Charity tax row: We will stick with policy, says Danny Alexander

 

John Low, Charities Aid Foundation: "It's not going to hurt the wealthy, it's going to hurt the poor and vulnerable"

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The government will stick to its controversial plan to cap tax relief on charitable donations, the chief secretary to the Treasury has said.

Danny Alexander told the BBC there were "very good reasons" for the cap - to ensure the very wealthy were paying a slice of their income to the exchequer.

Charities say the cap will hit big donations and have urged a rethink.

Some Tory MPs and Vince Cable have concerns while Labour has accused the government of "incompetence".

Under current rules higher rate taxpayers can donate unlimited amounts of money to charity, and offset it against their tax bill to effectively bring the amount of tax they pay down, sometimes to zero.

Although they are not benefiting financially, they choose where their money is spent - unlike most taxpayers, whose cash goes to the government.

'Economic problems'

Last month Chancellor George Osborne said that, from 2013, previously uncapped tax reliefs - including those on charitable donations - would be capped at £50,000 or 25% of a person's income, whichever was higher, citing the US presumption "that all taxpayers should contribute to government costs".

Analysis

The fight-back starts here.

Treasury ministers are hitting the airwaves to defend their tax relief plan, saying they will engage with good causes to ensure they do not lose out as this goes from a proposal to a piece of legislation in the coming months.

But even the government's supporters agree they've taken their time.

Behind the scenes, Conservative backbenchers give various reasons for why this appeared to go so wrong.

Some say it is a good policy communicated badly.

Others that it is another "out-of-touch" initiative concocted in isolation by the coalition's Big Four - Cameron, Osborne, Clegg and Danny Alexander.

Touring the Far East, David Cameron must fear that a plan to prove that the government can get tough with the rich is endangering one of his most cherished aims - to make Britain a more charitable place.

Mr Alexander told BBC Radio 4's PM programme that the coalition was having to take difficult decisions to deal with the "enormous economic problems we inherited from the previous government", which were bound to prove controversial.

Asked if there would be a climbdown on tax relief on donations, he said: "We have put in place a cap on unlimited reliefs, we have done so for the very good reason that everyone should pay a decent proportion of their income in tax and that is a policy that we are going to stick to."

But he said the government would work with charities and philanthropists "to ensure the removal of the tax relief does not have a significant impact on charities which depend on large donations".

He added that he did not see philanthropists as "tax avoiders" and argued that most did not give money on the basis of tax relief.

Charities have been annoyed by suggestions that charitable giving is a loophole being exploited by tax avoiders - and point out that wealthy benefactors give away far more than they ever get back in tax relief.

Philanthropist Marcelle Speller, who set up the website localgiving.com, told the BBC she had put £2m into the project adding: "I think it's rather galling to feel that the last four years and that money has now been seen as a tax dodge."

The chair of Arts Council England, Dame Liz Forgan, said: "We think at least £80m worth of regular donations to some of our largest organisations could well be at risk."

Business Secretary Vince Cable's spokesman told the BBC that the Lib Dem cabinet minister "fully supports the need to clamp down on abusive tax avoidance but this should be separated from genuine charitable giving". Mr Cable was "sympathetic" to concerns raised by universities - his department has responsibility for higher education.

'Incompetence'

Nicola Dandridge, chief executive of Universities UK, said universities raised £560m from "philanthropic gifts" in the last year, which went towards bursaries, scholarships, facilities and research. They were the "preferred cause" of big donors, so expected to be hard hit, she said.

How changes will work

From April 2013 there will be a limit on the amount of income tax relief individuals can claim.

At the moment there is no limit so it is possible to donate enough money to charity to effectively bring a tax bill down to zero.

Although the donor does not personally profit from the arrangement, it means they are choosing where their money is spent - unlike normal taxpayers.

The cap will be set at £50,000 in any one year, or at 25% of an individual's income - whichever is greater.

That means an individual with an income of £4m could still give £1m to charity and get full tax relief for that £1m.

However, if they want to donate more , they will have to donate from their taxed income.

BBC political correspondent Ben Wright said ministers at the Department for Culture, Media and Sport were also understood to be lobbying the Treasury to amend the policy, by raising the cap or better targeting obvious cases of abuse.

Labour leader Ed Miliband said the plans marked a "new level of incompetence": "Only this government could be so out of touch, so failing to meet 'we're all in it together', that they cut taxes for all the most affluent people in our society, the top 1%, except for those who do the right thing, except for those who want to give money for charity."

A series of Conservative MPs have also questioned the policy. Backbencher Zac Goldsmith, a multi-millionaire environmentalist, wrote on the Twitter website: "The plans have to be amended. They make no sense and will massively harm charities."

Conor Burns, a ministerial aide to Northern Ireland Secretary Owen Paterson, told the Evening Standard the government should do "a very quick review and retreat on this" while Mark Pritchard, secretary of the influential backbench 1922 Committee, and Lord Hodgson, the Conservative peer reviewing the Charities Act for the government have also raised concerns.

But in a column for the Times, former Barnardo's chief executive Martin Narey - now the government's adviser on adoption - said it was "dubious to argue that the proposed tax changes will stifle philanthrophy" as charitable giving by the wealthy was much higher in the US, where it is subject to a cap.

 

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  • rate this
    0

    Comment number 1336.

    #1335
    JB
    Can't say that I'm too enamoured by the result either. Tories restrained from doing what I expected them to do,
    ---------
    I thought you always expected them to do what they always do regardless of what they say? True to form to date surely?!

    Those lines must be a completely different gauge to the ones they have in Germany/ France...or do we have a higher propaganda tolerance threshold?

  • rate this
    +1

    Comment number 1335.

    #1333Billy

    Quite!

    Can't say that I'm too enamoured by the result either. Tories restrained from doing what I expected them to do, by the Fiberals.

    But, in the greater context; how broad is the difference? - Not much!

    The country is governed between 2 parallel lines. - What's pragmatic & what the electorate will put up with!

  • Comment number 1334.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 1333.

    #1328
    Regretfully I did. I believe they campaigned on an anti tax avoidance, don't waste dosh on Trident , EU friendly ticket., Tuition Fees etc

    Must admit I was tempted by the fact that Dave Cameron was going to match Labour spending £ for £, ring fence the NHS, not raise vat, protect winter fuel allowance and reinstate weekly refuse collections.

    Can't trust that New Labour lot mind...

  • rate this
    +1

    Comment number 1332.

    George Osborne was shocked at the rich using Tax avoidance scams in very much the same that Capt. Renault was ''Shocked, shocked'' to find gambling going on at Rick's place in Casablanca.

  • rate this
    0

    Comment number 1331.

    Someone raised a good point about how much of the charitable giving actually reaches the objective. I'm reminded of paying temp workers invoices way back in the 80's and the amounts paid by charities was far higher than those of other businesses.

    This and the mounts paid to charity exec's etc must be a large drain on the charities resources and for what end?

  • rate this
    0

    Comment number 1330.

    I support reputable charities and will continue to do so with or without tax relief.

    Is this a good policy? I'll be worse off as a consequence, but we're all in it together right?

  • rate this
    +1

    Comment number 1329.

    1314. Chnmmr

    Rich person: The government thinks I'm donating to charity to doge tax? I'll donate less now! That'll show them!
    ---------
    There's just a chance, slight I admit, that the rich person genuinely wanted to donate and might have a sufficiently well developed set of values to completely ignore this PR panto...someone like JK Rowling perhaps....

  • rate this
    -1

    Comment number 1328.

    #1324Billy

    "A collective of folk bound by the fact that they harbour disparate views eh? -Interesting..."


    Well, I think that I explained the connection, in the section that you omitted to quote!

    But, you voted for them Billy; Surely YOU knew what they were about?

  • rate this
    0

    Comment number 1327.

    Those at the bottom of the pay scales pay money to charity and recieve no tax relief for doing so

  • rate this
    0

    Comment number 1326.

    #1323Billy

    You've made 2 separate points there. The first; I think you missed my point; Tax relief to redirect capital is a VERY good idea.

    The 2nd; Did George see this storm on the horizon? Probably; & and it won't be a plus for him either, but it does put Cable's "we'll stamp out avoidance" nonsense into perspective, doesn't it?

  • rate this
    +1

    Comment number 1325.

    One can sympathise with charities that lose out from donations as a result of the cap. On the other hand the people making excessive donations are using money that isnt really theirs, undermining govt policy as to how resources (taxation money) should be spent ? A democratic process should control that, not the rich and powerful? The zero cap is undemocratic

  • rate this
    0

    Comment number 1324.

    #1323
    There is homogeneity to the Lib Dems; they are a 'collective' of single issue activists
    --------
    A collective of folk bound by the fact that they harbour disparate views eh?

    Interesting...

  • rate this
    +3

    Comment number 1323.

    #1320
    Tax relief is a very efficient way of diverting capital into areas that the Govt does not want to be seen to be subsidising.
    ------
    Perception is more important than reality as the Murdoch family crest proudly proclaims - nothing new there John.

    So. you really believe that George's advisers didn't see this little storm brewing....?

  • rate this
    0

    Comment number 1322.

    #1318Billy
    There is homogeneity to the Lib Dems; they are a 'collective' of single issue activists (from legalise drugs to ban the bomb) all bound together under another single issue; Voting reform - the objective being- facilitate more Lib Dem MPs

    And, they will pledge anything, no matter how absurd or unrealistic in order to attract votes. Unfortunately, the hung parliament exposed them!

  • rate this
    +6

    Comment number 1321.

    1318
    Can't believe I'm the only disenfranchised voter who wants to see Corporations replaced by sensible government with capable people with integrity rather than interest sponsored puppets.

    We have allowed ourselves to become USA lite, regardless of the cacophony of bleating from Murdoch, Tea Party and right wing malcontents about the much hyped influence of the EU.

  • rate this
    +1

    Comment number 1320.

    #1318Billy
    "some partisan rhetoric"

    Tax relief is a very efficient way of diverting capital into areas that the Govt does not want to be seen to be subsidising. Eg - the Film industry

    I actually agreed with Labour's policy; it's a shame the current Govt has been shoehorned into reversing these initiatives.

    Lib Dems?- I'll be back!

  • rate this
    +1

    Comment number 1319.

    There was another organisation whose supposed goal was charity who also were given a great deal of leeway on tax ie the medieval Catholic church...and look how rich they got.

    No doubt there a genuine donors today just as there were elements of genuine charity work by the church then but basically it is a scam and the rich know it.

  • rate this
    +1

    Comment number 1318.

    #1311
    Billy, as Labour man
    -----
    Nice try John.

    Let me remind you of where we are:

    Tories - consistent, in that they lie through their teeth and don't give a toss about anyone other than their wealthy chums

    New Labour - tried to be a 'third way' and 'business friendly' ...led by a wealthy barrister and someone who was on the same boat as Osbourn

    Lib dems...you didn't come back to me?

  • rate this
    0

    Comment number 1317.

    1304.PeterScheMichaelOwenHargreaves
    I might be wrong with the 50% but anyway its the same for everyone including you and me. The proposal is to cap this to 25% or £50,000, whichever is greater. I'm actually looking at what charities I might support this financial year out of my expected £14,000 tax bill - never done it before but this debate has made me think.

 

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