A Time To Re-Evaluate: Whilst The Chancellor Drops Plans To Limit Tax Relief, Charities Will Continue To Face Pressures

Last Thursday saw a great victory for the charity sector with the announcement by Chancellor George Osborne that his plans to limit tax relief on charitable donations would be reversed. The proposed cap would have limited the amount of tax a donor could reclaim to either £50,000 or a quarter of their income, depending on whichever was higher. This provoked intense criticism from the charity sector with concerns that it would encourage large donors to give less.

Surveys indicate that each year, £11 billion is donated to charity by the general public. The National Council for Voluntary Organisations estimates that 45% of the total amount given in 2009/10 was from 7% of all donors, indicating that these are the higher rate taxpayers. These are the people who would have been affected by the cap.

Following months of disagreement and pressure from the Give it back George campaign, the Chancellor finally admitted that it had become clear to him the impact it would have on charities. The department will however go ahead with their plans to limit other kinds of tax reliefs for wealthy individuals.

But this decision has not come without criticism. This is the third Budget U-turn that the Chancellor has made in less than a week. Shadow Chancellor Ed Balls turned to Twitter to vent his frustration saying that “it seems George Osborne has lost control at the Treasury tax u-turn after tax u-turn as economic plan collapsing”.*

Aside from the political dispute surrounding the Chancellor’s handling of the Budget, what’s important here are the implications that this decision will have on the charity sector. Chief Executive of NCVO Sir Stuart Etherington summed it up by saying that this is a “victory for common sense” and “a great day for philanthropy.”

Yes, this is a great victory but this is only one example of how charity funding is threatened. There are lessons that can be learned and charities should be prepared, as it is unlikely that this will be the last. Organisations will continuously face funding pressures and this is a time to re-evaluate how high demands can be met with little resources.

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