Opposition has been mounting to the government’s plan to introduce a cap on the level of tax reliefs that can be claimed on charitable donations.
George Osborne, the Chancellor of the Exchequer, announced in the Budget that from April 2013 the government intends to cap the amount of tax relief an individual can claim in any year to a quarter of their income or £50,000, whichever is higher. This includes tax relief on charitable donations.
More than 2,700 charities and individuals have so far signed up to support a campaign against the policy, called Give It Back, George.
Last week, a survey of 120 charity chiefs and senior executives by the Charities Aid Foundation found that almost 90 per cent believed the cap would hit donations from major givers and 78 per cent thought the government should reverse its decision.
Matthew Bowcock, chair of the Community Foundation Network, said community foundations expected the cap would lead to an average fall of about 20 per cent in the value of the donations they receive.
Several figures from outside the sector also raised concerns. Vince Cable, the business secretary, and the Conservative MP David Davis were reported to be worried. The Arts Council and senior figures in the arts came out against the cap, and the actor Cate Blanchett told BBC Radio 4’s Today programme that she was concerned.
Dame Stephanie Shirley, the former philanthropy ambassador, called on the government to abandon the proposals, which she said were "naive and ill-considered".
Universities also criticised the policy. Nicola Dandridge, chief executive of Universities UK, which speaks on behalf of university heads, has written to Osborne to raise concerns and has also discussed the issue with the Cabinet ministers Vince Cable and David Willetts.
"Universities have raised £560m from philanthropic gifts in the past year," Dandridge said in a statement. "We anticipate that they would be hit particularly hard by the change in the Budget."
Andrew Hamilton, vice-chancellor of the University of Oxford, also wrote to Osborne about the issue.
However, in an article for The Times newspaper, Martin Narey, the former chief executive of Barnardo’s, defended the government’s decision.
"The government is right to promote giving," he said. "But the belief that unlimited tax relief is necessarily a good thing must be challenged. There are charities that do so little in terms of charitable activity that, in effect, they are bogus."
The Prime Minister, David Cameron, said in a press conference in Jakarta, Indonesia, that he would "look very sympathetically" at charities’ concerns about the potential impact of the cap.
Cameron said, however, that he had been told by HM Revenue & Customs that "some people have been using charities established in other countries to funnel money in and get their tax rates so they’re not paying 50p tax or even 45p tax, but in some cases are paying 10 or 20 per cent tax".
A spokesman for the Prime Minister added to the controversy when he said the cap was necessary because "in certain instances, individuals may be giving money to charities, and those charities don’t in all cases do a great amount of charitable work".
Sir Stephen Bubb, head of the chief executives body Acevo, said the Charity Commission should investigate the spokesman’s claims. In a letter to the commission’s chair, Dame Suzi Leather, Bubb said: "The suggestion from No 10 that there are unnamed charities engaged in tax evasion is potentially seriously damaging. This cannot be allowed to rest without investigation."
The letter said the regulator should ask the Treasury for details of the charities that it thinks were acting improperly.
Sam Younger, chief executive of the Charity Commission, said in response to Bubb that HM Revenue & Customs had not raised any concerns with the regulator in the past few weeks about potential wrongdoing at charities.
Asked by Third Sector to set out his position on the proposals, Nick Hurd, the Minister for Civil Society, said in a statement: "Of course there is sector concern about the impact of the proposed cap on reliefs. I will continue to work to make sure that the sector voice is heard."
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