The tax relief cap is either confusing or stupid

For a government that is seemingly trying to push the philanthropy button hard, the chancellor George Osborne made a right mess of this year’s budget – the disapproving responses to which have only grown in size and negativity in the days since he announced his measures. 

The only real mention of charities and giving to charities was within the negative sphere of capping tax relief. In a nutshell, Osborne capped the amount of relief you can get at 25 per cent of your income or £50,000, whichever is higher.

On the face of it, this would seem more than fair in a time of extreme austerity. But when you look at the possible repercussions of this on charitable giving, it becomes a lot less fair, and incredibly confusing, given the high profile this government has been trying to give philanthropy. The measure makes is more expensive to give large donations to charities – and could therefore put a lot of wealthy donors off giving substantial gifts.

Coupled with a very insightful piece I recently read on Liberal Conspiracy – a post by Damian McBride which outlines how budgets are put together and why he therefore knew Osborne was in trouble –  all of this gives me very little confidence that the government has  any idea what it is doing, or that there is a huge amount of communication going on across departments.

Making it harder to give to charity, and thereby decreasing the amount given to charity, seems like a mean, unpopular move at the best of times. But doing so in a time of austerity when charities have enough cuts to deal with as it as, and for the move to be made by a government that has harped on relentlessly about making giving a “social norm” seems mind-boggling at best and utterly stupid and/or deceitful at worst.

I can only really think of three possibilities that could explain what happened here, none of them good:

1. Osborne didn’t really think this through, and nobody pointed out to him the massive difference this cap could make to charitable giving.

2. The whole philanthropy agenda is just a bit of a soundbite and it really isn’t that important to the government to push this forward properly at all.

3. Given the high level of national debt and the other wealth-friendly measures contained in the budget, Osborne knew he needed to set out a measure that looked as though it would hit the rich a bit, and he couldn’t think of anything more creative than this.

Whatever has really happened, I think now may be one of those times to listen carefully to huge levels of outcry and consider exempting charitable donations from this tax relief – a campaign calling for which has already been launched by a number of voluntary sector organisations, perhaps showing the seriousness with which they are taking this.

By Sophie Hudson

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