A modest proposal

This, from New Philanthropy Capital, is most interesting. As I have blogged previously, Trusts and Foundations have taken as big a hit as anybody from the credit crunch (though having suggested last November that grants may not fall quite as harshly as endowment values, at least for larger foundations, I might now recant that opinion.)

NPC float the idea that Trusts could borrow now in order to meet the increased needs of struggling charities, servicing the debt later when investment returns improve and demand decreases. (It's essentially a micro-version of the Government's response to the recession.) I hope that the good people of NPC won't mind my linking to their post, and reproducing my own thoughts here:

"The logic is clear. Borrow carefully now, to meet the increased demands of charities in these difficult times; pay back the loan with investment income/growth when times are better AND demands decrease. Sounds like a win-win.

It also sounds, perhaps unsurprisingly, like the "International Finance Facility" which Gordon Brown was trumpeting a few years back - sell bonds to increase overseas aid now, pay it back in future with aid budgets when the demands on those budgets consequently decrease. It's the epitome of a 'Keynesian' solution.

But it's a gamble. Just as the outcome of the present macro-economic policy is genuinely unclear at the moment, so one cannot be absolutely sure that demands on Trusts and Foundations will decrease sufficiently in future to enable debts to be serviced without eating away at much-needed grants funds.

It's also a slightly paradoxical proposal when I think that everybody would wish to see the voluntary sector grow - growth which would be stymied if Trusts had to use grant budgets to service debts.

It's therefore not a bad "emergency" policy, if, indeed, we're facing an emergency. A look at the balance sheets of the Trusts that I oversee suggests that it may well be - some, which are hundreds of years old, have lost 33% of their value in less than a year. Yet, even so, can I envisage the Trustees whom I serve taking such a step? Probably not - and I have been very successful over the past year at encouraging them to be radical!"

UPDATE: might another solution be to find some way of unlocking the funds of the many (often geographically restricted) foundations which struggle to find beneficiaries? In my experience, there are many that struggle to spend money - including some of those that I look after.

Often, these are smaller organisations, but I wonder if the Charity Commission couldn't accelerate their present encouragement of mergers and put forward a programme which would allow small grantmakers who struggle to spend their income a way of both liberalising their objects, and pooling their resources?

I wonder if this would have sufficient impact? Would smaller foundations be amenable to a "sledgehammer" policy which might diminish their identity, if the outcomes for beneficiaries were clear and substantial?