When capitalism works for good

Observations on chuggers

On walking through Victoria Station in London the other day, I was approached by an excitable young woman with a zealous gleam in her eye. The clipboard should have been a giveaway. This was a "chugger", or charity mugger, one of the swathes of postgraduate twentysomethings hired by private, profit-making companies such as Gift and Direct Dialogue to coerce passers-by, on behalf of a host of charities, into submitting their credit-card details.

This particular "chugger" turned out to be amiable, polite and broadly knowledgeable about her designated charity, Shelter, which helps to find housing for some of Britain's homeless. On learning of my vocation, however, my new friend, Debbie, became indignant. She was eager to respond to a raft of bad publicity directed at those in her line of work. She claimed that the stories had led to a marked change in attitudes towards her from members of the public.

Amnesty International, the Royal Society for the Prevention of Cruelty to Animals, Greenpeace, Oxfam - the list of charities that outsource face-to-face collections to private firms stretches to more than 100. They are overseen by the Pub- lic Fundraising Regulatory Association (PFRA), a specialist independent body that promotes quality, integrity and transparency, and are subject to the authority of the national Charity Commission as well as individual local authorities.

If the draft Charities Bill, published in May, becomes statute, companies will need a licence to operate within their local authority and will be subject to greater control over when, where and how often they can target prospective donors. It is hardly the out-of-control industry recently depicted in sections of the media.

The point about chugging is that it is extraordinarily successful. According to Henley Management College, in 2003, 600,000 people signed up on the street or on their doorstep to make a regular donation to charity. Henley's independent research shows that the average direct-debit donation lasts five years and has a total value of £350. This translates, it is estimated, into an income of £210m over the coming five years. Some charities simply could not operate without the additional money in their coffers: the National Deaf Children's Society gets more than 60 per cent of its income through face-to-face collections, and in the past three years, 75 per cent of new Greenpeace supporters have been recruited in this way.

There are other advantages. The more donors who undertake to make a monthly payment rather than a one-off donation, the more easily charities can plan with reasonable accuracy. It allows them to make the best possible use of the resources available to them. They can also target a specific audience. According to Martha Douglass, senior direct marketing officer at Oxfam: "Face-to-face recruitment has proved extremely effective in reaching a younger audience, which has not responded to traditional methods."

For every new donor recruited, companies such as Gift are paid between £50 and £100. This has significant implications. If a donor cancels within a couple of months, the charity loses money; if it happens regularly, the damage could be substantial. When Fruitful Fundraising crashed in July, the British Red Cross, Scope and Great Ormond Street Hospital all lost between £20,000 and £30,000. The Children's Society, which had paid for all its services upfront, lost £164,353.

The risk is evidently one worth taking. If supporters donate £350 during their time with a given charity, and if the charity paid £70 for the donor's signature in the first instance, that represents a return of 5:1.

In 1999, the National Society for the Prevention of Cruelty to Children ran a slick Saatchi & Saatchi advertising campaign that cost upwards of £30m. Would not that sum, in large part, have been better spent attempting actually to raise funds?

Clearly, if it were cheaper or more effective for charities to organise their own collections, they would do so. Sue Brumpton, director of the PFRA, told the New Statesman: "The notion that private [charity] companies make vast profits is a myth. In fact, the industry is extremely competitive and the companies we work with operate at a very low profit margin. This may explain the bankruptcy of some of the least effective."

Street collectors are usually paid about £8 an hour and, by PFRA rules, they are never offered commission. Most of these "chuggers" are graduates in their twenties, who could earn substantially more. As Brumpton explains: "Face-to-face collecting is usually a stepping stone for young people to work for major charities themselves. It is proof of their tenacity and dedication to a range of causes."

Those who seek to undermine street collectors no doubt come from the same ranks as those who would clear unsightly homeless people from our streets. To be forced to confront uncomfortable issues of national and international concern can be frustrating when all you want is to reach Pret A Manger before the shop runs out of crayfish-and-rocket baguettes, but this is one inconvenience up with which Britain should be prepared to put.