Chris White MP: Attacking charity donors will have unintended consequences. The Government must change its plans.

Chris White is the Member of Parliament for Warwick and Leamington. Follow Chris on Twitter.

At the last general election, the Conservative Party made clear that we wanted to support charities across our communities. This was not only because these organisations do worthy work helping thousands of people both at home and abroad, but also because we recognised the role that they would play in civic renewal. Like the rest of the country, charities are trying to operate in a difficult economic climate. The number of people that require their help has gone up, but they are feeling the squeeze as government support is reduced.

The National Council for Voluntary Organisations estimates that the voluntary sector will lose around £3.3 billion in public sector funding over the spending review period. Retrenchment in public spending is unavoidable and while I, like many others, would prefer to see local and central government do as much as possible to protect our charities from the worst of the reductions, support from the public sector was always going to fall. However this does not have to mean that support to charities has to fall.

Like the United States today, Britain has a great history of private philanthropy. Men such as Peabody, Rowntree and Wellcome have left legacies which have generated considerable benefit for the nation and have changed tens of thousands of lives. But since 2006/07, donations from individuals has flat lined, only increased by around £300m according to the NCVO’s Civil Society Almanac. This is in marked contrast to the start of the decade, where between 2001/02 and 2003/04 there was an increase in income to voluntary organisations from individuals from £9.7 billion to £12.3 billion – around £2.6 billion.

If we could achieve this kind of increase again in the years ahead, we could offset much of the reduction in support from the public sector and put charities on a more sustainable footing. This shows that there is potential for greater giving from private sources – and the Minister for Civil Society, Nick Hurd and the Culture Secretary, Jeremy Hunt, have been right to seek to increase the incentives for the wealthiest in particular to give more.

The announcement in the Budget 2011 that inheritance tax would be reformed to encourage chartable legacies for those giving more than 10% of their estate, was an excellent idea and sent a clear message of encouragement to philanthropists. But the most recent budget has muddied the waters. Like many, I agree completely with the aim to reduce the amount that the wealthiest can claim through unlimited tax reliefs, but the decision to include charitable donations could result in the loss of hundreds of millions of pounds for the sector and send out the wrong message on large donations – undoing a lot of the good work that has been done by the Government so far.

We have already seen a fall in the amount of donations over a million pounds between 2008/09 and 2009/10 from 100 to 80, with a reduction of around £218m in the total amount given through big donations. Capping tax reliefs could see this figure fall even further and threaten the existence of many charities that rely heavily on large private donations. I understand that there are concerns in Government at ‘tax dodgers’ using near dormant charities as a front to reduce their tax bill. But capping tax reliefs is not the way to solve this problem – more resources for the Charity Commission to clamp down on bogus charities is the way forward.

This is seeking to using a sledgehammer to crack a nut, and could have unintended consequences for the sector and for the Government’s aims to increase private giving and support charities. Fortunately, there is plenty of time for the Government to reverse this decision and to work with the sector at the upcoming Giving Summit to find constructive ways to clamp down on tax avoidance while at the same time supporting charities.

I will be working with parliamentarians and sector organisations such as NCVO and the Charity Finance Group in the months ahead to support their campaign to get the Government to change its mind on this issue. The Conservative Party at the last election made clear its commitment to the sector. This is an opportunity for the Party to show the strength of that commitment and show that we continue to have the best interests of our charities and communities at heart.