The Big Question: Why do wealthy Americans donate so much to charity and rich Britons so little?

Andy McSmith
Wednesday 27 June 2007 00:00 BST

Why are we asking this now?

The Americans, it seems, are privately more generous in giving than we are. New figures show that, last year, the US set a record for largesse, giving away the equivalent of almost the entire gross domestic product of Greece in private charitable donations that was an increase even on the bonanza of 2005, when America was moved by the plight of the victims of the Asian tsunami, the Pakistan earthquake, and Hurricane Katrina. In 2006, Americans dug into pockets and handed over 1.7 per cent of their country's economy, according to the report published yesterday by the Giving USA Foundation. In the same year, Britons gave away 0.73 per cent of the British economy, proportionately less than half as much.

Are the same groups generous in the US and the UK?

Some Americans are more generous than others, obviously. Generally, regular church-goers give away more than the irreligious. But in the USA, there is no great difference across the social classes. Over there, the super-rich and the working poor give away roughly the same proportion of their income. In the UK, the difference between the social classes is striking. One might say it is scandalous. Here, the poorest fifth give away three per cent of their income to charity. The richest fifth give away one per cent. In other words, it seems rich Americans take pride in giving their money away, while rich Britons apparently feel no shame in holding on to what they have got.

How generous are the British?

After the massive response to the tsunami appeal early in 2005, British charities - like their American counterparts - assumed that they would see overall donations go down in the ensuing 12 months. Like the Americans, they were proved wrong. The British gave £8.9bn to charity in 2005-06, the latest year for which figures are available. The survey, by the Charities Aid Foundation, produced the encouraging statistic that the under-35s are giving more than ever to charity, though the most-generous age group is the 35- to 44-year-olds.

It also showed that the richer a person is in Britain, the more likely he or she is to give something to charity. But that is not to say that the rich give more generously, just that more of them do some giving. A previous study based on the Family Expenditure Survey showed that the poorest 10 per cent of British households give 3 per cent of their annual income to charity, which means that proportionately, they were more than three times as generous as those in the top 10 per cent. In 2005-06, the overall average across the country was 1.2 per cent, but people in the top 20 per cent - those on £26,000 a year or more - gave only 0.8 per cent.

Not only do the rich give comparatively less, but they also choose different causes on which to bestow their generosity. Charities that look after children, the environment or the arts have a better chance of attracting rich donors; people at the bottom of the income scale prefer to give to charities that care for the elderly, or for animals, or to medical research, particularly cancer research. Overseas aid is perhaps the one cause that attracts all social classes equally.

What makes US billionaires so generous?

Part of the reason for the apparent generosity of the American super-rich is cultural. While the English aristocracy respected inherited wealth, the Americans revered heroes of industry like Andrew Carnegie, who said that "the man who dies rich dies disgraced". He was a hand-loom weaver's son from Dunfermline, who emigrated to the USA, became the world's second richest man and gave away the whole of his fortune, equivalent to billions of pounds in today's currency.

The two richest businessmen in the USA, Bill Gates and the investor Warren Buffet, are following in the Carnegie tradition.. The Bill and Melinda Gates Foundation, set up in 2000, is by a long way the world's biggest charitable trust, and in 2006 it attracted the biggest single charitable donation in history, of around £20bn, from Mr Buffet. But if other rich Americans - like Mr Gates's partner, Paul Allen - choose to be much less generous, that is their affair.

How does this compare with US state aid?

While Americans expect their billionaires to be generous, they do not expect the same of the US government. In 2002-03, the year when it launched the "war on terror", the US government spent just 0.13 per cent of its GDP on overseas aid, the lowest proportion by any of the 23 richest nations in the world - and much of that was directed to countries that were strategically important, though not necessarily poor, including Egypt, Israel, Russia and Serbia.

The American tax system encourages the idea that charitable giving is something that individuals should do, not the state. Many rich Americans take out "Lifetime Legacies", which allow them to set aside a proportion of their wealth by making an "irrevocable" promise that it will be donated to charity after their death. They can continue using the gift, or living off the income it generates, while offsetting it against tax. This particular tax break is not available in the UK.

Why are there so few British philanthropists?

British businesses have produced some examples of people who have made a lot of money and given it away. The Sainsbury family is famously generous. In 1904, the chocolate maker Joseph Rowntree gave about half of his fortune to four charitable trusts that are still major players in the voluntary sector. The world's second biggest charitable trust, after the Gates Foundation, is the Wellcome Trust, founded in the UK in the 1930s when the pharmaceutical magnate, Henry Wellcome, left his entire fortune to charity. It gives away about £400m a year to research projects. However, Henry Wellcome is perhaps the exception that proves the rule: he was an American, who was well into his fifties when he took British citizenship. The late Robert Maxwell, another immigrant, also promised to give away his whole fortune when he retired, but turned out to be a fraud with nothing to give.

So where does class come in?

It may be that the relative miserliness of Britain's rich is cultural in origin. Britons still show respect for those who inherit a great deal of money, from the Queen downwards, which is not necessarily extended to those who make money by their own efforts. The Tory diarist Alan Clark recorded how one wealthy Tory MP contemptuously dismissed Michael Heseltine as a man who "bought his own furniture". In Britain, therefore, it is respectable to keep your money in the family.

This attitude was vigorously challenged in the 19th century by self-made Victorian philanthropists like Rowntree. But they were themselves challenged by socialists and by the trade unions, who noted that private charity is likely to be governed by private emotions rather than hard-headed decisions about where help is needed most. The British, for instance, loved to give to animal charities; there was an RSPCA before there was any equivalent charity to prevent cruelty to children.

Despite the huge success of the various Live Aid concerts, campaigners like Bob Geldof and Bono, left, have discovered that government action can be more effective than private charity, particularly when there is a Labour government committed to increasing overseas aid. In 2002, for the first time, the voluntary sector in the UK received more money from the government than from voluntary contributions. But of course, the money that the Labour government gives away comes from wage-earners and salary-earners. The very rich not only do not give to charity: they do not pay tax like the rest of us either.

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