We were chuffed to see the recent announcement by the Department for International Development (DFID), the UK’s overseas aid agency, that it has decided to launch a £30 million scheme to ‘match fund’ public donations to charities fighting poverty around the world. We had proposed the idea back in 2009 when, in opposition, the Conservatives were touting a rather ropey scheme to get the public to vote on aid projects. Getting Brits to dip into their own pockets to have an influence on where public money is spent, we argued, will make them more engaged and encourages giving.
DFID is, however, the big exception among UK government departments at the moment. It has not only been protected from cuts under Prime Minister David Cameron’s austerity measures, it is going to be getting several billion more to spend because of the coalition government’s pledge to hit the UN target of spending 0.7% of national income on aid. Are match funding schemes like this a luxury that DFID can afford since it has more money than it knows what to do with, or an important tool that could be used in other areas?
At the end of last year, Arts Minister Jeremy Hunt announced that his department, which has been one of the hardest hit by the public spending axe, would put up £80 million for matching to help museums and galleries build up endowments that would provide a stable financial base for the future. This policy echoed an earlier scheme by the previous government to match fund gifts to universities that expires this year (there is no news on whether it will be renewed, despite positive reviews).
Match funding did get some attention in the recent White Paper on giving but the government’s approach seems to be to use them as one-off initiatives rather than using this as a strategic tool. This is considerably better, however, than anything suggested by the recent donor-led Philanthropy Review, which passed over the issue of match funding and lobbied hard instead for tax breaks.
There are three keys advantages of match funding, compared to tax-break subsidies to giving. First, a match fund can be targeted towards a specific objective (boosting public engagement in international development, helping museums and universities develop new funding models, and for supporting particularly needy arts) and tailored to leverage particular types of donors (DFID seems to be going for the general public whereas the arts scheme is more focused on major donors). Second, the spending department pays, whereas a tax break simply depletes the revenue pot, so the benefits of using the money for a match can be weighed by policymakers against spending the cash in some other way to ensure that the taxpayer is getting value for money. Third, match funding schemes are finite and need to be deliberately renewed – presumably only when they are delivering the desired results – whereas tax breaks are hard to unwind.
The DFID announcement is welcome and will contribute to a growing evidence base on the benefits of match funding (including private match funding schemes like the excellent Big Give). We hope that other government departments, in Britain and abroad, will take note and start doing some more strategic thinking on how they too might use this tool as a way to make scarce public money go further.