The challenges for the charity sector and many of the individuals it serves stand in stark contrast to a significant proportion of households which emerge from the pandemic with heavier wallets. The constraints on spending opportunities over the past year have resulted in an accumulation of around £180billion of excess savings (savings above the usual savings rate) since the start of the pandemic. The Bank of England projects that this figure could shortly reach £250billion.

This offers a potential opportunity to support a stronger, fairer recovery by redressing the imbalance of demand and funding that many charities face. Indeed, evidence around giving behaviour suggests that UK charities might receive an associated funding boost of somewhere between £500million and £1.2billion as a result of the spike in savings. This would undoubtedly be welcome, but it amounts to just 0.2 per cent to 0.5 per cent of the potential pot of excess savings and just 1 per cent to 2 per cent of the annual income of the sector. And it sits against the backdrop of an estimated £10 billion funding gap facing charities over the course of the pandemic.

The challenge then is to consider how more of this apparent savings “windfall” might be channelled towards the charity sector.

There are various financial incentives that the government could consider to aid in unlocking lockdown savings, from Gift Aid rates changes to match funding schemes. To capitalise on the window provided by the pandemic savings windfall, a time limited intervention, such as a Recovery Gift Aid incentive to increase giving from lockdown savings could be considered. For example, a temporary uplift in the match element of Gift Aid from 25p to 30p for every £1 donated could increase income for charities by around an additional £600million per year – potentially doubling the projected flow of lockdown savings to the charity sector through a combination of increased government contributions and additional public giving.

This increase in giving from the public could be further supported by a coordinated campaign led by a coalition of charities, drawing on behavioural insights about what drives giving beyond financial incentives. Messages that highlight the relatively fortunate position of those that have windfall savings, positioned around how others in a similar position are planning to use part of their excess savings to support the charity sector and why this is particularly important during the recovery, could help to encourage even more giving from this group over this critical period.

These are just two possible options that could play a role in unlocking a larger proportion of the £250billion of excess savings built up by some households as a result of the very pandemic. In the context of a charity sector capacity crunch, there is a clear imperative to consider options that could spread fortunes more evenly.

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