Leading Article: Bring clarity to the world of charity in the `Giving Age'

ONE OF the trees among the forest of small measures in Gordon Brown's Budget was a new tax break for charitable donations. It seemed a good idea; a sensible response to the decline in charitable giving in this country would be to make all donations to charity tax-deductible. Though the cause of the "philanthropy gap" between the United Kingdom and the United States lies deeper in our respective cultures, easier tax relief may shift Britain towards the "Giving Age" that the Prime Minister wants to see.

However, when the small print of the Budget is examined closely it turns out that the Government is moving in rather small, crab-like steps, albeit in the right direction. The new tax relief, given its full youth-showbiz launch by the surreal duo of the Chancellor and Eddie Izzard yesterday, can be claimed only for donations of more than pounds 100 to anti-poverty and educational projects in the world's poorest countries. It is thus only a small addition to the tax relief available for regular charitable donations over four years, and through payroll deductions.

This is a shame, but there is a good reason for being so restrictive, which is that the present definition of a charity is hopelessly out of date. The four headings - relief of poverty, education, promotion of religion and community benefit - were set out by the courts in 1891. And it would be wrong, to say the least, for the Chancellor to give further tax privileges to donations to Eton College. This is where we hit the limits to New Labour's radicalism. Private education is a sensitive area, in which votes can be lost. So sensitive that not even a review of charitable status carried out at arm's length from the Government by the Charity Commission can be allowed to touch it.

The most straightforward course for a radical government would be to redefine charitable objects to exclude fee-paying schools and religion (churches should not be charitable, except for the good works that they do), and then to make all donations to charity free of tax. But even that would rouse a whole host of angry clerics and suspicious professional parents.

Instead, Tony Blair and Mr Brown are trying to do good by stealth. Yesterday, the Charity Commission announced that relief of unemployment should be added to the list as an explicitly charitable purpose. At the same time it insisted that its review would not affect the long-standing recognition that advancement of education is charitable. Besides, it would require legislation to take away the existing privileges of private schools, and last November, when he was an education minister, Stephen Byers made it clear that the Government had no appetite for that.

Which is a pity. One solution is to give the Charity Commission more independence and more powers to "name and shame" the lazy charities that rely on sentiment and tradition to build up huge reserves. With many similar charities operating in the same field, the commission could provide league tables so that donors can make informed decisions about where their money will be most effective.

Meanwhile, the existence of charity law means that the makers of our laws already determine that some ways of disposing of our disposable income are better than others. The existence of a state-sponsored National Lottery devoting its surplus to "good causes" says the same thing. So, as Mr Blair believes it is "good to do good", he is surely under an obligation to clarify what is good and what is not, and to remove from the "good" category anything for which a clear consensus does not exist. Above all, that means excluding spending on private schools, which increases social division.

While this obvious injustice remains in the law, the new tax break for developing-world charities, and widening the definition to include the relief of unemployment, seem very much like tinkering at the edges.