Who would you rather the tax-avoiding rich gave their money to: charities or the Treasury? Give it up, George: this is one battle you can’t (and shouldn’t) win

Here’s a question: would you rather rich people’s taxes went to Macmillan Cancer Support, Save the Chidren, Help the Aged, university bursaries for poor students, free entry to our museums and hospice care for the terminally ill (all of which would be threatened without the help of the wealthy) on the one hand, or to paying for the Government to carry on with its plans for funding Trident (a wholly unnecessary defence system if ever there was one), a non-functioning NHS computer system and any one of a whole series of wasteful and unnecessary governmental big ideas (fill in your own details) on the other? In other words, who consistently spends money more beneficially, responsibly and carefully: the Government or the major charities?

Of course it is, to some extent at least, an unfair question. There are things that Government does, and has to do, which cost money and which won’t get done if the Government doesn’t do them. So there has to be tax revenue. Nobody is going to start a charity to maintain the road system. But there is also massive, unnecessary and grossly expensive incompetence by governments. And when the Treasury tells me that for a rich man to pay no tax at all is “unfair” to me with my pitiful income, even when every penny of the tax some millionaire is legally avoiding goes not to maintaining an extravagant lifestyle but to charities which have had their funding cut by Government, what the Government is in fact patronisingly telling me is that it is fairer to me to spend that money on my behalf on what the government decides to spend it on rather than allowing the charities to spend it, and that I ought to support that intention and be pleased with the Government’s superior fairness in this respect. Well, ******** (fill this in with your own expletive of choice).

It is quite clear that the charities will suffer, and massively. It’s not in fact true to say that (as I had supposed) overwhelmingly the greater part of the income of the charities comes from relatively small charitable gifts. In fact, nearly half the giving to charities comes from seven per cent of all donors. The Treasury is trying to argue that putting a cap on giving, of either £50,000 or 25 per cent of an individual’s income, whichever is greater, won’t really affect how much he gives to charity: he’ll just raise his non-tax-relieved giving to make up the difference.

But that’s almost certainly not what would happen. Take the case of someone earning £1 million a year. Approximately half of that will go in taxes and he will be left with £500,000. But if he decides that half his total of £1million should go to charity, the charity or charities would get £400,000, with £100,000 returned by HMRC. The Government, having begun by taking £350,000, would keep about £250,000. The high earner is left with £250,000 to live on, or approximately half what he would otherwise have kept. Under the Government’s new proposals, if he still wanted to give the same sum to charity, he would be left with a maximum of £150,000. He’s almost certainly not going to do that. Some much wealthier individuals would simply adjust their donations. But some will probably stop giving altogether.

That analysis isn’t mine, in fact, though it seems plausible enough; it’s based on an argument made over the weekend by the famously wealthy Zac Goldsmith MP, who wrote in the Mail on Sunday yesterday, under the headline “I am ashamed of my own Chancellor’s tax on giving”, that

In the past few turbulent days, this Government has adopted an extraordinary and unexpected new position. It has declared war on the country’s biggest philanthropists. It is a breathtaking spectacle.

This is a time when charity has never been more important. But I am ashamed that a Conservative Chancellor has not only announced measures that will undoubtedly depress giving in this country; he has spun a narrative in which philanthropists are now the enemy.

His intention to cap tax relief on donations to charity could well prove to be this Government’s single costliest mistake. It is certainly the most shocking and has triggered a justified backlash from virtually every significant figure in the charity world. More than 2,200 charities and individuals have already signed a campaign against the move.

Esteemed philanthropist Dame Stephanie Shirley put it at its simplest. “To look at philanthropists as if they were just being tax avoiders is disgusting,” she said. Save The Children declared it to be “completely at odds with the Government’s plans for a Big Society. We strongly urge Mr Osborne to rethink this plan and do the right thing”.

Unicef UK, which like many such organisations relies heavily on wealthy individuals when emergencies strike, told me ‘these proposals could leave some of the world’s most vulnerable children as the real losers’.

So what on earth is going on? This is a Government whose central message to the electorate has been about Big Society. Much pilloried by its opponents, I wholeheartedly endorsed it as a positive and necessary guiding principle.

Crudely put, it is an acceptance that the State cannot and should not do it all alone; that society needs to take the burden. And yet here we are, two years in office, and the Government is pulling the rug out from beneath the very champions of Big Society, and in a manner so brutal it has taken days for the news to sink in, and for the backlash to start.

At a time when the Government is having a rough time on various different fronts, this looks like being potentially its biggest own goal yet. The Tories’ own supporters are turning on it, big time. The Conservative Party Treasurer, Lord Fink, warned that the decision would “put people off” giving large sums to good causes. He ought to know: he is a multi-millionaire former hedge fund manager, who is one of Britain’s most generous philanthropists; and he says that if the plans went ahead, the amount he would personally give each year would fall “by definition”: I think he means for obvious and inevitable reasons. “Potentially,” wrote Iain Martin yesterday in the Telegraph,

this is worse for Mr Cameron and Mr Osborne than the ‘granny tax’ because it weakens a key claim of the Tory modernisers that the Conservatives in the Coalition are very keen on charity and volunteering. And even if a partial U-turn is executed, the affair adds to the sense that the Government is accident-prone and poorly organised when it comes to transacting business.

Well, I really don’t care about that; and I suspect, anyway, that in the long term the U-turn would be forgotten. As Mr Cameron is already discovering, changing your mind if you find out that, on consideration you may have got something wrong, is more popular that sticking to a wrong-headed proposal come what may.

If the Government thinks it can take on the charities and come out unscathed, it had better think again. These are very determined people: and they have massively more support from public opinion than the Government. Universities including Oxford and Cambridge and sponsors involved in the government’s own academy programme have turned against the government over this. More than 940 charities have put their name to the GiveitbackGeorge campaign to change the Government’s policy, including 18 that raise money for hospices, three hospital charities, 22 children’s charities, 15 church charities and 17 women’s charities.

According to a poll conducted over the weekend by Comres, almost two thirds of Conservative and Liberal Democrat backbenchers are opposed to the cap on tax relief for charitable donations. Give it up, George. If you do, you won’t end up looking weak (not for long, anyway): you will simply increase your reputation for common sense.