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Keeping up with the Hohnses

12 July 07 11:50 GMT

Britain's super-rich are starting to feel the squeeze of public opinion. One way to ease the pressure would be to follow the example recently set by some multi-millionaires, and donate large sums to charity, says Beth Breeze, a philanthropy researcher.

"Who says there's no parity in today's Britain? The total voluntary income to UK charities from individuals in 2005/06 was £8.9bn - ironically exactly the same amount as was paid out in City bonuses last year.

Of course, one does not directly equate with the other. Much of the cash given to good causes came from the pockets of ordinary folk who are able to spare a bit here and there.

In the past 10 years the combined wealth of Britain's 1,000 richest people has rocketed from £99bn to £360bn. Yet while the luxuries market is booming, donations to charities have largely plateau-ed.

Total giving by the 30 people named in the Rich List's "Giving Index" in 2007 amount to £1.2bn - the contents of the bank account of just 1 of the 64 billionaires named on that list. Honourable exceptions to the increasingly common caricature of "cheapskate billionaires" include the historically large recent gifts made by Chris Hohn (£230m), Peter Cruddas (£100m) and David & Heather Stevens (£100m).

Three separate reports published by the Institute for Fiscal Studies, Charities Aid Foundation and the London School of Economics all conclude that the adjective 'generous' might best be reserved for the poorest donors who give away around 3% of their income in contrast to the wealthiest donors, whose gifts might be bigger in absolute terms but which cost nearer 1% of their available income.

The widely perceived failure of the newly wealthy to fulfil their potential to give is key to the ire currently being directed at the super-rich.

However, when "the luckiest 1% do try to think about the other 99%", as Warren Buffett recently exhorted, their efforts are not guaranteed universal acclaim.

The muted reception to the newly created £5m charitable Private Equity Foundation demonstrated a lack of discernment between wealth creation and wealth distribution and a reluctance to praise people whose riches seem too easily or dubiously attained. Reacting to press criticism, the Foundation's chief executive, Shaks Ghosh said, "Do I care if [donors] get some PR for this? I don't think so."

Media bashing of new philanthropic initiatives are counter-productive and there is growing evidence that some potential major donors are put off by a fear that lifting their heads above the philanthropic parapet will only expose themselves and their families to abuse.

This knee-jerk attitude was not shared by one of the most eminent figures of the UK charity sector. William Booth, founder of the Salvation Army, believed that whatever its source, wealth could be redeemed by being applied for charitable purposes, saying, "the problem with tainted money is t'aint enough of it".

Besides, unlike their Victorian forebears, the "new philanthropists" don't have the "taint" of having inherited their fortunes, which were ploughed into the building of museums and monuments rather than helping the poor.

Patrons and givers

As today's philanthropists are more connected to the daily reality of the non-rich population, they contribute to many of the same causes that are supported by the general public.

Charities that help children and young people and that conduct medical research, especially into cancer, are favoured by the billionaire and the pensioner alike.

Arts and cultural organisations fundraise almost exclusively from the rich, while animal welfare charities regularly feature in the top 10 of "ordinary givers" but receive hardly a penny from major philanthropists.

And the donations of the rich tend to come with strings attached. Wealthy philanthropists usually deposit their charitable donations into a private foundation, often named after themselves or a loved one, and make grants that come with strict specifications on how the money should be spent and what outcomes are expected.

Whilst most donors are content with a standard thank you letter, those writing the biggest cheques can expect the biggest rewards, even if they are not asked for, including being invited to visit projects, attend elite events and see their name immortalised on new buildings.

Yet the desire to dictate how donations are spent also exists among ordinary donors, witness the phenomenal popularity of buying goats rather than writing a cheque to Oxfam. Nor is the existence of 'donor benefit' restricted to major donors. For example, supporters of the National Trust enjoy free access to the Trust's properties and many fundraisers acknowledge the importance of recognition by recording smaller-scale donors' names in public places.

Common motivations

Fundamentally, rich donors are not so different to the rest of us. They give because, like everyone, they want to be loved, admired, respected and remembered favourably.

There is no evidence that tax breaks are a primary motivation for giving. Rather, the rich become philanthropists when they are presented with an opportunity to do something special that they believe will create a real difference whilst bringing enjoyment to the donor.

A remaining obstacle to welcoming a new era of philanthropy is a concern that voluntary donations cannot be relied upon as a predictable source of funding. But this is to confuse philanthropic spending with the redistributive aims of taxation.

Charitable activity must demonstrate public benefit but that does not mean it has to be, or indeed ever has been, largely pro-poor. Major donors often support causes that are not tackling inequality. Saving Canaletto paintings for the nation and funding Oxbridge colleges are both important but not "charitable" in the popular sense of the term.

The onus is therefore on the rich, including those riding the private equity wave, to choose philanthropy above higher taxation. Giving money away to a cause of your choice is immensely more attractive than having it taken by the taxman. Swift philanthropic action by the rich could pre-empt action from the new, and clearly pro-philanthropy, prime minister whilst also adding to the enjoyment and experience of being rich.

The American super-rich are trying to keep up with the Gateses, not the Joneses. It is time for rich Brits to keep up with the Hohnses, regardless of how he made his money.


Beth Breeze is a philanthropy researcher at the University of Kent.

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