EQ Foundation

A Better Way to Fund Charities

Government spending on charities is highly significant for both parties but the way in which it is allocated is far from optimal. In this article we outline the potential for a more systematic and impactful approach.
  • There are over 163,000 registered charities in England & Wales, collectively spending more than £95 billion annually.
  • The ‘Value Add’ of the sector has been estimated at £17 billion annually but the true impact, allowing for factors such as volunteering and social value may be up to 12 times more.
  • Approximately 30% of charity income is provided via Government sources. However, there is very little visibility on how this money is spent and whether it represents good value for the state. Danny Kruger’s report into the sector stated: “Across government and its quangos, data is lacking, substandard, incomparable with other datasets, or simply not made available to non-government organisations working in the same field.“ At a time of severely limited public funding it is vital that the best possible use is made of this funding.
  • Kruger went on to point out that “… two negative syndromes afflict public sector commissioning: highly bureaucratic processes, and a tendency to award contracts to large corporate providers who do not necessarily offer the best work for the public but do offer the least risk for the commissioner. Lip service is paid to the need for a plural supply chain with opportunities for civil society organisations to deliver work, but in practice this rarely happens.” This is a missed opportunity. There are thousands of extremely effective small charities with passionate leadership delivering great outcomes but perpetually struggling to raise funds.
  • The first recommendation made by Kruger was for all government grants to be published by the end of 2020 to the 360Giving open source platform. We are pleased to see that some information on grants is now being published on 360Giving but the impact of these grants remains unknown. This information confirms that the lion’s share is being awarded to large charities.
    The second recommendation by Kruger was that every government department should have a DataLab similar to the one run by the MoJ. This would provide transparency on impact. We are not aware of this recommendation being implemented yet, which is unfortunate because the Justice DataLab provides a compelling example of a way forward to more effective funding as we explain below.
The Justice DataLab

The Data Lab, set up in 2014, enables researchers and organisations to access anonymised offender data collected by the UK Ministry of Justice. This data is used to evaluate the effectiveness of offender rehabilitation programs in reducing reoffending rates.

Any organisation can submit names of its beneficiaries to the service, which is free of charge. The DataLab will match each group of beneficiaries to an anonymous cohort with similar characteristics such as number of previous offences, gender and age. Results will be published as soon as the data has accumulated, which may take two years.

Interventions are assessed on three key criteria:

  • The rate of reoffending
  • The number of offences committed
  • The time after release before an offence is committed

The analysis determines whether the intervention has generated an impact and also whether that impact is statistically significant.

A blueprint for better giving

Let’s look at a hypothetical example of a charity working with a group of 100 ex-offenders that reduces the number reoffending from an expected rate of 30% to 15%. In other words, 15 additional people do not reoffend as a result of the charity’s work.

It currently costs the state over £45,000 per annum simply to keep people in prison, excluding the cost of conviction and lost tax revenue. So in this case the charity would have already saved the state over £675,000 (15 * £45,000) even if those persons went on to offend a year later. In practice many will never reoffend and so the saving is likely to be many times this amount.

If the Government paid that say, £20,000 per incremental result, that would cost only £300,000. It could be certain that it is receiving good value for money and that it would not require any additional budget! That sum paid to the charity would be a valuable addition to and diversification of their funding sources.

Since the Justice DataLab is already operational, there would be negligible additional administration cost required. Charities would simply make a claim linked to the outcomes of the DataLab report. They would then need to submit data for each year to be able to benefit from ongoing funding.
There have been several past attempts to stimulate the use of best practice to reduce reoffending rates, e.g. the Peterborough Social Impact Bond and the failed Transforming Rehabilitation scheme. The benefit of this proposal over those initiatives is that it leaves the service provider free to determine the most effective type of intervention and then rewards them based on a simple but highly relevant metric, namely the rate of reoffending. The risk attached to implementing it is low.

Other Sectors

Many types of charitable intervention are inherently difficult, in some cases impossible, to measure accurately. But there are many others where a DataLab would greatly improve the quality of data available. This would allow better decisions to be taken, both by the procurers of services and by the providers.

Some examples:

  • Education, depending on cohort:
    • Number reaching top universities
    • Number achieving GCSE pass grades in English and Maths
    • Number being excluded
  • Work
    • Number achieving regular employment
  • Healthcare
  • Reduction in NHS visits/consultations
  1. Wherever possible, government departments should be required to establish DataLabs
  2. Where possible, recipients of government funding should be compelled to submit data to the appropriate DataLab
  3. Reward payments should be made to organisations displaying positive impact (unless they had been funded in advance). There should be no additional cost to the Treasury because most of the interventions would already have achieved savings in excess of the amounts to be awarded.
Other Articles
Education News
Giving is Great scoops award for Best Philanthropic Initiative

We are extremely proud to announce that Giving is Great has won the 'Philanthropic Initiative Award' at the WealthBriefing Wealth for Good Awards ceremony in…

Carbon Offsets alone are not enough

Every day, more people and organisations are showing their recognition of the climate crisis by committing to become 'Carbon Neutral'. The first and most important…

Take-off for Green Match Fund

The EQ Foundation is proud to be a Pine Champion for the latest Green Match Fund organised by The Big Give. From April 22nd-29th all…

Running out of time to save our planet

Although the latest IPCC report has a few encouraging data points, you can't get away from the overwhelming likelihood that, barring a miracle or an…

What is the Disasters Emergency Committee?

The Disasters Emergency Committee ("DEC") is a registered UK charity that acts as an umbrella fund raising organisation for 15 large charities. It was originally…

EQ Foundation named as Money Marketing Charity Champion of the Year

We were delighted to win this award and the accompanying comments: "The judges were impressed by this submission for Charity Champion of the Year from…

Effective charities achieve 100x more impact

In all walks of life the best run organisations achieve more than those that are just average but the differences are often quite modest. Why?…

So you want to volunteer?

Helping others fulfils a deep need in our souls and usually results in a feeling of connection and self worth. There are tens of thousands…

Tythe creates Climate Action Charity Portfolio

The G7 summit in Cornwall has helped to remind us that averting catastrophic climate change is a massive challenge, requiring concerted efforts by all of…

Pros and Cons of Matched Giving

Double your donation is generally how the message goes. If you give £10 to a certain charity another party will add the same amount. Sounds…

Making charitable bequests in Wills

Many people make bequests to charities in Wills, partly because it can be highly tax efficient but to make best use of these incentives there…

Tythe launches with Environmental charity focus

Tythe is the latest initiative from the EQ Foundation - bringing a curated list of 9 highly effective Environmental charities together in one package and…

What is Effective Altruism?

In this article we explain the basics of Effective Altruism, which seeks to combine the instincts of our hearts to support charitable causes with hard…

Why we rate For Baby’s Sake

The latest addition to our list of Selected Charities is For Baby's Sake. We've been monitoring this charity for some while because it is providing…

The Big Give breaks record (again)

The 2020 Big Give Christmas Appeal was the most successful yet - raising £20.1 million, £4.5 million more than in 2019. In what has been…

Advent of Change keeps on impressing

We first met Kristina Salceanu, founder of Advent of Change, in 2018. We were immediately taken both with the genius of the concept and by…

How to become a Philanthropist

In this Blog we outline a strategy to help people who are new to philanthropy and for those who feel dissatisfied with the impact they…

How We Select Charities

There are thousands of highly effective charities in the UK and so we've tried to make the Giving is Great search engine efficient for finding…

Why we created Giving is Great

In 2018 I became increasingly frustrated that most of the organisations that we were supporting had been referred through contacts. I decided to try and…