Tax Freedom Day and the Adam Smith Institute

This is an editorial by our CEO, Andrew Cates

Ian Cowie first introduced me to the idea of a "Tax Freedom Day"; the date whose position in the year represented the proportion of national earnings which is gobbled up by tax. This year it was 2 June, meaning one could consider the whole year to June working for the chancellor and the rest of the year for your own needs. I think the Adam Smith Institute originally coined the phrase.

Imitation is a form of flattery and as I am a fan of James Joseph Sylvester (who invented the famous "Sylvester's Law of Inertia" reportedly saying he was jealous of Isaac Newton and felt everyone should have a "law of inertia") I will take a leaf out of Sylvester's book and the Adam Smith Institute and invent an "SOS Children growth day" representing the point in each year when we surpass our income in pounds in the previous year. This year SOS Growth Day was yesterday, 19 October 2009. There is still 20% of the year left but of course for charities the last ten weeks are traditional the best ones and our growth rate is indeed somewhere over 25%. We could have chosen the point in the year we covered our charity admin costs, which would have been early February.

Hard work in difficult times

Of course this year although our income has continued ever upwards in pounds sterling and although we have record numbers of new Direct Debits and new donors, what we will achieve for children in real abject need will be heavily affected by the decline in the exchange rate, which will effectively eat up a whole years growth. The world food crisis has made things even worse. People seem to understand this though and we should acknowledge fully how the British public has dug deeper than into ever emptier pockets in recognition of our work.

It is difficult in the Aid sector to look at the vast sums used to prop up our banking systems and reflect on how much that money could have achieved and the fact our government gives so little support to orphans abroad (and none through this charity). However the many donors who continue to give such priority to the needs of children alone is very heartening and we will use the £6m in income we hope to reach this year knowing that each penny was given involving sacrifice by the donor.

Donors are choosing charities with more care

The number of people giving online and taking out direct debits online is still going upwards through the credit crunch. The number of people cancelling Direct Debits with us is still very low (less than 1% in the worst month we have had, corresponding to a average of well over 100 months payment for each direct debit). Other charities, particularly ones which engage in face to face fundraising have reported cancellation rates of over 5% a month.

Our website still averages more that £1 per surfer in donations and commitments, or put another way 5-6 new sponsorships a day. One very noticable change though is in the number of pages on our website people are viewing before they give. Two years ago the average visitor would look at four pages before sponsoring. Now the total is nearly eight.

Child Sponsorship still lowest cost

For those wishing to minimise charity admin costs and make their money go as far as possible, our advice remains that online regular direct debits and online child sponsorships remain the most cost effective way to give.

We pass on 100% of child sponsorships without UK deductions, but we can only manage this because the actual costs are very low, and we feel those costs are worth it to have some personal idea of what your money does. Online, the first Direct Debit payment is more than the direct cost of maintaining our website, promoting it and setting the payments up. By contract, responding to advertisements or Direct Mail is a bad idea: six months or more of your contributions will have been spent on the mailing or adverts (which is why we don't do these).

The admin cost of a child sponsorship is less than 5% of the contributions made, which means that we can cover this from Giftaid and other general income sources.