Charity tax relief is David Cameron’s 30th U-turn

CHANCELLOR George Osborne has been left with a black hole in his Budget after he dropped plans to cap tax relief on charitable donations, the third economic U-turn of the week which will together cost the Treasury £120 million a year. The move to scrap the proposal of limiting tax relief to £50,000 of donations yesterday came after charities claimed it was already hitting their income.

CHANCELLOR George Osborne has been left with a black hole in his Budget after he dropped plans to cap tax relief on charitable donations, the third economic U-turn of the week which will together cost the Treasury £120 million a year.

The move to scrap the proposal of limiting tax relief to £50,000 of donations yesterday came after charities claimed it was already hitting their income.

But it has provoked fury from the Tories’ Liberal Democrat coalition partners who claimed it meant the government had dropped an important measure from the Budget to tax the rich.

The measure was part of a package to balance out the lowering of the 50p higher rate on income tax to 45p for the top one per cent of earners.

The announcement by Mr Osborne was the third backtrack on tax this week after he dropped the plans to put VAT on pasties, which would have raised £40m and reduced the VAT rate for static caravans to five per cent leaving him short of another £30m. According to the Budget red book the decision to drop the plans on limiting tax relief on charities will cost him another £50m a year.

A fourth U-turn this week also saw the government drop plans to allow some inquests in sensitive cases related to national security taking place behind closed doors.

Labour claimed the coalition government has now reversed at least 30 policy announcements since coming to power.

The chairman of the Commons Treasury Committee, Conservative MP Andrew Tyrie, said the succession of U-turns would encourage “vested interest groups” to press for concessions on measures in next year’s Budget.

But Mr Osborne said: “It is clear from our conversations with charities that any kind of cap could damage donations and, as I said at the Budget, that’s not what we want at all. So we’ve listened.”

Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, hailed the decision as “a victory for common sense”.

Last night, a Lib Dem government source said: “We just don’t understand what the Tories are playing at. This affected just a small number of very wealthy people who should be paying their fair share of tax anyway.”

The U-turn followed venture capitalist Jon Moulton announcing that he would not be giving money to the Tories because of his “discomfort” over limit on tax relief for charitable giving.

Mr Moulton said: “It was a bad decision. I am pleased they have had the nerve to actually reverse it. Nobody had thought through the implications of doing it.”

Labour’s shadow chancellor, Ed Balls, said the government’s week was a “shambles”, adding the judgment of Mr Osborne and Prime Minister David Cameron was “increasingly in question”.

The decision has come as a relief to universities including top Scottish ones such as Edinburgh, Glasgow and St Andrews represented by the Russell Group.

A group spokesman said: “Our institutions are increasingly reliant on philanthropic donations as we strive to remain world-class. Even a small drop in charitable donations would have represented a loss of tens of millions of pounds a year.”

Thirty definite U-turns

1 Anonymity for people accused of rape.

2. Selling off the forests.

3. Employing a personal photographer for David Cameron.

4. Unringfencing money for school sports in England.

5. Scrapping of free milk.

6. Cutting bookstart in English schools.

7. Cutting debt advice.

8. Ending housing benefit for long-term jobseekers.

9. Coastguard cuts.

10. Ban on circus animals.

11. BBC World Service cuts.

12. Enshrining military covenant into law.

13. Cutting support for disabled people in care homes.

14. Automatic prison sentences for those carrying a knife.

15. Immigration target.

16. 50 per cent sentence reduction for those pleading guilty.

17. Scrapping Chief Coroner for England.

18. Scrapping Youth Justice Board in England.

19. Scrapping Domestic Violence Protection Orders.

20. Unannounced Ofsteds in England.

21. Stopping all households with a higher tax rate earner receiving child benefit.

22. Ending video games tax relief.

23. Switching back to the B version of the Joint Strike Fighter which does not need catapult and traps launch system.

24. Giving voters the power to recall MPs.

25. Putting the minimum of 0.7 per cent of government spending for international aid into law.

26. Timing of independence referendum – said it must be 2013 and then Cameron said “not fussed” about timing.

27. Pasty tax.

28. Caravan tax.

29. Secret inquests.

30. Charity tax.

Three other U-turns Labour claim have taken place but aren’t really U-turns

1. Delaying decommissioning of ships and planes in MoD.

2. Scrapping NHS targets in England.

3. Introducing the Granny Tax, a freeze on income benefits, after making a commitment to increase all parts of the pension by the RPI rate of inflation.