Figures from Oxford Economics, released by the Charities Aid Foundation, say the cap could lead to a £500m shortfall in donations
A cap on tax relief on charitable donations could cost almost 11,000 jobs in the charity sector, according to calculations from the consultancy Oxford Economics, released today by the Charities Aid Foundation.
The cap on tax reliefs, proposed in the Budget, means that donors will be able to claim tax back only on donations of £50,000 or a quarter of their income, whichever is larger, from April 2013.
A report by Oxford Economics says the cap could lead to £500m in lost donations, based on an estimate by David Gauke, exchequer secretary to the Treasury, who last month said on BBC Radio 4 that the Treasury would expect to receive up to £100m in additional revenue as a result of the cap.
Oxford Economics calculated that for every £1 given in tax relief to major donors, a charity receives £5, suggesting the total loss of donations to the sector would be £500m.
If this figure was accurate, it concluded, about 10,700 jobs in the sector would be lost, and another 8,100 elsewhere in the economy.
Oxford Economics said the loss to the wider UK economy from the cap could be as much as £1.5bn, because social return on investment methodology suggests each £1 given to charity generates £3 of benefit to the country.
John Low, chief executive of CAF, said: "The reality is that this tax change will yield relatively small amounts for the Treasury, but will threaten large cuts in charities, which are already hard-pressed in the current economic climate.
"Jobs will go but, more importantly, charities will be able to do less and the country will suffer both socially and economically.
"We need the government to heed the stark warnings in the Oxford Economics study and drop this damaging charity tax."