Leading article: A mistaken tax on philanthropy

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For a Government that claimed it would "foster and support a new culture of philanthropy", the Chancellor's decision to cap the tax relief on large gifts in this week's Budget was quite a change of direction. It was also wrong.

In the short term, government spending cuts have caused a very real problem for charities of all kinds. But encouraging philanthropy is not just a matter of plugging the gaps left by a cash-strapped state. Even in the good times, we do not give away as much as we might. In Britain, only 27 per cent of higher-rate taxpayers donate to charity; in the US, 98 per cent do. Neither is there any UK equivalent of Microsoft founder Bill Gates's "Giving Pledge", calling on all US billionaires to donate half their wealth.

Experts agree that one of the most effective ways to tip the balance is through the tax system. Yet George Osborne has just taken precisely the opposite course, actually raising the cost of making large donations. True, the new cap will affect gifts of only perhaps £200,000 and above. About half of the total pot of all charitable giving comes from a very small number of very significant pledges, however, and it is these that will be hit.

Upper limits on personal tax relief claims in all other areas are to be welcomed. But to raise the cost of philanthropy was a mistake.

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