If you want to see a 24 carat Government cock-up gradually unfurl before your very eyes…

by Stephen Tall on April 10, 2012

… Then you could do worse than follow the quite absurd contortions the Coalition is currently executing as it attempts to defend its Charity Tax.

The Charity Tax — if you haven’t yet come across the term — caps the tax-relief available to the most generous philanthropists, with the very likely outcome that good causes are going to have less cash in the next year just as the public funding squeeze starts in earnest. It’s a bit of an odd policy to adopt if you’re a government supposedly committed to the ‘Big Society’ in which the third sector will be animated into re-energising all manner of civic virtues.

The policy itself (it’s becoming evident) was an unintended consequence of last-minute policy-making, with charitable donations accidentally caught in the crossfire as the Lib Dem half of the Coalition aimed fire against tax avoidance by the wealthy. Late in the day, before the budget was announced, the Government realised it was about to shoot itself in the foot, and hurriedly scribbled its get-out-of-jail-card into the budget book‘s margins:

The Government will explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations.

But then the consultation was booted over to the Treasury, and that’s when the Government’s problems began. Because if there’s one thing the Treasury likes it’s holding on tight to revenue. And if there’s one thing the Treasury doesn’t understand it’s people who willingly give their money away.

As a result today we witnessed the quite ludicrous sight of a Number 10 spokesman attempt to justify the unjustifiable, brilliantly dissected by the FT’s Kiran Stacey. After pointing out that the very purpose of tax-efficient giving is to encourage the wealthiest to give more of their money to good causes, the Government changed tack, insinuating that

In certain instances [the wealthy] may be giving money to charities and those charities don’t in all cases do a great amount of charitable work.

and

The tax [relief] doesn’t necessarily just apply to charitable organisations that operate in this country.

It’s all too easy to hear — above the shrill Treasury chorus-smear of ‘bogus offshore charities’ — the sound of the last barrel being scraped of its last-ditch excuse. After all, the charitable sector is intensely regulated by the Charity Commission, assisted by HMR&C, and those who attempt to benefit personally by abusing the system already face prosecution.

What’s most disturbing is to compare this Treasury entrenchment with the Budget just a few short weeks ago. Where once the Government promised consultation to protect ‘charities that depend on large donations’ today it invokes the spectre of philanthropy as riddled with tax-avoiding crooks siphoning their ill-gotten gains to offshore havens.

For a Coalition Government whose one single, solitary, unifying vision was the ‘Big/Liberal Society’ this is one heck of an omnishambles.

To show your support for the ‘Give it back George’ campaign for the Government to drop the charity tax, please visit this site and sign the petition.