A bit of give? Coalition set to retreat over charities row

Ministers appear close to retreat over plans to cap tax relief on charitable donations.

The coalition faces a growing backlash after the Budget proposed plans to remove tax relief for individual donations over £50,000 or 25% of an individual's income.

Over half of senior charity bosses said they expected their income would fall by over 20% as a result of the changes, according to a survey released today by the Charities Aid Foundation (CAF).

Cabinet ministers including Liberal Democrat business secretary Vince Cable and Conservative culture secretary Jeremy Hunt have privately voiced concerns because of the potential impact of the changes on universities and arts groups respectively, the Independent newspaper reported.

Mr Cable's spokesperson said he "fully supports the need to clamp down on abusive tax avoidance but this should be separated from genuine charitable giving".

Junior government figures are speaking out publicly. Ministerial aide Conor Burns called for a "quick review and retreat". Backbench Tory MP Chris White warned the changes were a "sledgehammer to crack a nut".

The row reinforces the claim of opposition figures that George Osborne's 2012 Budget has effectively unravelled, after rows over its measures punishing pensioners and the large portion of society devoted to hot savoury products.

Ministers are set to hide behind the Budget red book's commitment to "explore with philanthropists" how the changes can be made without significantly affecting charities relying on large donations.

Prime minister David Cameron, speaking in Indonesia, said the shift was needed to ensure the richest were prevented from effectively paying as little as ten per cent in income tax.

"I'm quite convinced we can get the balance right increasing philanthropy and charitable giving, which is an important part of our culture which I want to see expanded, and making sure the tax system isn't abused," he said yesterday.

"These are the goals the chancellor and I are absolutely aligned on achieving and I'm quite convinced we will be able to do that."

Nearly nine out of ten charity executives said over the Easter weekend they believed the decision would have a 'negative impact on the value of donations from major donors', however.

CAF chief executive John Low said the coalition's white paper on giving last year had made clear tax reliefs on giving were intended to promote philanthropy.

"Ultimately, it will not be the rich who will lose out," he said.

"It will be the most vulnerable people in society, and the other causes charities support."

Shadow Cabinet Office minister Gareth Thomas, writing on the Left Foot Forward blog, claimed Mr Osborne had announced the charities cap in a "last-minute panic" to deflect criticism of the 50p rate cut, rather than out of principle.

"In their rush the Tories didn't think through the impact on charities," he wrote.

"It is simply baffling that in seeking to excuse a tax cut for all very high earners whether or not they gave to charity he chose to hit those who did.

"David Cameron's cuts were already squeezing the life out of the big society. His insults this week have put another nail in its coffin."