Ian Clark explains how gift aid has increased giving levels for the Church of England, despite reports it hasn’t had any impact on giving.


The recent National Audit Office report on gift aid criticised HM Treasury and HMRC for not properly evaluating the effectiveness of gift aid as a tax relief. Although NAO consulted several charity umbrella bodies, apparently no-one could produce satisfactory evidence that gift aid had increased the numbers of donors or improved their levels of giving.

So can I use one charitable organisation’s experience over the last few decades to demonstrate that gift aid was an important factor in helping to grow real (after inflation) income levels consistently for almost every one of the last 20 years?

The Church of England is the UK’s largest charitable organisation, and as such it collects far more gift aid tax refunds – over £80m a year – than any other charity. It accounts for about 8 per cent of total gift aid by value, and probably about 15 per cent of volume. A majority of the Church’s voluntary income comes through more than 12,000 parishes -- most with one or two churches – run mainly by committed volunteers. Each parish is an independent local charity established by statute and recognised by HMRC.

The Church has always taken planned tax-effective giving seriously. During the 1960s it launched local stewardship campaigns, encouraging taxpaying church members to make their regular donations using legal deeds of covenant (the forerunners of modern gift aid declarations) that could run for four years before they needed to be renewed. I can vividly remember getting members of church congregations to participate in a sketch explaining how covenants worked, by acting as the donor, employer, taxman and charity. Often the audience would boo as the taxman took the tax from the pay packet before the donor got their pay, and clap when the taxman gave the tax back to the charity! The Church was among the charities that lobbied for the covenant regime to be made less onerous, and welcomed the introduction of gift aid in 1990 (when it was effectively limited to wealthy donors) and opened to all taxpayers in 2000.

Here are the relevant parish income figures for the recent decades, summarised from the latest Church Statistics publication.  The actual giving totals have been rebased by RPI to give the value in real £m 2010 terms. Only the net value of gifts (excluding any tax recovered) is shown, to remove the distortions of varying income tax rates over time.

Although adult churchgoers have declined by more than a quarter over the last three decades, the number of members using covenants and gift aid has risen substantially through the hard work of stewardship (fundraising) teams. It is unlikely that the proportion of tax-effective subscribers among congregations will rise much further, as nearly 40 per cent of adults do not pay income tax (many pensioners, students, part-timers etc).

Church members have been increasingly generous, more than doubling the average real level of annual giving over the three decades. The £217m of extra real total giving appears to have come mainly from the increase in tax-effective giving (£212m).

I am not trying to claim that the covenant and gift aid tax reliefs were the only driver in this very significant increase in fundraised income, but they certainly played a significant role. Most people clearly think it is right that the taxman should not tax their hard earned gifts, but that all of their money should go to a good cause. Perhaps this is best summed up by a comment I once saw in the visitors’ book in a country church: “Sorry no gift, as no gift aid envelope available”!

The Churches pioneered the idea of regular (weekly or monthly) gifts - the practice goes back to Biblical times 2,000 years ago. As wage and salary payments changed, they adapted as weekly envelopes were replaced by bank standing orders and direct debits. The tax reliefs provided by gift aid certainly motivated many more donors to switch from casual to committed giving, thus helping to both grow and stabilise the Church’s income.