Donors could desert universities

The Liberal Democrat Business Secretary’s public questioning of the policy has added to pressure on George Osborne to soften his plans to restrict tax relief on donations. Mr Cable’s intervention – which will further strain relations between Conservative and Lib Dem ministers – came as more Tory MPs raised concerns about the plans. Now, higher-rate taxpayers donating to a charity can reclaim more than half of the tax. From April 2013, the maximum will be £50,000 per year, or 25 per cent of the individual’s income. Ministers say the change is needed because some rich people are abusing the reliefs to cut their income tax bill. A spokesman for the Business Secretary said he “fully supports the need to clamp down on abusive tax avoidance but this should be separated from genuine charitable giving”. She added that concerns have been raised with ministers, including Mr Cable, by universities and that the minister is “sympathetic to those concerns”. One Tory government source questioned Mr Cable’s position, pointing out that Nick Clegg and the Lib Dems have backed moves to reduce tax evasion. The source said: “We’re a bit bemused that he’s coming out against a measure aimed at wealthy people not paying their share of tax – especially since his own leader has pushed so hard for this.” Jeremy Hunt, the Conservative Culture Secretary, is also said to have concerns. A number of Tory backbenchers are also speaking out. John Whittingdale, the chairman of the culture, media and sport committee, said the policy will undermine Coalition work to encourage charitable giving. “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. Ministers have said that much of the “abuse” of the relief system involves money donated to foreign-registered charities. Some MPs say that means ministers should look at regulating charities more closely, instead of cutting reliefs. Daniel Byles, a Tory backbencher said: “If some charities [are] not doing much 'charitable’ activity they shouldn’t have charitable status, rather than a general cap on charitable tax relief.” This week David Cameron will “look very sympathetically” at concerns about the policy, and officials are understood to be studying ways of softening the blow for some British charities. David Gauke, a Treasury minister, said that the Coalition stood by the principle of cutting reliefs, but will be flexible about how the change is applied. He said: “We are very keen to engage with charities to have an understanding as to where some charities may be very dependent upon large donations and to see if there are ways in which we can bring in this cap, but without doing it in a way that has a significant impact on those charities.”