Super-rich donations are just a drop in the ocean

Super-rich donations are just a drop in the ocean
Alison Benjamin The Guardian, Wednesday 5 July 2006 Article historyIf I had £1 for every excitable word that's been written about Warren Buffett's $37 billion (£20bn) donation to the Bill and Melinda Gates Foundation, I, too, could give away a lot of money to charity. Guardian columnist Simon Jenkins' verdict on this once-in-a-lifetime, never-seen-before munificence by the world's second richest man was that it could herald a new "age of charity".

While I'm not in any way belittling Buffett's unusual decision to hand over 80% of his £44bn fortune to a charitable foundation run by another man - the world's richest as it goes - pronouncements that such largesse will persuade the mega-rich to follow suit are decidedly premature, at least in Britain.

According to the 2006 trends in charitable giving published last week by the Charities Aid Foundation (Caf), the super-wealthy are also the super-tight. The richest 1% of the population in Britain, despite owning a quarter of all wealth, contribute a miserly 7% of the £8.2bn given to charities by individuals. And the top 10% - which includes that mega-rich 1% - own more than half of all of wealth but fare little better in the generosity stakes, contributing just over a fifth of giving, amounting to a parsimonious £1.1bn.

That leaves the vast bulk (79%) of the £8.2bn coming from the benevolent pockets of the rest of the population. But this is no surprise. Previous studies by Caf and the Institute of Fiscal Studies have calculated that the richest 10% give less than 1% of their income to charity. In contrast, the poorest 10% hand over 3%.

Cathy Pharoah, Caf's research director, says the latest findings show no signs of a wave of philanthropy sweeping through the upper echelons of society. Yet signs of a change are afoot in the shape of a new breed of financial adviser called a "planned giving adviser" (PGA), whose job is to help the mega-wealthy divest themselves of some of their fortune charitably. PGA's herald from the welfare state-less United States, where people who amass riches are expected to prop up education and healthcare.

If Salvatore LaSpada, the new US chief executive of the UK Institute for Philanthropy (Money matters, page 5) has his way, that culture of giving - which he says is still more of a nice idea than a concrete reality this side of the Atlantic - will soon be spreading across these shores.

But to get our new dotcom entrepreneurs and hedge fund millionaires signed up to the Buffett school of philanthropy requires more than a few role models. What LaSpada failed to mention was that the highly favourable US tax regime helps to focus the minds of the mega-rich on altruism.

But even if there was a sudden proliferation of foundations and large-scale donations, would it even make a dent in the spectrum of social need? It is easy to understand why commentators have got carried away by Buffet's big bucks. His unprecedented bounteousness will allow the Gates foundation to spend $3bn a year. Yet juxtaposed with UK government spending, these sums of money are a drop in the ocean.

Although gargantuan by charitable giving standards, Buffet's billions would not even keep half of the NHS - with a £90bn annual budget - afloat for one year. Social care, which costs the taxpayer £17bn, would benefit for little over 12 months. In a more global context, the Gates Foundation endowment is about the same as a year's worth of official UK development aid.

That is not to say that charitable giving is little more than a PR stunt or a tax dodge. But neither should it be viewed as somehow "better" than money spent by a democratically elected government. It has a different role. At its best, it funds risk taking or unfashionable projects; at its worst it promotes the whims and values of the super-rich. Even the great philanthropist Andrew Carnegie recognised this. He warned that 95% of philanthropy was at best useless or at worst actively harmful.

Given Buffett's investment record, his gift will no doubt fall into the 5% well spent. But far from ushering in the age of charity, all his actions really signify is that we have entered the age of colossal wealth.

· Alison Benjamin is deputy editor of Society Guardian.