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Another day another dollar?

Finance | Niki May Young | 1 Feb 2011

It's tempting to look to the United States for inspiration, but we're very different demographics, says Niki May Young.

Times are changing for charities in the UK, there's no escaping that. Sector cuts and greater expectations are forcing organisations to rethink their finance strategies and funding models to keep up with demand for their services, and fill the gaps created under the Big Society's volunteering movement. So at times like these it's understandable that we look to other lands for inspiration, and where better than the US, where philanthropy appears to thrive? 

The statistics are exciting - in 2009 American giving reached $303.75bn, $227.4bn of that was from individuals (Giving USA 2010 report). So philanthropy is high in the United States, and this has prompted many in the UK to consider the American way.

But there are fundamental differences between the UK and the USA that shouldn't be overlooked in the process. Some of which are easy to pin-point.

Firstly, tax. Our tax systems differ greatly. While income tax can range from 0 - 50 per cent in the UK, the maximum American income tax is 35 per cent, on average 15 per cent is paid and only 7 per cent pay more than 30 per cent from their salary.

The average salary in the United States is $60,753 while in the UK it is just £25,402. With the current exchange rate, this equates to a difference of more than £12, 200 per year in the American's favour. The poverty rate is also higher in the UK. The poverty threshold in the US for one person is considered to be anyone earning less than $11,136 per annum - and the average poverty rate is 14.3 per cent. While in the UK, this figure was 21 per cent in 2008/9. So Average Joe has more money to play with, or to donate, in the United States. 

And not all is as it seems with American philanthropy. The close of the Second World War equipped the UK with the welfare state, the NHS, free healthcare for all and state benefits for the unemployed. The United States took another tack, the commercial route, and the growth of the health insurance market occurred, encouraged by the government as a form of employee compensation. Today the US is looking to reform its health services. Michael Moore's documentary Sicko highlighted many an issue with the US healthcare system that has fed a demand for voluntary or pro-bono healthcare, a need that may soon dissipate.

The route of donations differs too. In the US the majority of charitable donations in 2009 went to religion, 33 per cent in total - in the UK only 13 per cent went to religious causes, with the primary cause supported by the British people being medical research (supported by 32 per cent of donors) followed by children and young people (25 per cent). In the US just nine per cent went to 'human services', 13 per cent to education and ten per cent to grantmaking foundations. So our charitable targets are very different. We have different priorities. 

Charities such as Project Prevention, which thrives in the US, struggle to migrate to the UK. The US charity which pays addicts to undergo sterilisation or long-term contraception has been met with great controversy here. Likewise not all funding models will be transferable, even if they work overseas.

While times are hard it's easy to lose sight of the home-grown positives, but whether you're a pot-ay-to or a po-ta-to, your funding strategy must be consistent with the needs and function of the society in which you work.