Nearly a month after the Chancellor dropped his bombshell in the Budget, announcing a cap on tax reliefs for charitable donors, the House of Commons finally had a chance to discuss the matter in yesterday’s debate on the Finance Bill. Here’s an extract from the debate:
Rachel Reeves (Labour, shadow chief secretary to the treasury): …included in the Government’s definition of tax avoidance is tax relief for donations to charities including UNICEF, Macmillan Cancer Support, the Royal National Lifeboat Institution, Oxfam and many others. The fact that the Government cannot tell the difference between that and real tax avoidance shows how incompetent and out of touch they are.
Mrs McGuire (Labour MP): Does my hon. Friend agree that it might have been more appropriate for the Chancellor to discuss with the charity commissioners whether bogus charities were taking part in tax evasion schemes than to have come up with an ill-considered tax proposal?
Rachel Reeves: I thank my right hon. Friend for that intervention. She is absolutely right: instead of the Government making up policy as they go along, without bothering to talk to anybody who is affected by it, they should have consulted the Charity Commission and the charities affected. The Press Association reports that the Government are doing a U-turn; perhaps we will get clarification on that from the Chief Secretary to the Treasury, if he is bothering to listen to anything that is being said this afternoon. Will he confirm what the PA says—that there is a U-turn on charities tax relief? The fact is that nobody knows: the Government and the Prime Minister do not seem to know what is happening with their own policy, and we have had no clarification in the House this afternoon.
Charlie Elphicke: It is clear that we should crack down on tax avoidance, but I want to know whether the hon. Lady is serious about doing so. Will she condemn the tax avoidance of people such as Ken Livingstone, or is this just more crocodile tears from the Labour party?
Rachel Reeves: We are serious about cracking down on tax avoidance, but tax avoidance is not the same as giving donations to UNICEF, Macmillan nurses, the Red Cross, the National Trust and thousands of charities in this country that rely on the money they get to do their important work, often supporting some of the most vulnerable people in society. If the Government cannot tell the difference between tax avoidance and doing the right thing and supporting valuable charity work, it shows the extent to which they have lost their grip on reality.
Mr Ben Wallace (Tory MP): Does the hon. Lady agree that before people give money to charity, they must also fund their obligation to society? They must do that first, before they start funding charity.
Rachel Reeves: If the hon. Gentleman extended that logic, there would be no tax relief for giving to charities. I am not sure if that is what the Government are proposing. People who give money to charities should be supported. We have heard a lot from the Prime Minister about the big society, but all those words about philanthropy and giving seem to have gone out of the window. It would be interesting to know whether the Chief Secretary thinks he has performed a U-turn this afternoon in the Chamber, as is being reported.
As the British Red Cross said, “Not only is such a measure at odds with the Government’s own announced agenda of increasing and facilitating philanthropy, it would reduce our ability to achieve our charitable objectives and reduce our help to people in a crisis.” Is that really what the Government intended when they announced these changes to tax relief in the Budget? Indeed, after the performance of the Exchequer Secretary to the Treasury on the radio this morning, it seems that, along
with “expansionary fiscal contraction” and “we’re all in this together”, the latest casualty from the Conservative lexicon is the big society.
Christopher Pincher (Tory MP): Earlier the hon. Lady was extolling the virtues of the United States. She will know that even the US, which is possibly the most philanthropic society in the world, has a cap in place on philanthropic donations, so is she opposed to the principle of what the Government are doing, or does she accept that there is a role for a cap?
Rachel Reeves: In the US there is much more generous tax relief for legacies, for example, so it is a very different tax system. In many ways it is more generous than the system in this country. What I would like to see is policy being made in the proper way, which is by consulting the people who will be affected by it—consulting the charities, which stand to lose tens and perhaps hundreds of millions of pounds and which do such good work. Like the Red Cross, they say that their ability to do their work will be hampered by the changes in tax relief. That consultation should have happened before, rather than after, the Government’s policies were announced and the financial changes to Treasury revenues were introduced.
Calling people who give to charities tax dodgers, as this Government imply, and referring to charities as dodgy, when those charities include Macmillan, Red Cross, UNICEF and Oxfam, is unhelpful. If the Government truly want to increase giving, the language should be tempered and people who try to do the right thing and support worthwhile causes should be encouraged, not insulted, for what they do.