Tory tax policy 'a mess' says Ed Balls

Shadow Chancellor Ed Balls has sought to step up pressure on the Government over the controversial cap on tax relief for charitable giving, describing the move as “cobbled together at the last minute”.

Mr Balls said there was a “massive outcry” against the plans, which, he said, came at a time when charities were under pressure from public spending cuts.

“If you cobble something together at the last minute and you don't think about it, you don't talk to the charities, you don't talk to the Charity Commission, it all falls apart,” he told ITV Daybreak.

“In this Budget, there have been so many things - caravans, pasties, pensioners' tax rise, charities - where the Chancellor doesn't seem to have thought it through in advance.

“Now it is a mess, really.”

He added: “At the moment out there, there are cuts to local services for elderly people, for children, and it is hospices who are saying we are going to lose funds, it is Macmillan nurses, lots of charities, saying at just the moment when our services are under pressure any way from public spending, they are now going to take away money from charities.

“What is so difficult is that the Government cut taxes for the richest people but they are taking the money away from the charities. Where is the fairness in that?”

His remarks come after David Cameron yesterday gave a strong hint that he is poised to water down the proposed cap, saying he was ready to listen to critics and take time to “get it right”.

The Prime Minister said he wanted to see more philanthropic giving to charities - something a Treasury minister conceded would fall under the plans announced by Chancellor George Osborne.

Downing Street confirmed that a full consultation is to be held over the summer on Mr Osborne's policy, which would see a limit on a range of income tax reliefs of £50,000 or 25% of income, whichever is the greater.

The Treasury has said the move, announced in the March Budget and due to be introduced through the 2013 Finance Bill, will crack down on wealthy individuals who use reliefs to minimise their tax contribution.

It released figures showing that 6% of £10 million-plus earners paid less than 10% in tax and another 3% came in below the basic 20% rate. Fewer than three-quarters paid more than 40%.

Charities have denounced the Chancellor's policy as “a shambles” and warned it would hit good causes like medical research, education and help for the vulnerable, while raising “relatively small amounts” in additional tax.

Mr Cameron is expected to be among ministers who will talk to charities and philanthropists over the coming weeks about their concerns.

Speaking in Derbyshire yesterday, he said he wanted charitable giving to increase and that “lots of things” could be done to sort out the issue.

“This was never going to introduced until next year - plenty of time to get it right, plenty of time to consult and to listen,” said the Prime Minister.

“But the key principle is - more for charities and philanthropic giving - yes.

“Allowing people to drive their tax rate down to 10% when they are some of the richest people in the country - no.”

Exchequer Secretary David Gauke fuelled charities' anxieties over the cap when he confirmed the Treasury expected it to have an impact on their incomes.

Mr Gauke said the measure was expected to bring in £300 million of additional revenue across the range of reliefs, of which between £50 million and £100 million would come from the charities cap.

The latest to join the outcry was Labour's former prime minister Tony Blair, in a long-planned speech in the United States about the role of philanthropy.

“This is absolutely the right moment for government to do all it can to promote philanthropy; and certainly nothing to harm it,” he said in a thinly-veiled swipe at the Government's plans.

Mr Blair said later that the Government should change course and do a U-turn.

“The Treasury's got a battery of measures to take against people who are avoiding their tax or abusing the tax system,” he told the News At Ten.

“But the philanthropic sector does a fantastic job and, really, in the right circumstances, it can be a great partner for government and it can often do things that government won't do.

“So I think, you know, they've gone down this route; the most sensible thing is, frankly, as I learnt in government, sometimes it's best just to do the U-turn.”

Labour leader Ed Miliband made clear his intention to keep up the pressure on the Prime Minister on the budget, by forcing a series of votes in the Commons on controversial tax measures.

Speaking during a visit to a job support service in Stratford, east London, yesterday, Mr Miliband said: “What we're seeing is a Government that is cutting taxes for millionaires through the Budget, and at the same time raising taxes on charities, pensioners and working families. I think that's the wrong thing to do.

“We've seen total incompetence from the Government. Four weeks after the Budget, they're ripping up their proposals on charity taxation. That is not the way tax policy should be conducted.

“They were desperate to cover up the 50p tax cut by having a hasty and ill thought-through measure which was apparently trying to counter tax avoidance.

“Of course we should counter tax avoidance but we must make sure it is done in a competent and fair way. The Government has failed that test.”

Chief Secretary to the Treasury Danny Alexander has said there were “attractions” in the US system, which caps relief on donations to some charities at 50%.

This was one of the options reported to be under consideration by the Chancellor. The Financial Times said Mr Osborne was also looking at the possibility of allowing donors to roll over unused tax reliefs to future years if they are used for gifts to good causes.

A Number 10 spokeswoman has said the changes set out in the Budget Red Book, which are due to be implemented through the 2013 Finance Bill, remain Government policy.

“What is in the Red Book is Government policy. It is set out,” she said.

“But there is a process in terms of how it might be implemented. That is the conversation we are now going to have with charities.

“We have yet to discuss how it will be implemented. There are various options on the table and we are going to discuss them. We have set out the broad policy and now we want to see how we are going to implement it.”

PA