The rate at which grant-making trusts are set up has slowed dramatically over the past few years following a 20 per cent drop in the 1980s, according to the Charities Aid Foundation.

For the past four years trusts have been set up at a rate of 28 per year, with an annual income of Pounds 4 million.

This compares with the boom decades of the 1960s and 1970s, during which trusts were set up at a rate of 82 per year with annual incomes of Pounds 22 million and Pounds 11 million respectively.

The slow-down has implications both for individual students and researchers looking for funds and for institutions, such as universities, which are the major recipients of grants from trusts and foundations.

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Speaking at the launch of the latest issue of the Directory of Grant Making Trusts, Alun Michael, shadow minister for home affairs, said: "It is clear that the concept of a trickle-down society has failed. Whatever else may have happened in recent years, we have have not seen a rush of new charitable foundations being set up to help meet the increasing demands being placed on the voluntary sector."

Nigel Siederer, director of the Association of Charitable Foundations, said that it was unclear why there had been such a drop in the 1980s. He suggested recessions, a decrease in the popularity of philanthropy, and the drop in the average age of millionaires, who do not tend to set up foundations until they are in their 70s. Also lower tax rates may have reduced incentives.

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The drop in the 1990s may be because of the start of Gift Aid, a system that gives tax relief on individual donations. Between December 1990 and June 1994 companies and individuals gave Pounds 730.8 million.