The Broadbent Blog


Governments and Charities

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Every year, just before Christmas, the Fraser Institute publish a “Generosity Index” which compares charitable giving in Canada and the United States. The widely-publicized message in 2016 was that Canadians are relative tightwads, with just 21.3% of us making tax deductible charitable donations in 2014 compared to 23.5% of Americans, and total donations amounting to just 0.6% of Canadian family incomes compared to 1.2% in the United States

Consistent with their philosophy of small government and individual responsibility, the Fraser Institute seem to think a reduced “scope of government” and lower after tax costs of donating help underpin greater generosity and better-funded charities south of the border. The reality is much more complex.

While we can all applaud individual generosity, the data used by the Fraser Institute are not the whole picture. Statistics Canada's General Social Survey reports that 82% of Canadians made donations averaging $531 in 2013, to a total of $12.8 Billion. Many of us appear to make cumulatively significant small donations which are not reported for tax purposes. 

In addition, 44% of Canadians donated volunteer time equal to one million full-time jobs to charitable and non profit organizations, hardly a sign that our better instincts to care and to share have been suppressed by “big government.”

More importantly, public spending is actually far more critical to the health of the charitable and not-for-profit sector than charitable donations. Canadian charities delivering community based social, health, educational, housing, cultural, recreational and immigrant settlement services among others often rely upon strong partnerships with governments.

Due to the unfortunate discontinuation of satellite national accounts for the not for profit/ non governmental sector by Statistics Canada, the data are now a decade old. But we know that, in 2007, the “core” charitable and not for profit sector (a category which excludes publicly funded hospitals and post secondary educational institutions) was surprisingly large in scale, accounting for 3.3% of GDP and 1.3 million paid jobs.

Donations from households accounted for just 12% of charity revenues, much less than the 20% of revenues received from governments (mainly provincial governments) as grants. Almost one half of revenues (45.6%) came from sales of goods and services, with the remainder coming from investments and memberships.

Many governments choose to supply social and community services by awarding contracts for services to charities and not for profit agencies. Once this is taken into account, it is clear that public support is much more crucial to the operations and financial wealth of the charitable sector than are individual donors.

A comprehensive study by the Canadian Council on Social Development for the Voluntary Sector Initiative, Funding Matters, found that the key financial issue for not for profits as far back as 2003 was not a lack of donations but government cuts, especially to core funding, and a shift to competitive tendering.

When it comes to delivery of services such as home care for the elderly, community supports for persons with disabilities and child care, charities and not for profits have been increasingly forced to compete for contracts with commercial providers, putting downward pressures on already low wages for paid employees and on the quality of services to clients. In effect, governments have cut social and health services costs by squeezing charities and forcing them to do more with less.

The key problem for charities is not a decline in the generosity of individual Canadians, which has been quite steady in the context of a soft economy, but the general retrenchment of government social spending.

In the early 2000s, the Liberal government initiated a Voluntary Sector Initiative to build closer links with the charitable and not for profit sector on the grounds that it is well-placed to assess and meet the needs of clients and communities. While this left little in the way of an enduing legacy, the Trudeau government has promised to develop a “social innovation” strategy and to increase investment in “social infrastructure.” 

Charitable donations are to be encouraged. But a strong charitable and not for profit sector also requires strong public financial support.

Andrew Jackson is an Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute.