Why is there so much fuss about George Osborne's capping of tax relief on charitable donations (amongst capping it on other things)?
Surely, the innocent (and forgivably ignorant) might think, the charities would not like it at all but the donors can go on giving the same amount from their pockets as before. Is it not that the government just will not top up their donations by paying the charities the tax that the donor would have been paid?
Not so (or at least only for basic-rate tax-payers).
As Polly Toynbee points out:
'Here's another eccentricity: if a basic-rate tax payer – ie 87% of the population – gives £1, the state adds another 25p in gift aid to the charity, but the donor gets no tax relief. Only 40% or 50% tax rate donors can claim a personal benefit and get their tax bills cut. Since those in the bottom 10% give a higher proportion of their income than those in the top 10%, that seems unfair.'
So there is a direct financial benefit at stake that is only available to the higher-rate tax-payer; it is not just a potential loss to charities. I do not think many understand that.
And perhaps the rich donors face other, less tangible losses as well:
'I want to talk about what charity can do for us ... What do you do now you've got all the toys? ... You've already got all the houses, yachts, cars and jets you can use, so what comes next is charity ... I get invited to places I'd never have seen otherwise.'
Lord Fink, Conservative Party Treasurer, generous donor, ex-Citibank, ex-Man Group, ex-investment partner of Lord Levy (ex-chief fund raiser of the Labour Party and ex-friend of Tony Blair - see 'Cash for Honours') at a Lord Mayor's breakfast in the City of London
And the underlying argument remains that state funding of 'good causes' should be directed by a democratically accountable government rather than by the choice of the rich.
