Saturday, 2 June 2012

U-turn on Charity Tax Relief

George Osborne's budget in March announced that tax reliefs for high earners, including on donations to charity, would be capped for each taxpayer at one quarter of their income.  I commented at the time on the implausibility of the reasons they gave for the cap. On Thursday, Osborne recanted: donations to charity will not after all be included in the cap.
I can confirm that we will proceed next year with a cap on income tax reliefs for wealthy people, but we won't be capping relief for giving money to charity.
It is clear from our conversations with charities that any kind cap could damage donations, and as I said at the Budget that's not what we want at all. So we've listened.
Osborne did not in fact say anything in his budget speech about not wanting to damage donations, but he may well have made some such remark to someone "at the Budget".

What's remarkable about this is that either Osborne is more stupid than I think he is (and I am not an admirer), or he knew from the first that restricting tax relief on donations to charity would mean that charities got less money.  Osborne's colleague, Treasury Secretary David Gauke said (in a radio interview) that the charity tax relief cap would bring in £50m-£100m a year and that money has to come from somewhere.  No one knows just what the effect will be on donors' behaviour: if they make the same net donations as before, £100m saved will cost the charities £100m; if as seems likely the cap acts to discourage donations the effect on charities will be amplified (though the estimate from Oxford Economics that it would cost the charities £500m is highly unconvincing).

So what's happened is that Osborne announced his plan, and the charities who would obviously be adversely affected by it protested.  There was nothing remotely unpredictable about that.  And if Osborne wasn't willing to stand up to the protests, why did he announce the plan in the first place?

I have a suspicion that he planned this all along.  The sums involved are small enough not to make much difference to the budget, so he was always in a position to change his mind.  And by starting the fight then withdrawing from the field, Osborne leaves tax reformers on the left who support the proposal in the line of fire. And most importantly it's handy for a government to have a popular announcement up its sleeve for release when it wants to deflect adverse publicity, say when the Culture Minister is in trouble for his extraordinary closeness to News Corp (it will be recalled that he was brought in to oversee News Corp's bid for BSkyB because Vince Cable was found to be insufficiently neutral).

Hanlon's (or Heinlein's) razor advises "Never attribute to malice that which is adequately explained by stupidity."  But is Osborne really that thick?  Perhaps his supporters would like to help me on that.

1 comment:

  1. "If you haven't any charity in your heart you have the worst kind of heart trouble" to cure it
    Help people, let's unite for one good cause, be a volunteer"save live"!