Charities U-turn timing attacked

Labour said the Budget had become an “embarrassing shambles” after earlier climbdowns over VAT on hot pasties and caravans.

Charities said they were delighted the Chancellor responded to their Give It Back, George campaign, which was supported by more than 1,000 voluntary sector organisations.

The cap, limiting tax relief at £50,000 or 25 per cent of income (whichever is higher), was proposed in Mr Osborne’s March 21 Budget and was expected to save the Treasury £50m-£80m a year.

The Chancellor told MPs then it was wrong to allow wealthy individuals to make “unlimited” use of income tax reliefs.

Westminster insiders understand that he was particularly concerned about donations to bogus foreign charities being used to avoid tax in the UK.

Charities warned, however, they stood to lose a significant proportion of the £1.4bn of donations on which reliefs are claimed each year, and Conservative MPs complained that the measure did not fit with the Government’s policy of promoting volunteering through the Big Society idea.

The Treasury had been holding talks with charities and major donors to assess the likely impact of the change but no announcement was expected until the end of a consultation this summer.

Mr Osborne has now written to representatives of the sector to tell them he was ditching the cap proposal, while pressing ahead with limits on other income-tax reliefs for the wealthy.

“I can confirm that we will proceed next year with a cap on income tax reliefs for wealthy people but we won’t be capping relief for giving money to charity,” said the Chancellor.

“It is clear from our conversations with charities that any kind of cap could damage donations and, as I said at the Budget, that’s not what we want at all. So we’ve listened.”

Labour accused Mr Osborne of trying to “bury bad news” by unveiling his latest climbdown during the parliamentary recess, at a time when Culture Secretary Jeremy Hunt’s evidence to the Leveson Inquiry was dominating the news agenda.

The judgment of Mr Osborne and Prime Minister David Cameron was “increasingly in question”, shadow Chancellor Ed Balls said.

“Another day, another Budget tax U-turn – three successive U-turns in four days – all when Parliament is not sitting and just a few weeks after ministers were defending these measures, show just what an embarrassing shambles George Osborne’s Budget has become,” added the MP for Morley and Outwood.

“But George Osborne and the Treasury are fooling no one when they claim to have cleared up their Budget mistakes. We now need to see a rethink on the biggest blunders in the Budget: the tax cut for millionaires while millions of pensioners and families are asked to pay more and the total absence of a plan for jobs and growth.”

Venture capitalist Jon Moulton, a major Conservative donor who announced he was withdrawing financial support from the party over the issue, said charities have already been hurt by the uncertainty of the past few weeks.

“It was a bad decision,” he said. “I am pleaded they have had the nerve to actually reverse it. It seems to reflect a lack of proper consideration before the stuff was put out. Nobody had thought through the implications of doing it.”

The chairman of the Commons Treasury Committee, Conservative MP Andrew Tyrie, said the succession of U-turns would encourage “vested interest groups” to press for concessions on measures in next year’s Budget.