The situation looks bleak in the UK, USA and Australia. 2018 is a big year for Brexit negotiations. A ‘no-deal’ scenario seems scarily plausible and would result in an estimated loss of half a million jobs and a slowdown of nearly every sector in the British economy.
While these losses seem like the worst possible outcomes, there is one sector whose loss in funding and growth will have greater negative repercussions than others’. The UK’s development sector is currently the second largest recipient of EU funding in the form of grants and contracts and will be majorly impacted if there’s ‘no-deal’. Most of the money goes to areas such as food security and human rights. Unfortunately, the harmful effects of failing to reach an agreement on the terms of withdrawal were made clear by the European Union. Specifically, applicants for funding for aid and development-based causes from the European commission would completely cease to receive funding if no deal is reached by October.
But what does this mean for the future of charities in Britain? It has been found that in light of these recent developments, many organisations are actively considering establishing offices and headquarters in European countries. This, in turn, would naturally reduce the focus of development projects in the country by these charities, either due to the decline in funding or due to the relocation of the centres. While those already contracted on EU work won’t have their agreements terminated, there will be “modifications”. Bond, the network of UK development agencies, recently estimated that while small and medium-sized charitable agencies would clearly be greatly affected, large-scale UK-based international organisations such as Oxfam and Save the Children would also feel the blow. These traditional recipients, along with International Medical Corps and the International Rescue Committee receive funding from the EU’s one-billion-euro European Civil Protection and Humanitarian Aid Operations (ECHO) budget. There are seven other major programmes worth billions of pounds, and any organisation seeking contracts will be rejected outright after Brexit day.
On the other side of the world, in the USA, the new Republican tax bill is also predicted to have a negative effect on the number of charitable donations. The bill was signed late December in 2017 and reduces the incentive to itemize tax-deductible items such as donations to charities. This is due to the dramatic increase in the level of the standard deduction on federal tax returns. While this simplifies tax returns for middle-class taxpayers, non-profits are correct in their fears that the change will cause a fall in charity donations. In fact, the Tax Cuts and Jobs Act (TCJA) will raise the after-tax cost of donating by about seven percent. Regrettably, this means that these organisations will become more dependent on their wealthy and corporate donors, which may affect the independent functioning of the charities.
Funding for charities in Australia is facing new hurdles as well. Recent legislation proposed by the Turnbull government requires charities to register as “political campaigners” and ban all foreign donations. This was done as part of the government’s attempt to crack down on foreign influence in Australian politics. Many charities have argued, however, that the policy enables the government to unfairly interfere in the social justice work that charities undertake by creating cumbersome administrative requirements and blocking their sources of funding. Charities advocating for causes such as the environment, pensions, wages and refugees would have to register their costs as ‘political expenditure’ thus enabling the government to regulate their sources of funding. Several local and international philanthropic organisations such as WWF, Save the Children and Oaktree have come together to protest the change.
We are seeing that majorly, governments in developed countries are now willingly redirecting their focus inwards, away from foreign aid and development. Within the countries, heated, divisive debates are sparking up about accepting refugees, public health care provision and even the extent of sexual harassment in workplaces. It could thus be considered unsurprising that both nationally and internationally focused non-profit organisations are coming under fire. The deteriorating situation of charities in these three countries may be a coincidence, but it may also reflect a global shift towards an attitude of less charitable giving.
Barbara Stocking, the former CEO of Oxfam will be one of the speakers at WES2018. Come to the event to gain some valuable insight into her experience in the charity sector and what she thinks about its condition today. Tickets go on sale Wednesday, 17th January!
Tulika Jain
Readers Insights:
"In my opinion, the main drivers of aid are not always necessarily governments. In fact, development assistance that does come from the governments of developed countries does not always reach the right places and is not always effective. That’s why the reduced power of NGOs is definitely not ideal." - Joaquin, Economics and GSD, First Year
"The fact that charities are becoming more and more dependent on government funding and being influenced by government policies is extremely troublesome. Government focus is not always in the right places when it comes to the development work that charities undertake. It's possible that focus will shift away from the people and causes that really need help." - Natalye, Sociology and GSD, First Year
References:
https://www.theguardian.com/politics/2018/jan/10/uk-aid-firms-may-lose-millions-in-eu-funding-if-no-brexit-deal-agreed
https://www.globalcitizen.org/en/content/uk-ngos-could-lose-millions-eu-brexit/
https://www.bond.org.uk/resources/the-impact-of-brexit-on-eu-funding-for-csos
http://www.independent.co.uk/news/uk/politics/brexit-sadiq-khan-no-deal-hard-latest-economy-eu-article-50-billion-theresa-may-jeremy-corbyn-a8152856.html
https://www.abqjournal.com/1118164/tax-bill-could-cause-dip-in-charitable-donations-ex-locally-based-organizations-are-largely-remaining-optimistic.html
https://www.forbes.com/sites/beltway/2018/01/11/21-million-taxpayers-will-stop-taking-charitable-deductions-under-the-new-tax-law/#4fcefce2238f
https://www.theguardian.com/australia-news/2018/jan/11/charities-warn-australias-foreign-donation-laws-will-strangle-advocacy