Two months ago, a banker walked into a high-rolling London club, bought 72 bottles of the world's finest champagne, and over the course of the evening sprayed them around the VIP room. The bill for his party came to £41,000: £26,728 for the drinks bill and £15,000 for the damage done to the restaurant.
These bankers or their colleagues might also have invested £200,000 in a fast Ferrari, a swanky Gucci suit or a luxury weekend getaway to the Bahamas. After Christmas, they will receive a hefty round of bonuses, expected to be up 10 to 40 per cent on last year, according to Russell Reynolds, the headhunting firm.
Yet charities willing to benefit from their largesse have so far been disappointed. Research from the Charities Aid Foundation shows that while figures for individual giving in the UK have returned to levels last seen a decade ago, they remain low. Individual donations in the UK totalled £8.2bn in 2004-2005, or 0.9 per cent of GDP, while in France, the figure was 0.28 per cent and in Germany it was even lower at 0.13 per cent.
Worse, although the well-off are more likely to give than low earners – and in bigger amounts – they give less as a proportion of total wealth. Of the UK households that donate, the richest fifth give less than 1 per cent of their income compared with the poorest fifth who give as much as 3 per cent. Women give more than men, while older people in the 55 to 64 age bracket are the most generous. These trends are broadly reflected across Europe.
Traditionally, it has been argued that the failure of wealthy people to contribute more has been that they were taxed so heavily they felt they had done their bit. In contrast to the US, tax relief across Europe has not been especially generous and this, it was said, did not encourage giving.
Moreover, Europeans have always believed more strongly that the role of the state is to provide. Indeed, in 1948 – the year in which the welfare state was born – an opinion poll in the UK found that more than 90 per cent of people felt there was no longer a need for charities in the country.
In the UK, registered charities receive the bulk of their income from government, followed by gifts from legacies and contributions from private donations. So long as the state is involved in the charity sector, and the government relies on it to help provide public services, many people question the need to donate on top of what they pay in taxes.
Could wealthy people be persuaded to give more? The recent establishment of several charitable institutions in London's financial district suggests they could. Organisations such as Ark, a charity established by hedge fund managers, and New Philanthropy Capital (NPC), run by former finance professionals, are pioneering new forms of giving that could encourage people to donate more money, and more effectively.
This, in turn, is leading to greater scrutiny of charities. Guidestar UK is a new website that enables people to compare the finances, activities and outputs of different charities. Likewise, NPC acts much like a broker between donors and charities, publishing in-depth reports into particular charities that it has identified as achieving the best results.
NPC is also involved in spearheading innovative ways of giving. Earlier this month, it joined the CAF to launch two charitable mutual funds that enable donors to spread a single donation across a range of different charities and receive regular feedback on how the money is being used. The launch is timed to coincide with bonus time in the City, and has received backing from a number of leading figures from the financial world including Nicola Horlick of Bramdean Asset Management and Nick Finegold of Execution, the stockbrokers.
As Gavyn Davies, former Goldman Sachs chief economist and a trustee of NPC, puts it: "Investors in financial markets have benefited from funds for decades. It is great to see funds being developed for charitable giving."
But there are other initiatives that aim to make giving easier, too. One of the more interesting is CAF's Charity Account, which operates in much the same way as any bank account. People are given a debit card that they can use to donate online, by post or phone to any recognised charity in a tax-efficient way. Charitable gift vouchers are also increasingly popular as are payroll-giving schemes, where employers agree to match the donations of employees.
Jai Mukherjee, head of marketing at NPC, says that the recent bout of "wealth creation" has led to renewed interest in charitable involvement. "Once people in high-flying jobs reach their 50s, they often want to give more as a way of keeping themselves grounded," he explains. "It used to be that people planned to give money away when they died, now they are starting to do it while they're alive and they're looking for a rewarding experience."
Thus, another trend is that donors are often becoming more involved, donating time as well as money to their chosen charities. "People will think, 'Look, we're making big money or big bonuses, but look how much we're giving away,'" he says.
But it is also a matter of finding a charity that motivates. Children's charities are a traditional favourite for donors, with Ark, for example, involved in educational initiatives in Britain. Medical research charities are also popular, particularly those that deal with cancer.
The hardest charities to raise money for are those that deal with drug and alcohol problems. Wealthy bankers splashing out on cocktails and champagne take note.
