It is disappointing for Conservative ministers to seem to equate philanthropy and charitable giving with tax avoidance

At the last general election David Cameron declared that the Big Society was the Conservatives’ big idea. Whatever one thinks about the potency of the Big Society as a political message – and I have my doubts, as I have said before – it is based on a good Conservative principle: that the state’s role is limited, and voluntary groups have an important part to play in helping society flourish. So it would be a pity if, rather than encouraging such groups, the government’s policies actually damaged them.

It is good news that the government has announced a formal consultation on its plans to restrict tax relief on charitable donations, announced in last month’s Budget. As they stand, the proposals threaten to deprive charities of funding and contradict the government’s intention to promote the voluntary sector.

Under the previous government charities came to rely more and more on taxpayers’ money, to the extent that parts of the voluntary sector practically became another arm of the state. The coalition has tried to correct this, not just for reasons of austerity – necessary though that is – but to ensure that these groups can thrive in the future independent of government. Culture Secretary Jeremy Hunt and David Willetts, the Universities and Science Minister, have quite rightly been encouraging the arts establishment and the universities to look more to philanthropy as a major source of income.

This idea works well in America. The richest Americans give eight times as much as their British counterparts (though we are more generous than Europeans). Yet rather than encouraging individuals to get into the habit of giving, the Budget plans, as announced, would take us in the opposite direction by limiting a powerful incentive to contribute.

Worst of all, an impression has been created that philanthropists are just trying to get out of paying tax. Marcelle Speller, the founder of localgiving.com who has given £2 million over the past four years and was awarded the OBE in 2011 for services to philanthropy, said last week that it was “rather galling” – to put it mildly, I should imagine – to think “that money has now been seen as a tax dodge. It doesn’t give me a good feeling.” The government should encourage people to give, not call into question the motives of those who do so. It is disappointing for Conservative ministers to seem to equate philanthropy and charitable giving with tax avoidance.

Those who give to charity do reduce their tax bills, but they are not better off as a result of their giving in the way that is sometimes suggested. They are still giving more money away than if they had simply paid their tax and carried on with their lives. More to the point, it is the charities who would ultimately suffer under the proposed new rules – perhaps to the tune of hundreds of millions of pounds – as money that they would otherwise receive was diverted to the taxman.

People contribute to the general good in all sorts of ways: by creating wealth, providing jobs, developing new products and services, by volunteering their time and talents, by giving money. This is central to the idea of the Big Society. It would be a sad state of affairs – and a profoundly unConservative one – if we came to judge a person, company or country by how much tax we all paid.

Read this press release on ConservativeHome

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