by Stephen Tall on April 10, 2012
So says The Guardian today:
The culture secretary, Jeremy Hunt, was blindsided by Treasury plans to restrict tax relief for philanthropists, the National Theatre’s artistic director, Sir Nicholas Hytner, has claimed. Hytner is one of a number of figures from the arts and charities campaigning for the government to think through the impact of its changes to tax relief in the budget. The chancellor, George Osborne, announced that anyone seeking to claim more than £50,000 of tax relief in one year would be subject to a cap at 25% of their income.
Hytner, speaking on the BBC, said the budget decision was already having an impact, describing it as a blow. He said £40m of already committed gifts to the National Theatre were now under threat.
He said: “A lot of that money has been pledged in instalments over the next four years in good faith by generous wealthy individuals who will now obviously be having to look at whether they can meet their obligation because they planned their donation under current regulations. … Hunt has been very eloquent on the benefits of philanthropy and how necessary it is for us – those who have hitherto been dependent on government subsidy – to go out and raise money. That is what we have been trying to do. … We have got ourselves into a position now where it is probably easier to raise $8m from Americans for the British National Theatre than it is going to be to raise money from our British supporters.”
The last-minuteness of the policy seems to back-up my original theory of how this perverse consequence of the tax relief cap came to pass:
What I suspect happened in the budget negotiations is this (this at any rate is how I’ve rather shamefacedly explained it to my colleagues in the charitable sector who’re curious why the Lib Dems are so keen on the ‘Charity Tax’)…
Rather late in the day, Nick Clegg and his advisers hit on the idea of the ‘Tycoon Tax’ in exchange for dropping the Lib Dems’ opposition to the 50p rate. Even later in the day, someone noticed that charitable giving would be caught in the crossfire. So a caveat was hastily inserted promising “the Government will explore with philanthropists ways to ensure that this measure will not impact significantly on charities that depend on large donations.” The Treasury is now into its formal 90-day consultation mode, and met with charity campaigners this week. With luck — and with pressure — they may see sense and exempt charitable giving from the tax-relief clampdown. The current mood music is not encouraging, however; once the Treasury sniffs revenue they are doggedly tenacious in keeping it — “entrenched” is the word I’ve heard used to describe their attitude.
Another policy to chalk up to ‘cock-up over conspiracy’, it appears.
One final point. The final paragraph of the Guardian story notes:
The Treasury argued that in its 2011 budget it provided a tax break for people who donate 10% of their legacy to the arts. From this month such philanthropists are eligible for a 10% reduction in inheritance tax bills – a move that could result in more than £350m worth of additional legacies in the first four years of the scheme.
Now I’m a fan of the Legacy10 initiative — it even brought me to agree with Lord Ashcroft — and I’ve written before on the importance of legacy giving: for example, to me personally, and to charities as a whole.
But legacy gifts are, by their very nature, unpredictable money (manna from heaven, if you like). A charity cannot base its three-year budget on the basis of unknown income. That is why major gifts from donors who want to support the strategic mission of the charity are so important. It is just those gifts which are likely to be hit hardest by the Coalition’s ‘Charity Tax’.
Moreover, the whole thrust of the Coalition’s ‘Big Society’, of its capacity-building of the third sector, is that the Government should be further encouraging philanthropy — not giving with one hand and taking away with the other.