Matching Fund Issues (a new approach to funding Public Benefit)


Magazine article

It is my belief that the present chaotic economic situation could lead to a change of direction politically as dramatic as happened in 1906 (Lloyd George), 1944 (Beveridge) and 1979 (Thatcher). If crisis is to lead to opportunity the institutions and leaders of civil society must think longer term. What should society be like in 2050? For me this time-scale is not ridiculous. I started in the sector forty years ago when it was on its knees; forty years from now will be 2053! And we can be sure the rate of change over the next decades will be more rapid than hitherto.

The essence of the problem is government cannot afford to provide for health, welfare, education and pensions at current, let alone future levels. Yet deep cuts are politically unacceptable and heavy tax rises counterproductive. Government must therefore rebalance responsibilities: it must take steps to create a Civil Society Sector an order of magnitude bigger than it is today, and quickly. (This doesn’t necessarily mean a smaller state; it is not a zero sum game.) The problem is that government does not know how to bring this change about. The only lever at its disposal, apart from rhetoric (The Big Society!), is the tax system. But the various incentives to giving are nowhere near to creating the flow of private funds needed.

What I am arguing for is a new system of Fund Matching. Fund Matching has been successful in the fields of Higher Education and produced results in the difficult field of creating endowment for Community Foundations. Its potential for the sector as a whole could be very great.

The system would in many ways be like issues of gilt-edged securities. Government would periodically offer Matching Fund Issues (MFIs) for more or less specified purposes addressing social problems. As with issues of gilt-edged stock the “coupon” (the size of the match) would be more or less financially attractive. Each Issue would have a Prospectus setting out the terms. No one Issue would be the same.

In the early years one could argue that MFIs for capital projects – a school playground, a cardiac unit – would be easier to understand. But sooner rather than later revenue projects, including the payment of salaries, should be introduced; if not the ambition to “rebalance responsibilities” between state funding and citizen participation will not be realised.

An example of the latter might be a £2 billion MFI offer, delivered through local authorities willing not only to participate but add a council tax rebate to the “state-side” offer, at a ratio of say 1 to 3, to guarantee every school leaver in that authority on Job seekers allowance a post in a useful activity at a rate equivalent to the living wage. No school leaver would be at home “resting”; all would have something on their C.V.  And the beneficiaries would be hospitals or carers or farmers, or anyone needing enthusiastic “labour”. If Council X took £10 million to raise £30 million to raise the take home pay of all school leavers out of a job to the living wage then that Community would have no youth on the street, lots of motivated youngsters, and a number of very proud donors.

When up and running there would be a number of MFIs of various orders of magnitude. Government (the Treasury and HMRC) could avoid the cost of offering MFIs by outsourcing to organisations like Banks or Community Foundations or Local Government or Hospitals, Schools, Churches or Consortia of Charities. An obvious set of intermediaries for an early experiment would be Community Foundations. They would be well placed to transfer funds from the well-off into areas of poverty, from a city sized MFI. Effective and highly imaginative promotion of the system would be very important including perhaps prizes (as with National Savings). Donor recognition and reward may also be key -  (a new Honour for example).

It will be argued the Chancellor would never agree to it because he is so short of money. But if the government’s matching offer is met by a response two or three times as great, he might. This could be determined by experiment; answers would be needed to questions like What levels of matching? What causes and how specific? What amounts of money? What donor discretion? What donor recognition? Once results come in from pilots, the Chancellor would know how to maximise contributions and how closely they can relate to government priorities.

The development of a powerful and recognised system of MFIs from the present small ad hoc experiments will take time, perhaps a generation. As MFIs begin to work they will bind Citizens and Government more closely together for the common good. This in turn will shatter the existing taxonomies of “charity”, ngo, independence, public/private and so on. The new taxonomy will of course include thousands of genuine, independent charities whilst making clear what large service providing charities are for. MFIs are also likely to encourage the creation of large conglomerates relating public benefit to commercial and other interests. All of this is not before time: in a rough and changing global economy we all need to work together to prosper in a civilised country. In the new world of instant information, trust in the charity sector will be at risk if the present myths and contradictions are allowed to continue.

This article is tagged under:

  • Matched Giving