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5:35pm UK, Thursday May 31, 2012
The Treasury has announced the cap on tax relief for charitable donations proposed by George Osborne in the Budget is to be dropped.
The controversial plans were criticised by charities that warned they could lose a significant proportion of their income.
More than 1,000 charities signed up to a call by the Charities Aid Foundation (CAF) for the Government to think again.
The move is the latest in a string of Budget climbdowns, which this week included a U-turn on the so-called pasty tax.
In a statement, the Chancellor said the Treasury had “listened” to concerns over the capping of relief for those who give money to charity.
“It is clear from our conversations with charities that any kind cap could damage donations, and as I said at the Budget that’s not what we want at all,” Mr Osborne said.
We have said from the very beginning that this plan would be a disaster… It was completely at odds with the Government’s plans for a Big Society and charities would have lost many millions of pounds.
Save The Children chief executive Justin Forsyth
“Frankly, at a time like this the Government is going to focus on the big issues like the worsening eurozone crisis and Britain’s deficit, and not get distracted with unnecessary arguments.
“We’re going to concentrate our efforts on what really matters: keeping Britain safe in the gathering storm.”
Mr Osborne added he would be pressing ahead with the cap on income tax reliefs for wealthy people which do not relate to charitable donations.
Save The Children chief executive Justin Forsyth said the Chancellor should be “commended” for the decision.
“We have said from the very beginning that this plan would be a disaster. The good points were far outweighed by the bad,” he said.
“It was completely at odds with the Government’s plans for a Big Society and charities would have lost many millions of pounds.”
The cap – which looked to limit relief at £50,000, or 25% of income – was proposed in the Budget on March 21.
Since then, the Treasury has been holding discussions with charities and major donors to discuss the impact on charitable giving.
Labour has accused Mr Osborne of trying to “bury bad news” by unveiling the latest climbdown while Culture Secretary Jeremy Hunt gives evidence to the Leveson Inquiry.
The party’s charities spokesman Gareth Thomas said: “This decision has already done considerable damage and, taken alongside huge cuts in Government funding and contracts like the Work Programme not delivering the money for charities ministers once promised, has been responsible for the toughest year in a generation for Britain’s charities and community groups.
“If ministers understood the work charities did, the vital difference they make for some of our most vulnerable and the important contribution they offer to make our communities stronger, this policy mess could have been avoided.”