Analysis: A united sector wins its campaign against the tax relief cap

How the voluntary sector persuaded the government to perform an about-face on the proposed cap on tax relief for charitable donations

The sector thanks the Chancellor
The sector thanks the Chancellor

A major turning point in the sector’s successful campaign against the cap on tax relief for charitable donations came three weeks after the Budget, when a spokesman for Number 10 suggested that some major donations went to organisations that "don’t in all cases do a great deal of charitable work".

At around the same time, the Treasury minister David Gauke made remarks suggesting that many philanthropists were using charitable giving to dodge tax.

Until that point, says Peter Kyle, deputy head of the chief executives body Acevo, the sector had tried to work behind the scenes to get the government to change its mind on the proposed cap, which would have limited the amount a donor could claim back to £50,000 or a quarter of their income from April 2013. It had held back from a full-scale public onslaught.

But he says the government’s comments were "the mother of all insults".

"We had wanted to give the government the opportunity to step away from this swiftly in a dignified way," says Kyle. "But at that point we decided to launch a large-scale public campaign. We felt the government had made a mistake. Rather than trying to play an honest hand, it had tried to get dirty."

That campaign finally achieved victory yesterday when George Osborne, the Chancellor of the Exchequer, announced that the government was abandoning the tax relief cap proposal for charitable donations. It was the government’s fourth major U-turn in a bruising week when it also backed away from VAT on pasties and static caravans, and watered down proposals for secret court hearings.

Timeline: the rise and fall of the tax capThe climbdown was hailed as one of the sector’s most significant successes of recent years, with umbrella bodies and major charities working together under the Give it Back, George banner.

The proposal, which the Charities Aid Foundation estimated could cost the sector about £500m a year, had united charities in opposition from the very start. The opposition went beyond the potential cost: there was anger at an ill thought-out measure that likened charitable donations to tax avoidance.

Hannah Terrey, head of policy at CAF, says charities were quickly able to raise the public profile of the campaign. A campaign website and slogan were launched within days of the announcement.

"There was a rapid pooling of resources between ourselves, the National Council for Voluntary Organisations and the Philanthropy Review," she says. "It got a huge amount of support from charities and there was an unprecedented level of coverage.

"We had support from universities, the arts and philanthropists. All of them got in touch with ministers and their MPs. There was a daily flow of stories over nine or 10 weeks."

In addition, says Karl Wilding, head of policy and research at the NCVO, the sector worked hard to establish the scope of the cap, in the face of confusing and contradictory statements from the Treasury and HM Revenue & Customs.

It was only a fortnight after the announcement, he says, that the government was able to issue a clarification note explaining how it would work.

"Eventually it explained that it was taking the strictest possible interpretation," he says. "It became clear it would cost the sector a lot of money."

Kyle says it was clear from the start that the cap was not the result of coherent policymaking.

"This was an afterthought that was hastily added to the Budget," he says. "There was no consideration, no consultation and no concept of what the impact on the sector might be.

"It was a complete surprise to large chunks of government. It was a complete surprise to the Cabinet Office and most of the Cabinet. Even Number 10 seemed bewildered.

"A kind interpretation might be that this was down to dysfunctional relationships within the coalition. Another view might be that this was sheer incompetence by the Treasury."

In addition to the work in the media, the campaign was lobbying hard behind the scenes.

"We contacted Cabinet ministers," says Kyle. "Education charities spoke to the education secretary, Michael Gove, and health charities spoke to the health secretary, Andrew Lansley. We attacked it from every angle and we got plenty of nods and winks suggesting the cap didn’t have much support in the Cabinet.

"The idea of a 50 per cent cap was raised by several different ministers at several different meetings. Every time we said: ‘No, we want it scrapped.’

"In particular, there was a meeting with David Gauke where we made it absolutely clear how strongly we felt about this. There were flashes of anger at that meeting that I don’t think I’ve ever seen in a ministerial meeting in all my time in this line of work.

"The Treasury looked into the whites of our eyes and they saw that we wouldn’t back down."

In the end, says Wilding, the level of pressure proved too much.

"They were getting the same message from every corner," he says. "The unity of the sector convinced them.

"Everyone was saying the same thing, and everyone was well briefed. Every time there was a meeting, everyone the government spoke to gave them the same message.

"The public, philanthropists and charities all said it was wrong."

Wilding now wants the government to think about it how can repair the damage to the sector.

"A lot of mud has been thrown at the idea of philanthropy and some of it might have stuck," he says. "Some vehemently unpleasant things have been said about charities.

"There are a lot of things we’ve still got to get right when working with government. They haven’t talked to us enough before developing their ideas. I’d like to see the government strengthen the Office for Civil Society – and listen to it, as well."

For Terrey, the time has come now to put philanthropy back on track.

In order to do that, she says, it is time for another Giving Summit – one that is not affected by the distraction of arguments over the cap.

"There’s a lot that can be done to improve philanthropy in this country," she says. "Also, I think it’s time for a party."

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