Business Secretary Vince Cable enters charity tax relief row

Business Secretary Vince Cable today weighed into the increasingly bitter row over Chancellor George Osborne's controversial cap on tax relief for charitable donations.

The senior Liberal Democrat Cabinet minister let it be known that he was "sympathetic" to concerns raised by universities that funding for scholarships and research could be hit by the move.

Meanwhile Arts Council England warned at least £80 million in regular donations to its organisations was at risk, while a new £55 million "matched funding" scheme with the Department for Culture, Media and Sport (DCMS) could also be in jeopardy.

Mr Cable's intervention came after the umbrella body Universities UK wrote to Mr Osborne warning that they were likely to be "particularly hard-hit" by the cap as they relied heavily on big donations.

"Concerns have been raised with ministers including Vince by universities and he's sympathetic to those concerns," a spokeswoman for Mr Cable said.

"We will make sure that what we are hearing from universities is fed back to the Treasury."

Universities UK chief executive Nicola Dandridge said the cap could undo much of the progress universities had made in raising funding from private donors.

"Universities raise considerable sums from philanthropic gifts, £560 million cash in the last year," she said.

"These donations make a major contribution to the support universities can offer students through bursaries, scholarships and improved facilities such as libraries. It also contributes to advancing research.

"Because universities are the preferred cause of major donors - gifts over £1 million - we anticipate that they would be particularly hard-hit by the change in the Budget.

"After a period in which universities have stepped up their game in fundraising, this could undo some of the excellent progress they have made."

Arts Council England chair Dame Liz Forgan said donations to arts organisations were also likely to suffer as wealthy backers looked again at the amounts they were prepared to give.

"We think that at least £80 million worth of regular donations to several of our largest organisations would be at risk and there could well be a wider impact than that," she told BBC Radio 4's The World at One.

"It is actually very difficult for arts organisations to raise private money, it's hard work and seeing a concession from the taxman really does help. It is a critical ingredient in the package.

"So I'm afraid that unless something changes this will make a big difference."

In particular she pointed to a new £55 million "matched funding" scheme set up by Arts Council England with the DCMS and the Heritage Lottery Fund designed to encourage wealthy donors to fund endowment to arts organisations.

"I think a lot of organisations who applied for that money did so with an understanding with potential donors as to what they might raise. I think all those plans are probably now up in the air," she said.

Her concerns were echoed by the senior Conservative MP John Whittingdale, who chairs the Commons Culture, Media and Sport Committee.

"There is a real danger here that we throw out the baby with the bathwater. The Government has set great store by trying to increase philanthropy in support of the arts and good causes and this clearly won't help," he said.

"To say that we are going to put an arbitrary cap as the Budget has done on the amount of tax relief that can be claimed just seems to me to send a very contrary signal to all the messages that the Government has been putting out up to now."

Treasury Minister David Gauke insisted the Government stood by the "broad principle" of the cap in order to stamp out "abuse" of the system by wealthy individuals who used tax reliefs to minimise their income tax payments.

But after David Cameron said yesterday during his tour of the Far East that he was "very sympathetic" to the concerns raised by charities, Mr Gauke said the Treasury was looking at how it would be implemented.

"The broad principle that people should not be in a position where wealthy individuals don't pay income tax or very low rates of income tax is something that we are right to address," he told The World at One.

"But of course, when it comes to the implementation, as we have said all along, we want to work with charities."

Chief Secretary to the Treasury Danny Alexander told BBC Radio 4's PM programme 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".

The Lib Dem Cabinet minister added: "The policy is one we have set out for extremely good reasons."

PA