Osborne retreats on charitable donations

Posted on May 31, 2012

George Osborne has reversed his unpopular decision to put a cap on tax reliefs for charitable donations after weeks of sustained pressure from the charitable sector.

The chancellor has decided to exempt charitable giving from the overall limit on the amount of tax reliefs taxpayers can claim in any one year.

    The retreat is the third humiliating Budget U-turn the Treasury has executed in a week, after proposals to put VAT on hot takeaway food and caravans were both dropped. Mr Osborne hopes now to have drawn a line under his controversial package, which has triggered bad headlines and a slump in the opinion polls.

    The curb on charitable donations policy was originally announced in the Budget, and sparked widespread criticism and complaints that it undermined the government’s vision of a “Big Society” sustained by voluntary groups.

    Mr Osborne said: “It is clear from our conversations with charities that any kind of cap could damage donations, and as I said at the Budget that’s not what we want at all. So we’ve listened.

    “Frankly, at a time like this the government is going to focus on the big issues like the worsening eurozone crisis and Britain’s deficit, and not get distracted with unnecessary arguments. We’re going to concentrate our efforts on what really matters: keeping Britain safe in the gathering storm.”

    John Low, chief executive of the Charities Aid Foundation, said: “We are delighted that the government has responded to the challenging calls from philanthropists and charities across the country and taken the bold decision to exempt charitable donations from the cap on tax relief.

    “We thank ministers for the support they have shown to charities large and small, which are so vital to the health of our country.”

    Treasury officials had originally wanted to strike a compromise with the charitable sector, offering to put a higher cap on charitable donations and allow reliefs to be rolled over from one year to the next. But after charities made it clear they would accept nothing less than a full retreat, Mr Osborne decided to drop the policy altogether.

    “This decision has already done considerable damage and, taken alongside huge cuts in government funding and contracts like the Work Programme not delivering the money for charities ministers once promised, has been responsible for the toughest year in a generation for Britain’s charities and community groups,” said Gareth Thomas, Labour’s shadow charities minister.

    “If ministers understood the work charities did, the vital difference they make for some of our most vulnerable and the important contribution they offer to make our communities stronger,’ Mr Thomas added, “this policy mess could have been avoided. Instead we have the spectacle of George Osborne trying to bury bad news on the day one of his rivals is in hot water at the Leveson Inquiry.”

    Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said: “We are delighted that the Chancellor has listened to reason and pledged to drop the charity tax. This is a victory for common sense and validates the strength of feeling from the thousands of organisations who lent their weight to the ‘Give it Back, George’ campaign. This is a great day for philanthropy.”

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