Leading article: Don't discourage the philanthropists

Almost half of the £11bn given to charity last year came from 7 per cent of donors

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Give It Back George is the name of a new campaign supported by a thousand British charities that are growing increasingly alarmed at the plan by Chancellor George Osborne to remove the tax relief which the rich can claim on donations to good causes. From April next year, any donor giving more than £50,000 a year including gift aid, or a quarter of their income, will not be able to reclaim all the tax they have paid on the money they donate.

The measure was designed to show that last week's Budget was not entirely biased in favour of the rich. It aims to claw back £490m from top-rate taxpayers. But this "tough on the rich" gesture looks set to have dire consequences for the charitable sector – which at the start of the year was showing a 2 per cent annual drop in donations from the public, and has suffered cuts of between 30 and 40 per cent in government grants.

The Treasury argues that the plans will affect only a few people. That may be true. But the impact on charities will be disproportionate. Almost half of the £11bn given to charity last year came from just 7 per cent of donors. The top 100 donors gave £1.67bn. There were 174 donations of £1m or more given by just 80 individuals. And these private donors took more risks in the kind of projects they backed than did government departments and foundations accountable to others for the money they give.

So it is bad news that 83 per cent of the 200 major philanthropists surveyed since the Budget announcement predict that philanthropic donations will fall. Of those individuals who donated more than £50,000 each over the past three years, nearly half said they would now have to cut their donations by more than 40 per cent. This impact on charities is not unintentional. Spokesmen for both the Treasury and HM Revenue & Customs have said: "Giving shouldn't mean you pay no tax."

There is a bizarre incoherence in government policy here. Part of the Prime Minister's much-vaunted vision for his Big Society was that charitable giving should be "a lot higher". Last year, David Cameron called for more people to give to charity through their company payrolls and even at cash machines. He announced a "giving summit" to bring together charities with philanthropists and financiers. Mr Cameron's intention was to "foster and support a new culture of philanthropy", but George Osborne's latest scheme flies in the face of it.

Around 73 per cent of us donate to charity each year. Briton is eighth in the World Giving Index, two ranks below the United States. But in the UK, only 27 per cent of higher-rate taxpayers donate to charity, compared with 98 per cent in the US. Incentives in the tax system vary significantly between the two cultures. Yet the UK Government is sending out mixed messages.

On the one hand it runs match-funding schemes to double the value of donations the public make to charities. It has introduced a gift aid "small donations scheme" on amounts less than £5,000. It has cut inheritance tax for people leaving at least 10 per cent of their estates to charity.

All this seems to be driven by 10 Downing Street and the Cabinet Office. But over in the Treasury, officials appear ruled by suspicion that tax breaks for big donations are dodgy, ineffective and open to fraud. Mr Cameron needs to assert his authority here. At this time of increased austerity his Government should be encouraging major donors to dig deep in their pockets, not changing the tax rules to put them off.

Moves to limit the availability of tax relief for top-rate taxpayers are clearly not unreasonable, and too often the rich get away without contributing their fair share. But donations to charity should be spared.

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