Can charities learn from online innovation when it comes to raising money?

We’ve become so used to charities being funded through Government grants that we are in danger, now the Government has closed off streams of funding, of ignoring their demise. If we value these organisations and the work they do then perhaps we need to look at innovative ways of funding them?

Last month the Poppy Project, a charity which pioneered  specialist support services for the victims of sex trafficking, found out that the Government was immediately cutting its funding. It is now faced with a need of £450,000 in donations by the end of June to continue. TimeBank, on the face of it an excellent example of David Cameron’s vision of the Big Society, faced a similar situation when it found the Government cutting a quarter of its funding by refusing a £500k Office of Civil Society grant.

With hundreds of charities facing the same grim reality it is becoming increasingly important for charities to find better ways of raising money and showing that they are valuable enough to merit attention. Big Society in Austerity Britain seems to mean a begging-bowl dependent Third Sector.

The obvious stumbling block is that in most cases charities aren’t able to ‘sell’ what they do to the people who benefit from what they do – frequently their ‘customers’ have no hope of affording these services. This either leaves charities having to cultivate philanthropic supporters with deep pockets (who are few and far between… The most wealthy 10% account for about half of all individual giving in the USA; in Britain it is only a fifth) or fundraising through the public. [There's an interesting table, table 4 on page 9, of this Charity Commission report which looks at just how important different forms of funding are to different sized charities.]

Justgiving (though it is worth mentioning that Virgin Money Giving doesn’t take a commission) is a typical experience for those seeking to raise or donate to charity. People tend to ask their friends and associates to pledge money to their favourite charity in return for them doing something – running some sort of race, jumping out of an aeroplane or dyeing their body magenta. Hopefully people realise their fundraising targets and charities are suitably grateful. But, a controversial view perhaps,  are we learning to care less about the charities and their work, and focus more on the fun and exciting challenges we get to take part in to support them?

But is there a better way to achieve the same aim of raising money and raise interest in charity projects?

I happened to read this article from the Harvard Business Review on pay-what-you-want experiments online, some people will remember the less successful experiments:

• Steven King’s aborted attempt to get people to pay for his book, The Plant, chapter by chapter – it was never finished; and
• Radiohead fans will remember the band’s attempt at ‘honesty box’ music distribution with the digital album In Rainbows – people paid on average £2.60 per album.

Of course the failures are easier to remember than the successes,  but Prof Gans highlighting of Kickstarter should make UK charities think seriously about what they can learn from online innovations in money raising.  These tech start ups are embracing the sort of democratic low-value, large-base crowd source fundraising that political campaigning, like Obama’s 2008 campaign, has taken on and showing a more business/value ingenuity.

Crucially they don’t depend on Mr Cameron’s largesse.

What is THE alternative?

Tomorrow, tens of thousands of people will descend on London to “March for the Alternative” – an anti-cuts demonstration organised by the TUC, but which is likely to draw broad support amongst the left.

In my mind, the name of the event – “March for the Alternative” – encapsulates two strategic issues for the left when opposing the cuts.

1. What is THE alternative? Does it even exist?

I’d wager that there will be a multitude of different reasons for people attending the march – they are a public sector worker facing redundancy, their local library is being closed, an elderly relative is seeing their care reduced.

And it is entirely rational for these individuals to oppose cuts in government spending for these personal reasons.

But as Arrow’s Impossibility Theorem implies, you are unlikely to achieve a coherent macro-policy simply by aggregating individual preferences – if you agree that government spending will need to be reduced, then at some point you will have to make choices as to how this is achieved.

So I don’t agree there is one alternative – THE alternative. March for AN alternative might have been a better slogan.

This isn’t a trivial point, and links to a potentially more significant issue for the left and Labour in particular in opposing the government.

2. Focusing on THE (or AN) alternative is a strategic error.

By defining clearly what you stand for, you take the focus off what you are against. Opposition should, by definition, be primarily about opposition.

But if Labour pretends to be in government* by setting out specific alternatives, rather than general guiding principles, it will become a hostage to fortune; a lot will change between now and 2015.

*Something Ed Balls is more than a little guilty of. For example, in yesterday’s Commons debates he said:

“Under Labour’s plan, the economy was set to grow strongly, unemployment was falling, and we were on track to halve the deficit in four years.”

But Labour lost an election on their plan. So it’s probably time to reflect on alternatives, while opposing the only plan being implemented – the government’s.

Alex Baker is Secretary of the Young Fabians.

What is government for?

This isn’t a glib question. Or the start of some quest for anarchy. Rather, it strikes me that this is the one question which is absent from much of the noise about deficits and cuts and economic policies.

Politicos claim the state is either too big or not doing enough, too powerful or not powerful enough, and that is either a good thing or a bad thing (or you’re indifferent), depending on your tribe. Cuts are either good because they reduce the deficit or the amount of tax payable, or they are bad because some people use the services or it will affect employment.

Economists aren’t much better. Theorists either claim that the only way to stave off impoverishment the likes of which we’ve never seen before is to engage in a slash-and-burn fiscal policy, or they claim that only way to reduce debt is to spend more, presumably on roads and infrastructure which may or may not be used.

But surely discussions around what to cut and when should be second order to a view of what government is actually for? Where intervention is desirable and necessary? And how best to implement any intervention? Economic policy should flow from this, rather than the other way round.

In some senses the role of the government is implicit in much of the discourse, but it isn’t explicit. And in any event, the cart appears before the horse.

We’re in a state where the dominant political ideology is defined by the direction of public expenditure, not about why, where or how the state intervenes. And the opposition to that ideology is just that – pure opposition to an ideology, with no tangible sense of what the government ought to do either.

In my mind this leads to some pretty perverse outcomes. For example – surveys claiming public sector workers, if made redundant, would struggle to find new employment being used as a justification to keep them on the public payroll (it’s not clear to me this is an unambiguously good thing); or cuts to existing benefits whose wider consequences seem ill-considered relative to the benefit the taxpayer derives.

Seemingly, not being able to articulate a vision for government beyond the amount it contributes to public expenditure is a problem for the right. And not being able to articulate a vision for government which justifies its contribution to public expenditure is a problem for the left.

Of course, it might be naively optimistic to hope for anything different.

Alex Baker is Secretary of the Young Fabians.

Cutting Housing Benefit is a false economy

Earlier this month, the Young Fabian Work and Families Policy Development Group looked at the issue of housing, here PDG member Catriona Hatton finds that the arguments for and against cutting housing benefit all point towards the need for more housing.

In June George Osborne announced that a new housing benefit cap would be introduced in an attempt to slash the cost of housing benefit, which has risen sharply to £19.6 billion per year from approx £11 billion in 1997. The cap places an upper limit of £400 a week on a four bedroom house and £280 for a two bedroom property in rented private sector.

In favour of the cap, there is a strong argument that leaving housing benefit uncapped increases the housing benefit bill, since landlords effectively set the rate at which the benefit is paid. If Government willingly pays housing benefit at the price set by the market, landlords have incentives to set the rents as high as possible, since raising rents will not affect the tenant’s ability to live there. The result is tax payer’s money going to the benefit of private landlords in the buy-to-let market, an upward pressure on property prices for all, and an ever increasing housing benefit bill.

However the arguments against the cap, in my opinion, far outweigh the arguments for it. The impact of the cap will have devastating consequences for recipients, particularly in London and the South East where in many places it is simply not possible to find quality housing at the rate set by the cap. In addition any future increases in the cap would be linked to consumer price inflation rather than increases in rental prices, reducing the real value of the allowance.

Importantly the social mix of the London would be drastically changed, with thousands of families being forced out of inner London, causing greater disparity in wealth between different parts of London. Overcrowding will occur and new slum areas are likely to develop, resulting in the less well off being geographically cut off from the wealthy in society.

All evidence shows that separation in this way lowers life opportunities, for instance due to inferior access to education and employment opportunities and lack of connections. In addition there would be greater pressure on schools and social services in other areas as a result of a sudden influx and overcrowding.

It is argued that the cap will increase incentives to find work. However this is unfair on recipients who are not able to work such as pensioners, people with serious disabilities, and also on those recipients who are already in work but it is too low paid for them to cover their rent fully.

The root cause of the escalation in the housing benefit bill is the under supply of affordable housing and addressing this would be the most beneficial solution. The priority should be to create more affordable homes through the building of council housing, the expansion of housing association schemes, private investment through subsidies and through the expansion of shared ownership schemes. Only when the supply of affordable homes is increased will it be unnecessary for the tax payer to subsidise high private sector rent. Unfortunately the cap will only serve to worsen the problem as waiting lists for council housing and housing association homes lengthen, and ultimately it will push people into poverty.