While our rich may be getting richer, they lag badly behind America when it comes to acts of philanthropy. However, there are signs in Scotland that the spirit of Andrew Carnegie lives on

THE man who dies rich, dies disgraced," Andrew Carnegie, pictured, Scotland's biggest philanthropist, once said. If that is the case, most of Britain's rich will exit this mortal coil in varying degrees of dishonour.

With generous exceptions, many of them anonymous, Britain's rich can safely be seen as tightwads in the philanthropy stakes. In the last 10 years, the combined wealth of Britain's 1000 richest people has more than tripled from £99 billion to £360bn. Yet in that time, the total amount donated to charities of all kinds has actually slipped behind in real terms.

As Beth Breeze, philanthropy researcher at the University of Kent, points out: "The luxuries market is booming but donations to charities have largely plateaued. The total voluntary income to UK charities from individuals in 2005-06 was £8.9bn. That's the same amount as was paid out in City bonuses in 2006-07."

In the latest Sunday Times Rich List, meanwhile, just 30 people are named in the "giving index" as donating £1.2bn between them. By Andrew Carnegie's standards, it seems disgraceful that much of the £8.9bn donated to charities every year comes from the pockets of what are classified as "ordinary givers". That is, people on average wages or less who make regular contributions of a fiver or so to the SSPCA, Salvation Army, local schoolkids' working bee, Oxfam and other indisputably worthy organisations.

According to three separate reports produced by the Institute for Fiscal Studies, Charities Aid Foundation and the London School of Economics, it is these ordinary givers who are the most generous as measured by their capacity to give. On average, they give away 3% of their income compared with 1% for the wealthiest.

Americans run rings around Britons in philanthropy. Last year, charitable giving across the Atlantic hit a record $295bn £148bn. Americans donate 1.7% of gross domestic product to charity, compared to 0.7% here.

The disparity is generally attributed to more favourable tax breaks, but philanthropy professionals say this is a myth. Top-rate tax in Britain is 40%, although in practice few high-earners pay that, compared with 35% in New York, home of America's mega-givers.

British tax breaks for giving are also far better than they used to be. Dr Salvatore LaSpada, chief executive of the Institute for Philanthropy, the research body founded seven years ago - and chaired by Scotland's private equity veteran Nick Ferguson - to boost giving and to educate donors says: "Over the past seven years, Britain received Europe's most generous tax incentives to stimulate giving, which in some cases are more generous than America's."

Anyway, there is no proof that tax breaks in themselves open wallets. Ferguson, who last summer famously lambasted his colleagues in the City for enjoying tax rates "lower than a cleaning lady or other low-paid workers", believes it is the sheer pleasure of giving that motivates right-minded donors.

Part of the problem in philanthropy in Britain, and even in the United States, is rubber numbers. Nobody knows exactly how much money ends up where because most surveys are based on limited data, but there is a belief that heavy-duty philanthropy is part of a gilded and virtuous circle that recycles money around elite, showcase causes. Regrettably, it does not in general trickle down to the most disadvantaged. In the trade, it is known as "scratch-my-back" giving. As Beth Breeze observes: "If you shake a tin for charity, most people think it's going to the poor, whereas it could be going towards the restoration of St Paul's Cathedral, the Opera House or Eton, which is also a charitable trust. Many people believe charity is "pro-poor" but it's not. Typically, big donors give a lot of money to art, their old private school or a restoration fund, but only £500 to the Sally Army. It costs a lot more to run an art gallery than a soup kitchen but soup kitchens are very grateful for £100."

At Kent university, she is sharing a £2.2 million government grant with other institutions such as Strathclyde university to harden up the numbers. However, it is likely to show what philanthropy professionals have long argued. Namely, that billionaires favour marquee fundraisers for arts and cultural organisations while almost completely ignoring bread-and-butter charities such as animal welfare organisations.

Some blame the welfare state for laggardly donors. According to Ferguson, our welfare system has obscured the need for full-scale charity. "In years gone by, we had the Peabody, Whitbread and Tate families and many more, who did the right thing," he told Financial News in early December. "Then we had two wars, inflation and a tax system which convinced people the state would provide. Frankly, it didn't, and it can't with tax at current levels. Society needs the development of philanthropy and that is exactly what we have been seeing since the 1980s, although there is a way to go."

US-born Alan Harden, chief executive of Alliance Trust, agrees. He doubles as a trustee of the Scottish Community Foundation (SCF), our fattest pipeline for charitable giving, and a fundraiser for St Andrews university.

"In America you don't expect the state to pay for everything. In the UK, you expect education, hospitals and welfare to be provided by the state," he told the Sunday Herald. "The expectation is that the government will provide, yet government can't."

If we accept this anti-welfare argument, various sources say that the media has to take its share of the blame. There is not half the kudos in giving as there is in the US, where men like Bill Gates can gain near heroic status for their efforts. In the UK, many appear scared to put their heads above the parapet.

Having said all this, there are signs that British philanthropic efforts might be improving. Ferguson's comments about cleaning ladies have boosted the returns at the Institute for Philanthropy, according to associate director of communications Musa Okwonga. "We have noticed more companies coming forward to get involved in our giving programmes," he said.

Alliance Trust's Harden has noticed improvements too. "I see a huge demand from wealthy people to engage in charitable giving," he says. "They are trying to give where it really matters. They see a need to give back."

There are also signs that Scotland just might have an edge over the rest of the country. The SCF is practically awash with funds, albeit it is looking for more, and there are numerous high and low-profile givers, women in particular.

For instance, transport tycoon Ann Gloag supports Mercy Ships, the charity that operates on African women with the childbirth injury fistula. Former travel company owner Margie Moffat helps dispense £3m a year. Perhaps the ghost of Carnegie still stalks the land after all.

Scotland has also been at the forefront of pioneering a different approach to philanthropy, thanks in part to Tom Hunter, who has pledged to donate £1bn to good causes and is arguably the Carnegie of our time. He throws in his money to kick-start a project and then attracts the government and other funds to give it extra momentum. With most of his investments to date pouring into education, he typically leverages his original investment by about five times.

This harder-headed, more hands-on kind of giving has become known as venture philanthropy. Instead of giving and forgetting - the old model based on bequests - venture philanthropy applies commercial skills to the dispensing of money and follows its progress through the entire process. Between 3% and 5% of all the funds - over £35m committed so far with another £965m to go - is earmarked for rigorous evaluation of the success or otherwise of the projects. No point in pouring good money after bad.

Indeed the tools of "definitive analysis" employed by the Hunter Foundation's investment programme are little different from those of Sir Tom's West Coast Capital, his unashamedly profit-making vehicle. The idea is to achieve the maximum bang for the buck by lining up joint ventures and other forms of partnerships to share the load and leverage the return.

According to financially skilled donors like Alliance Trust's Alan Harden, this is the way to go: "Modern philanthropists expect to see specific out-takes and want to drive improvements. Each pound has to work harder."

Sadly, all this implies that a lot of charitable giving, whether by the wealthy or ordinary donors, has not worked hard enough in the past. Certainly, Nick Ferguson would agree.

In the nicest possible way, he deplores the absence of serious investment skills in British charities. While paying tribute to the "able and decent people" who give their time to charitable work, he says the philanthropy industry needs to raise its game. He says: "Charities do not always have investment people on their boards. Often, they do not even have investment committees. Work needs to be done to improve overall governance."

Frustrated by this, Ferguson founded the Kilfinan Group dedicated to the mentoring of chief executives of charities. Next, he rounded up a number of friends and colleagues in financial circles. They now sit down in one-on-one sessions with the people at the sharp end of the philanthropy industry to offer their expertise in making the charity pound go as far as possible by applying conventional investment techniques.

The Institute of Philanthropy agrees that not enough philanthropic endeavours are working in this way. It has been working on a study of the performance of £10m-plus endowments. It won't be released until January but insiders say it will reveal a marked need for more investment expertise in charities.

This new breed of commercially savvy, self-made, democratic donors is a far cry from those of yesteryear. Not only do they operate in a much less sentimental way, men like Tom Hunter identify more closely with ordinary Britons and everyday causes than the grandee givers of the past. In a complete contrast to the 1980s, the bulk of Britain's rich lists is now composed of people who could have come from next door. Only a quarter, and falling, of the richest inherited their wealth. It is similar in America where 15% of wealth comes from inheritance compared with 40% a generation ago.

The new breed is not a showcase giver but is more likely to donate to a varied range of neighbourhood charities, ranging from adventure playgrounds in schools to struggling boxing gyms, that were part of their lives. This is in marked contrast to the elite donors of last century who preferred to give their names to museums and libraries. And the new breed's children can forget about fat inheritances. Impatient philanthropists, they want to give it away now. "There is an increase at the high end of the very wealthy who are giving more during their lifetime," says Dr Susan Mackenzie of Philanthropy UK, which monitors the industry. "They're saying, Why should somebody else have all the fun?'"

The neighbourhood-giving way is exemplified by Margie Moffat, who established one of Scotland's biggest charities eight years ago after the death of husband Jim, co-founder of AT Mays in Saltcoats, which became the third-biggest travel agent in Britain. Margie, now 85, has donated £50m to the Moffat Charitable Trust run by son Jamie.

"We feel we want to radiate our giving out from the Saltcoats area," he told the Sunday Herald. "Most of it is spent in north Ayshire and the west of Scotland."

Its latest beneficiary, to the tune of £1m, is The Princess Royal Trust for Carers, operating through 29 centres between Orkney and the Borders. Among other good causes it supports are The Ark, an alcohol-free nightclub in Ayr, the outdoors-oriented Urban Fox programme in the east end of Glasgow, and UK-wide causes such as Cancer Research UK and Diabetes UK.

"My father wanted to give something back to the community in which he lived and worked," Moffat says. "Even now, we ask ourselves, What would my dad have thought about this?'"

According to major donors, philanthropy is an addictive activity. All of them told the Sunday Herald of the pleasure they get from seeing results, particularly in the case of young people.

Ferguson insists he gets as much pleasure out of his voluntary work as others do from sport. He donates mainly to charities that begin at home. They include scholarships for students from the west coast of Scotland to Edinburgh university, his alma mater; a donor-advised fund with the Scottish Community Foundation that benefits the youth and elderly in Argyll; and an art fund.

None of this changes the fact that British giving is a long way behind the US. If the numbers of philanthropists and their donations are improving, this is not yet showing up in the figures. If we are serious about private giving, there is still a long way to go. The media has a role to play in shifting the mindset of a culture still hung up on the idea that the state should provide everything.

The main blame, however, surely has to lie with the wealthy. If Christmas still means anything, the flipside of material gain is surely charitable giving. Until that message permeates more widely to the nation's top tables, the ordinary giver will have to share a disproportionately heavy share of the load.