Could the wealthy give more?

Theresa Lloyd, independent philanthropy advisor and author of Why Rich People Give, is one of a passionate few bold enough to pose the ‘disruptive’ question ‘Could the wealthy give more?’

“As we consider the impact of the financial situation and the move to the ‘Big Society’, it is appropriate to ask whether the rich should and could be encouraged to give more in proportion to their wealth – at least in due course to the level of 3% of annual income given by the poorer members of UK society,” says Lloyd.       

In the US, Microsoft founder Bill Gates and investor Warren Buffett have tackled the issue head on, asking billionaires to pledge to give away 50% of their fortunes in an effort to draw attention to the responsibilities the wealthiest have for aiding the needy. (See US Giving Pledge poses $600bn question).

'The Giving Pledge’, as the drive is called, has a minimum goal of about $600bn (£407bn) in commitments, based on the calculation of half of the $1.2 trillion (£0.8 trillion) in net worth of the 400 richest individuals compiled by Forbes magazine.

The Charities Aid Foundation (CAF) estimates a £60bn figure for the UK if all its billionaires took up the pledge, based on The Sunday Times Rich List figures.

But perhaps the real potential of the pledge is that it might encourage everybody to give more, says Sean Stannard-Stockton in his Tactical Philanthropy blog.

“The Giving Pledge might result in a 10% increase in charitable giving, but it is important because of its potential to trigger a 100% increase in charitable giving,” he says.

While the pledge suggests that the world’s most influential philanthropists feel their peers could do more, most of the wealthy do already give. Charitable activity is near universal among the wealthy, with 97% giving in some form, according to recent research on behalf of Barclays Wealth, based on a survey of 500 UK and US high net worth individuals (HNWI), including 150 with investable assets of over £3m.

However, despite widespread involvement, only a third will donate more than £10,000 a year – less than 1% of their net worth, says the research.

“It is a disappointment and a challenge to those of us who wish to encourage a stronger culture of philanthropy to see that in spite of the sometimes very significant levels of wealth only one-third are donating more than £10,000 a year,” says Lloyd in response to the findings.

Canadian entrepreneur and philanthropist Aditya Jha also comments in the Barclays Wealth survey on the need for the wealthy to give more. “The world needs more support and governments will not be in a position to provide it. Private individuals have more wealth than before but they are not doing enough to give it back.”

Of course, the recession is a major factor and has hit giving at all levels of wealth.

CAF’s latest annual survey of giving, UK Giving 2009, found an 11% drop in the value of all donations and the Coutts Million Pound Donors research records a 13% drop in the value of gifts worth £1m plus.

But the effect of the recession on giving is not straightforward. Research reveals the performance of the economy is both a barrier and a driver to giving among HNWIs.

The Barclays Wealth study, for example, shows that although 23% of the wealthy decreased their donations in 2009, with many giving time instead of money (20%), 49% said they were planning to give the same amount as last year and 36% were planning to increase donations. The research found evidence that the economic downturn had galvanised many; 35% of the wealthy are `“more passionate in supporting charitable causes in an economic downturn, when they are struggling for funds,” it says.

A recent report from The Economist substantiates this - most very wealthy individuals intend to maintain or increase their level of donations, it says. In some cases this is because they have set up foundations, the output of which is not dependent on economic cycles.

The 2009 Sunday Times Giving List reveals the top 30 UK donors collectively pledged more in 2009 than in 2007, £2.6bn compared with £1.2bn. This year’s list showed an 11.5% drop in giving – aligning with the CAF’s figures for all givers – but it is set against a 37% drop in wealth of the top 1000 Rich Listers – "this provides important context” says Giving List editor Alastair McCall. “The conversations I am having with wealthy donors indicate they are committed to continue giving particularly in the recession and feel a social responsibility to help now need is greatest.”

The newly published World Wealth Report 2010 from Merrill Lynch-Capgemini, based on surveys with more than 1,100 wealthy investors, reveals philanthropy by the world's rich recovered in 2009 in all regions but North America after undergoing a sharp drop the previous year due to the global financial crisis.

A further indication that levels of giving remain resilient and may even be rallying is CAF’s reported 250% rise in the value of donations to Charitable Trust Accounts compared to last year.

In the first quarter of 2010 CAF, one of the UK’s biggest providers of charitable trusts, opened 51 new Charitable Trust Accounts with a total of £70m in donations, compared to £20m for the same period last year. The charity is now opening as many accounts each month as it was in early 2008 before the recession began.

And as we regularly report in our Philanthropy UK News Bulletins, numerous philanthropists continue to give millions of pounds to good causes, such as Kwik Save supermarket founder Albert Gubay, who this year bequeathed £800m in a ‘deal with God’.

But that said, the wealthy give a much smaller proportion of their income than lower-income donors and levels of individual giving as a proportion (%) of Gross Domestic Product (GDP) are tiny with the UK comparing poorly with other nations.

In its 2006 International comparisons of charitable giving report, CAF reviewed and compared the results of surveys of individual giving in a number of countries whose wealth covers over half of the total global economy.

The results show the amount individuals give to charity varies from 0.14% of GDP in France to 1.7% in the US, while the UK records the second highest percentage at 0.73%, not including legacies and trusts or any tax-recovery.

It concludes that the UK could set itself a higher target for giving.

Philanthropists too have said the wealthy could do more and suggest the recession may be a smokescreen for giving less. Rohini Nilekani, one of the most prominent philanthropists in India, has been reported as saying there is no justification for a decrease in donations, despite the financial crisis. “Given that most philanthropists in India are giving away only a tiny fraction of their wealth, I see no reason for a slowdown in philanthropy,” she says.

Despite their own pledges to maintain donation levels, many of the very wealthy questioned for the Barclays Wealth report believe that much more needs to be done to encourage private philanthropy, especially since governments around the world may be unable or unwilling to play such a large role in the future. “As a society, we need to think about what we need to do to motivate private individuals to give more,” says Jha. “I think this problem has been there before the crisis and now the need is much greater for people to give.”

Gates and Buffett are clearly in agreement and have put their considerable weight behind the push to encourage wealthy Americans to give more with their ‘Giving Pledge’ idea. Might it encourage more of the ultra wealthy to give?

At the very least it focuses the spotlight on the question ‘could the wealthy give more?' and further, ‘what can be done to help them?’

In the following articles we look at the barriers to and motivations for giving and the roles government, donors, marketers and media can play in promoting more giving, while offering examples of where this is already happening.