World Vision UK Written Submission to the IDC on the Impact of Coronavirus on Developing Countries – Part II
- We welcome the opportunity to provide evidence to the International Development Select Committee. World Vision is the world's largest international children's charity. We are a Christian multi-mandated organisation implementing relief, development and advocacy activities for children, their families and communities to overcome poverty and injustice. We work in 100 countries to help improve the lives of millions of people worldwide.
- The UK faces unprecedented socio-economic impacts of COVID-19. This will not only affect the British economy, but will have knock on effects on both UK Aid and British International Non-Government Organisations (INGOs). The economic cost of this crisis could severely hinder the work of INGOs, both through a reduction in the absolute value of UK Aid, and the UK public’s charitable giving. It is vital that the Government supports the vital work of INGOs as well as continuing its commitment to spending 0.7% of GNI on UK Aid to ensure the world’s most vulnerable communities are not left behind.
- To maintain the impressive record of UK Aid the Government should consider its engagement with civil society and scale this up. As an international development sector we are well positioned to respond effectively to COVID-19 and other development issues:
- We are largely aligned with DFID’s agenda of: strengthening global peace, security & governance; strengthening resilience & response to crises; promoting global prosperity; tackling extreme poverty & helping the world’s most vulnerable; and delivering value for money & efficiency;
- We have a proven track record managing DFID funding well – World Vision UK has £46m worth of active DFID grants, including Aid Connect, has been a PPA holder and is 100% aligned with DFID’s Code of Conduct;
- We have global reach and are active in the most fragile contexts. Globally World Vision is already reaching 10m people with preventative activities and food and cash assistance with the capacity to reach 70 million people through our COVID-19 response;
- We are accountable and transparent in our use of funds through publishing data on IATI, Annual reports; and
- We have the support of the British public behind us – World Vision UK has 90,000 active and valuable supporters championing and supporting our crucial work.
The impact of the outbreak, and consequential mitigation measures, on fund-raising by UK-based development charities/NGOs
- The British Chamber of Commerce business tracker data shows that 57% of UK firms have three months or less cash in reserve and 37% are planning to furlough, or have already, furloughed 75-100% of their workforce. The UK Government have set a strong precedent by releasing strong economic packages to support the economy. However, national economic uncertainty and financial concerns at household level are anticipated to negatively impact the voluntary donations to international development charities.
- INGOs are highly dependent on the generosity of the UK public – approximately 11% of the £10 billion the UK public gave to charities in 2019 was donated to overseas development and disaster relief organisations. However, recent surveys by the Institute of Fundraising showed that on average UK charities are predicting a 48% decline in voluntary income because of the economic impact of COVID-19. Rapidata’s tracking data shows UK charities have seen a large increase in cancellations of regular Direct Debit donations with cancellations in March 2020 being 41% higher than in March 2019 and new donor numbers also falling sharply.
- For the past two years, 55% of World Vision UK’s income has come from the generous donations of the British public. Potential drops in income are therefore concerning for both short- and medium-term financial sustainability. Significant drops in income would reduce our capacity to effectively operate at our current size and scale. It could also potentially affect our ability to pre-finance grants, particularly where NGOs need to use reserves to pay staff and other core costs. These impacts will hinder our ability to respond to the needs of the world’s most vulnerable children and their communities, as well as contributing to the UK Government’s strategic imperative to help fulfil the Sustainable Development Goals to end extreme poverty by 2030.
- As World Vision UK formulates the financial impact of COVID-19 we anticipate negative impacts to all of our UK public income lines in the following categories:
- Pledge (regular monthly) giving
- We have seen an uplift in cancellations of monthly direct debits as individuals’ income falls or they feel more financial pressures. Our principal methods of acquiring new supporters is through face-to-face channels, with around 85% of our planned new supporter signups anticipated this way. Although short-term cost savings will be made to offset some lost income, such as moving some signups online, these opportunities are limited. Such challenges reduce our overall supporter base and will significantly reduce income in our 2021 financial year and beyond.
We have cancelled some programmed appeals to our supporter base and more general public appeals for 2020 due to the current climate and the economic impact of COVID-19 on our supporters.
- Single giving philanthropy
Major donor giving may vary depending on the health of their own companies or portfolios. Some will have businesses directly impacted by COVID-19 and lockdown, or have seen the value of investments falling as uncertainty hits stock market valuations or confidence. Others may donate large amounts of money to enable us to respond more effectively to the pandemic. The uncertainty of future finance this way makes it difficult for us to plan effectively.
Some members of the public pledge support to World Vision UK in their will. The value of these pledges depend on the health of the UK economy. It may take many months for the housing market to unfreeze and families may hold property sales and charitable distributions until markets recover.
- Whilst the impact on World Vision UK has been minimal to date, with only modest drops to income as a result of cancelled sponsorship, we anticipate the full impact will be seen in our 2021 financial year and beyond. Overall, the medium- and long-term concerns are a reduction in our supporter base through higher cancellation rates and significantly reduced new monthly pledges which will materially reduce income in late 2020 and 2021. In addition, we expect the impact to be greater for smaller NGOs with smaller cash reserves, fewer income streams and less flexibility to adapt.
The impact of the outbreak on UK aid funding in the longer term
- The UK Government’s Department for International Development (DFID) is a global leader in aid and development. It is highly regarded as one of the most transparent and effective aid donors. The UK is also one of the few countries in the world to commit to the target of spending 0.7% of Gross National Income (GNI) on UK Aid. This commitment is an example of the UK’s commitment to the world’s most vulnerable communities, and represents Britain’s value as a force for good in the world.
- As the UK economy shrinks, so will the absolute value of UK Aid. While we recognise that the UK is under considerable economic stress as a result of the pandemic, the world’s most vulnerable communities will only be hit harder. In light of the reduced amount of UK Aid available for the world’s poorest, it is vital that the UK Government maintains its commitment to spend 0.7% of GNI on UK Aid, to ensure the world’s most vulnerable are not left behind.
- The decreased amount of UK Aid increases the imperative to spend aid as effectively and transparently as possible. Therefore, the UK must maintain DFID as a standalone department with permanent cabinet representation and avoid subsuming it underneath another department. DFID has the best transparency record of all Government departments on aid spending, and represents the best the UK has to offer in terms of development and humanitarian expertise.
- Furthermore, the UK Government should consider its engagement with civil society to get the most out of UK Aid. The COVID-19 pandemic has created innovation and expansion in the development sector which DFID should capitalise on by increasing engagement with INGOs. By utilising the best of British development experts DFID has an opportunity to focus its work on the world’s most vulnerable and ensure that UK Aid is targeted at those who are most in need.
- The UK Government should not see the economic situation as a reason to scale back the UK’s significant and impactful development arm. Instead, it should be utilised as an opportunity to ensure UK Aid is as effective, transparent and values-based as it can be.
 British Chamber of Commerce business tracker, https://www.britishchambers.org.uk/page/bcc-coronavirus-business-impact-tracker.
 CAF UK Giving Report, 2019, https://www.cafonline.org/docs/default-source/about-us-publications/caf-uk-giving-2019-report-an-overview-of-charitable-giving-in-the-uk.pdf?sfvrsn=c4a29a40_4.
 Institute of Fundraising, https://www.institute-of-fundraising.org.uk/news/coronavirus-impact-survey-results-charities-cannot-meet-the/.
 UK Fundraising, https://fundraising.co.uk/2020/04/08/direct-debit-cancellations-jump-under-covid-19/.
 World Vision UK Annual Report 2019, https://www.worldvision.org.uk/who-we-are/annual-report/.