George Osborne's planned "charity tax" was scrapped as the Chancellor completed his third embarrassing Budget U-turn in four days.
Charities, universities, medical research centres and arts organisations had joined forces with MPs to condemn plans to limit tax relief on gifts to good causes to £50,000 or 25 per cent of income.
They protested that the cap would have a devastating impact on donations from philanthropists, undermining David Cameron's commitment to the "big society".
The retreat was announced as Jeremy Hunt, the Culture Secretary, came under pressure at the Leveson inquiry over his links to News Corporation. The timing, three days after the Treasury denied a U-turn on the issue was imminent, provoked accusations that the Chancellor was attempting to lessen the impact of yet another retreat on a tax measure.
Ministers promised to hold consultation on the contentious scheme after it provoked a wave of anger. It was expected to last over the summer, with concessions announced in the Autumn Statement, expected in November.
But Mr Osborne moved to scrap the plans entirely yesterday – three days after he dropped moves to levy VAT on hot takeaway food and static caravans.
The Chancellor 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." The Chancellor's latest U-turn will cost the Treasury between £50m and £80m.
Aides said he had decided to lift the cloud of uncertainty that would have hung over charities over the summer, potentially costing them millions of pounds in lost donations.
But Ed Balls, the shadow Chancellor, said the succession of retreats proved the Budget had degenerated into a shambles.Reuse content