the UK: average donations by FTSE 100 companies continue to be less than 0.25% of profits and this has barely shifted despite the boom over the past decade. In the US, this figure is calculated at closer to 5%. And people on average incomes make up the bulk of giving to charities, with corporate giving in the UK only accounting for about 3% of total UK charity income - a figure that has hardly moved for 10 years.

In the recession, trusts and foundations have been restricted by the financial performance of their funds. But it has been gratifying to see how individual donations have held up and to some extent compensated for the shortfall in spending.

Indeed if there is a beacon of light about our society, it is that the poorest 10% of donors give approximately 3.6% of their income to charity, compared with 1.1% when it comes to the wealthiest.

With a number of honourable exceptions, the situation among corporates and the wealthy is disappointing.

The time is ripe for businesses to start improving the communities in which they operate while still delivering value for their shareholders. Companies have employees, customers and shareholders but there is a fourth stakeholder, the community.

The message to shareholders should be "we are making money out of our community and we should be putting some proportion of our wealth back to show customers we care about them and the society which we all inhabit".

Banks are down the list for charitable giving, and way behind pharmaceuticals. At a time when the Bank of England Governor is talking of this sense that banks profit unduly from their customers and don't give enough back, they must embark on a meaningful new era of philanthropy to win back some trust and respect. And companies should understand that their own philanthropic power can be significantly leveraged when aligned to the contributions of time, skills and money from their employees.

The Government's recent Giving Green Paper talked of creating a culture of giving. Well, who is going to do what to create it?

Chancellor George Osborne took some welcome steps in the recent Budget to help, but if Government is to be the facilitator, it must be more radical and move faster. There are adjustments to tax systems that would help: Gift Aid can be simplified and improved further; consideration should be given to creating a mechanism where charities can recover higher rate tax relief on donations from wealthier donors; the Government should consider extending tax relief to those who give art to charity in their lifetime - at present the relief only applies to shares or charity. And why not extend that relief to unquoted shares?

As we have seen from the acts of individual giving, the tax regime is not a major disincentive. But improvements will help and some incentives would be appropriate to encourage companies to give employees time to commit to charitable endeavours.

But a change in culture will only come by example. In the US, super-rich individuals like Warren and Bill Gates have galvanized wealthy Americans into signing up to the Giving pledge by promising to donate significant proportions of their fortunes in their lifetime to charity and good causes. That kind of leadership makes a difference.

Surely more of our top corporates who make a deliberate decision to up their game significantly in terms of charitable giving and encouraging employees to give time and money, could do the same.

It is a strong and important message - particularly at this time.

Sir Victor Blank is a UK business ambassador, chairman of Wellbeing of Women and former chairman of Lloyds Banking Group.

The City must follow US and give more back

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