The aftermath of Brexit and the midst of a global pandemic may seem an odd time to be talking about philanthropy, yet the UK has a golden opportunity to position itself as the leading global centre for philanthropy and global investment.
Our Beacon Collaborative report published today, “The UK as a Centre of Excellence for International Philanthropists and Social Investors”, examines the UK’s strengths and argues that it can do even better to increase its share of an estimated £180 billion global opportunity.
By welcoming international philanthropists who are seeking positive social impact, the UK can enhance its positioning as a world-leading centre for progressive global finance and wealth management.
It can send a powerful signal to the world about the UK’s commitment to responsible global leadership. And, it can create an enabling environment for philanthropy that will benefit our home market too, encouraging more and better giving to our charity sector, as well as boosting the City’s professional services advice.
Brexit has caused a reappraisal of the UK’s international standing. The coming years will see a repositioning with a focus on global competitiveness and future trading partnerships.
The sense that this is a watershed moment has been compounded by Covid. International philanthropists have contributed to relief and recovery efforts. The crisis has highlighted the need for joined-up working and a global response to cross-border challenges.
Our report makes nine recommendations aimed at government, the Charity Commission, professional services and the philanthropy sector, based on the pillars: enable, invest and promote. First and foremost is the call for an equivalency regime, whereby philanthropists would receive the same tax advantages donating to foreign charities as they do UK ones.
As things stand, the Finance Act of 2010 gives these advantages to charities in many European jurisdictions, but post-Brexit we can apply this globally. An equivalency regime would assure that overseas gifts have a public benefit and the money is used wisely, responsibly and with accountability. The US already has such a provision.
There are also elements of the UK’s current tax system which offer an opportunity to encourage responsible global citizens to base their business, investment and philanthropy here. Both Gift Aid and Social Investment Tax Relief (SITR) are world-leading incentives, but they are not widely understood.
The latter offers an opportunity for the UK to attract progressive social impact investors, a growing market. The report also suggests that the Charity Commission and HMRC could play a greater role providing greater clarity and dedicated support to international philanthropists and their advisers.
Match funding partnerships is another area which could be used, whether aligned with foreign aid or areas like health and education. In 2008 the government rolled out a match funding scheme in the UK’s higher education sector that garnered £580 million from donors in England alone.
International philanthropists already make substantial gifts to UK academic and cultural institutions and match funding could encourage much more. Genuine partnership with government in areas of mutual interest is an appealing prospect for many international philanthropists.
To lobby for and champion for the various measures in the report, we advocate a Philanthropy Commissioner, who would act as the focal point for this activity within government. This could be complemented by an International Philanthropy and Social Investment Council, comparable to the five Business Councils advising on post-Brexit plans.
In advocating these measures, the UK starts from a strong position. The UK is already an attractive place for international donors. Notwithstanding Brexit, it is seen as a global and fair-minded strategic power. It has a benign and broadly consistent political environment and is seen as having a strong rule of law.
The UK is viewed as soft power “superpower.”
The Portland Soft Power Index in 2019 showed the UK in second place, behind France, having come top in the previous year. Institutions such as the BBC, the British Council and the monarchy have global reach, as do things like the Premier League and our film, TV and music.
Whilst the UK has many appealing attributes to the foreign HNWs, the scale of global philanthropy is also on the rise.
A staggering 72 per cent of the world’s 260,000 foundations have been established in the last 25 years.
The assets of those on the radar have been estimated in excess of $1.5 trillion and total annual expenditure has been estimated at $150 billion. Accounting for those not on the radar, expenditure could be as high as $250 billion, or £180 billion.
Wealth is transferring to younger generations, who tend to be animated by causes such as climate change and social justice.
Of the $68 trillion passing to the next generation in the next 25 years, it is thought that as much as $6.3 trillion could go to charities. The philanthropy pie is most certainly getting bigger and the UK can claim a larger slice.
The UK faces fierce competition from other countries, which aim to be a magnet for international philanthropy. In the US, there is a deep-rooted philanthropic tradition, which generates huge volumes of charitable giving.
Philanthropy is well supported, but legislation, tax policy and regulation are based on the assumption that philanthropic activity will be domestically focused, which means a mixed landscape for the prospective foreign donor.
Meanwhile, Switzerland has a well-developed capability for international philanthropists and social investors. This is reflected by the rise of Geneva in recent years as a global hub for sustainable finance.
International philanthropy is on the rise. Philanthropists want to set up their giving structures in places that are well governed and enable them to give to the place and causes they care about.
The UK has a lot going for it, but with some policy changes and other measures, it can lift its game. The City will end up wealthier as a result, as more international philanthropy will require lawyers, accountants and wealth management advisers, which we excel at.
The government rolled out the powerful “Great Campaign” to promote the UK overseas. The time now is ripe to exclaim that “Philanthropy is Great.”