Everyone can win in charity

Since Strategic Giving is directed at both the researcher and the practitioner in the US, it might be thought not to have any particular interest or usefulness in the UK. This is not so. It demonstrates the enormous differences in culture, structure and attitude between the two countries and, if studied by HM Treasury, would help to inform those who wish to encourage a more active culture of giving in this country. Peter Frumkin's thought-provoking book is not a critique of contemporary philanthropy nor an instruction manual for donors, but he does make an extremely strong case for so-called planned giving.

A new generation of wealthy donors in the US (and in the UK) is seeking to leave its mark on the public sphere, and what Frumkin strives to explain is that these donors could benefit enormously from having a comprehensive plan. This is much more difficult to organise than it might seem on the surface. Frumkin suggests a model of philanthropic strategy by identifying five essential rules for donors to consider when developing a philanthropic strategy: "1) Donors must declare for themselves the value to be produced through their giving; 2) Donors must define the type and scope of programme to be supported; 3) Donors have to select a vehicle or structure through which they will conduct their giving; 4) Donors must find a giving style and profile level that is satisfying and productive; 5) Donors have to settle on a time frame that will guide their giving."

"Strategic giving", Frumkin argues, can be defined as the clear alignment of these five important philanthropic dimensions. He suggests that only when answers to all five questions are in alignment will the opportunities for social impact and donor satisfaction be high. Moving towards alignment is the central task of the strategic donor.

He further argues that in the US, the underlying trend towards professional management of philanthropy has significant weaknesses. First, questions about effectiveness have been weakly transformed into conversations about the performance of grantee organisations instead of being focused on the more central issue of achievement of the donor's philanthropic mission.

Also, demands for greater accountability have led professional grant-makers merely to increase the flow of public information about foundations and not to redress the fundamental power imbalance between institutional donors and recipient organisations that makes real accountability difficult. Finally, Frumkin states that nagging concerns about the legitimacy of private action on behalf of the public have never been fully resolved.

The book forces one to look at the philanthropic scene in the UK, which certainly demands a similar study. A recent conference organised by the Institute for Philanthropy threw up some useful information on the subject.

Hilary Browne-Wilkinson, the institute's director, outlined the way in which the strong traditions of Victorian philanthropy were replaced after the Second World War by the welfare state. The problem has been that, since 1979, voters have refused to countenance higher taxation. As she said, "with diminished government funding, we must turn to other means of supporting public purposes - philanthropy being one; another being the revenue creation of charity itself". She pointed out that in attempting to rebuild a culture of philanthropy, the UK has wisely, like Canada, looked to the US, which has never had the same level of government support for social causes.

She provides helpful statistics. As a percentage of gross domestic product, individual charitable giving in the US is more than double that of the UK.

In 2002, $183.7 billion (£98 billion) was given, which represented 1.75 per cent of GDP; the comparable UK figure was £7.3 billion, or 0.76 per cent of GDP.

Why do Americans give more? The US is a country where people make money and realise that they have a responsibility to give it away to keep the system going. This helps them to feel part of the community and is reflected in the causes they give to. Religion (including local charities) gets 45 per cent of donations, while university and alumni-giving gets only 1.4 per cent. In the UK, 13 per cent goes to religion, 17 per cent to medical research, 14.4 per cent to children's causes and 9.5 per cent to animal causes. Few UK donations go to the community.

There is an enormous difference in how Americans and Britons give. Seventy-seven per cent of all collection methods in the UK (according to the UK Voluntary Sector Almanac ) are spontaneous loose-change methods. In the US, "planned giving" is the preferred method; 61 per cent of the voluntary income of non-profit organisations comes through planned giving.

A key issue is tax incentives. According to the Chronicle of Philanthropy , 54 per cent of the richest US donors said that they gave for tax benefit. In the UK, although there have been changes to the tax regime, including reforms to Gift Aid and payroll-giving, there is a significant difference in that the charity receives most of the refund under Gift Aid, not the individual. This is one difference that the Treasury should examine because many people do not feel that Gift Aid gives them a tax break.

The Treasury also needs to consider the fact that gifts of capital and assets in the UK do not have an allowance similar to that on gifts of shares. Sir Nicholas Goodison's recent review, Securing the Best for our Museums: Private Giving and Government Support , recommended a tax allowance to encourage getting more art into museums. But nothing was done to implement this recommendation.

When similar proposals were made to the Treasury by the Art Fund before the last Budget, it was said that they were supported by Treasury officials but then torpedoed by the Chancellor on the grounds that it was wrong to give tax benefits to the rich. But without obvious and understandable tax benefits, the rich in the UK are unlikely to put as much back into the community as they do in the US.

The Government must somehow encourage individuals in the private sector to share the responsibility for running the state. The main change required is to allow donors to retain an interest in or derive a benefit from gifts while still receiving a deduction from their taxes.

Planned giving is vital to the US economy and to the sense of responsibility individuals have for the welfare of their local community.

It could be just as vital in the UK, but the Government and the Treasury must learn how to foster a culture of philanthropic giving and must recognise that the public interest is served by promoting self-interest.

Christopher Ondaatje is a benefactor and trustee of the National Portrait Gallery and was a member of the advisory board for the Goodison review, Securing the Best for our Museums , published by the Treasury in 2004.