By Tim Montgomerie
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George Osborne gave a good defence of his Budget yesterday, declaring that he wasn't in this for short-term politics but had taken decisions for the long-term competitiveness of the UK economy. Putting aside my belief that he should have done a lot more on competitiveness a lot earlier, should have accelerated spending cuts so he could afford substantial emergency tax relief for the low-paid and, thirdly, putting aside the Budget's dodgy presentation, I can't quarrel with most of the individual budget decisions. The so-called granny tax is perfectly justifiable given the heavy burdens on the young. The pasty tax clears up the anomaly whereby you pay VAT in a fish'n'chip shop but not for your pie in Greggs. The tapering of the child benefit policy tackles the cliff edge problem. Most of all the 50p and corporation tax cuts are vital for the UK economy's job creating potential (although if you are going to take the flak for lowering the top rate you might as well cut it to 40p and straight away).
There's only one tax which is clearly a mistake, and that's what's inevitably been called the charity tax. ConservativeHome columnist Jill Kirby was quick to condemn it, calling it "crazy". She warned Mr Osborne that big donors were as important to good causes as wealthy taxpayers are to the Treasury:
"We should not forget that a similar dependency on the wealthy few applies not only to our tax system (the top 1% of earners contributing 30% of revenue) but also to charitable donations. Whilst the UK still lags far behind the level of philanthropy in the USA, major donors here account for a disproportionate share of all charitable giving. According to the Charities Aid Foundation, of the £11 billion given to charity by individuals in the UK last year, nearly half was provided by the 7% of adults who each gave more than £1,200. Strikingly, 10% of the total was provided by just 200 people, each of whom gave more than a million pounds."
The campaign is now gathering steam with today's Observer splashing with the news that voluntary groups and the arts establishment are uniting to oppose the Chancellor's cap on the tax relief that large philanthropists can receive. The alliance against the change includes Unicef, Macmillan Cancer Support, the National Theatre and the Royal Academy of Arts. Cabinet ministers including Jeremy Hunt as well as Cameron's outgoing adviser Steve Hilton are understood to have protested against the move. Zac Goldsmith MP tweeted this morning that "making it harder for people to make donations is surely a madness". It's "Less Big Society, more Big State'" he continued. Lord Oakeshott from the yellow half of the Coalition's backbenches had a similar take. He told The Observer that the policy was an example of "bad society, not big society", adding: "It's insulting nonsense to pretend people give generously to charity to dodge tax."
John Low, Chief Executive of the Charities Aid Foundation warns today that the most vulnerable people in society as well as medical research and the arts will be the real victims of the Budget's implication that philanthropy and tax avoidance overlap. He says the Prime Minister's looming 'giving summit' shouldn't go ahead if the measure isn't revisited. He's right. The philanthropy cap should be scrapped and scrapped as soon as possible.