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British Philanthropy is Coming of Age but Don't Expect it to Fill the Gaps Left by the State

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The dramatic emergence in recent years of the Bill and Melinda Gates Foundation, the American billionaires Giving Pledge and reduced public resources, have all contributed to propelling philanthropy into the public arena in the US and abroad.

Family Foundations - the leading source of major philanthropy - are also coming of age in the UK. The Family Foundation Giving Trends series, the annual report which I co-author (on behalf of the Pears Foundation) and produce with Prof Cathy Pharoah, documents the growing strength of foundations in terms of levels of giving and ways of working. However, philanthropy's presence and impact in the UK is not as well understood as it might be. It is inhibited by the lack of reliable and robust data opening up the black box of philanthropy. Giving Trends - now in its fifth year - has sought to remedy this deficiency by building an evidence base to inform understanding of philanthropy.

There is little doubt that British family foundations constitute a reliable and robust source of giving to charitable causes. Our research shows that the largest 100 contributed just under £7 billion to charitable causes in the last five years. With collective assets of almost £30 billion and annual spending averaging at £1.3 billion during this period, the largest 100 family foundations are responsible for around 8% of all private giving.

This year's research also points to a diverse distribution of funding to causes including health, education, arts and social welfare. Health dominates the spending of the largest foundations; reflecting the focus of the largest foundation, the Wellcome Trust. In terms of size, Wellcome is the Gates Foundation of the UK, dominating the philanthropy field in spend and assets.

But the picture of British philanthropy cannot be measured by numbers alone. There are also increasing signs of maturity and innovation amongst foundations. This is reflected in increased capacity building, greater professionalism, the appetite for improved foundation-grantee relations and a willingness to support research, as well as a series of innovations amongst both long standing and newer foundations. For example a number of British Foundations have undertaken Grantee Perception Surveys conducted by the US based Center for Effective Philanthropy whilst IVAR research highlighted the 'funder plus' approaches of foundations seeking to add value beyond grants. A good example of emerging best practice is the Paul Hamlyn Foundation's work to create 'relationship agreements' with grantees as documented in their annual report.

Other capacity building developments include a new focus on research and policy at the Association of Charitable Foundations, Britain's umbrella body for foundations, as well as their working group, convened with NPC, to inspire impactful ways of working and promote collaboration. These developments are occurring across Europe with increased capacity building initiatives including at the EFC who held a landmark conference in Belfast and have co-operated on a European Philanthropy Learning Initiative, which is fostering learning amongst foundations.

Well established foundations are also showing new signs of life and growth. For example, the Wolfson Foundation increased its spending to over £50 million in 2011-12. They have also adjusted their funding mix to provide revenue funding alongside capital investments, all of which makes their investments more sustainable and impactful.

Other foundations are doing cutting edge work experimenting with using endowments for social investment, as in the case of Barrow Cadbury's partnership with Essex Council - although our research shows that foundations remain unconvinced about impact investing. Only 20% of foundation's surveyed said they had been influenced by social investment in their current spending decisions.

Social media is another frontier, with many foundations upgrading their websites and seeking new ways to communicate via Facebook and Twitter.

All of the above points to the emergence of philanthropy in the UK - with family foundations at the vanguard.

However, the hopes of government and fundraising charities that foundations can fill gaps left by the state are likely to be unfulfilled. Despite their potential, foundations' assets represent a small fraction of public sector funding and there is likely to be increased demand and competition for their scarce resources. Moreover, our research also showed a limited appetite for funding partnerships with government.

With increasing need and reducing public welfare budgets, there are signs that foundations are shifting some spending to social welfare. Social welfare accounted for £108m of spending in 2001-11 and our survey showed that the majority support social welfare and think that their funding in this area will increase. However, that funding tends to be of smaller scale and localised compared to some of the big gift-giving to higher education and the arts.

Our survey also shows that increased political and public pressure for foundations to support specific areas such as social welfare may also be counter-productive. The majority of foundations surveyed placed a high premium on their independence and, moreover, a significant majority (65%) feel that the introduction of a mandatory payout would not be beneficial to funding levels in the UK.

All of this points to the need for more grown up conversations about philanthropy, including between foundations and government. This is urgently required if philanthropy is going to fulfil its promise to British society and beyond.