George Osborne on Thursday dropped a proposed cap on tax-free charitable donations – his third Budget reversal in rapid succession – on a day that also saw a cabinet minister fighting for his ministerial career in front of the Leveson inquiry into media ethics.
The chancellor said he would exclude charitable donations from a limit on how much tax relief individuals can claim in a single year, giving way to sustained pressure from the voluntary sector.
The U-turn came as Jeremy Hunt, the culture secretary, emerged humbled but still in office after answering accusations he was too close to Rupert Murdoch’s News Corp while deciding whether to allow its bid for BSkyB to proceed.
Announcing his abandonment of the so-called “charity tax”, the chancellor said: “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.”
It comes just two days after he had a similar change of heart on other tax rises, dropping plans to put VAT on hot pasties and caravans, at which time his advisers insisted he would not make a similar move on charities. The total cost of the three reversals is at least £150m, prompting allegations by Labour that the chancellor has presided over a “shambles” of a Budget. In April he also gave churches a reprieve from VAT on building alterations.
Mr Osborne made his statement hours after Andy Coulson, the prime minister’s former head of communications, was charged over allegations he committed perjury during the trial of former MSP Tommy Sheridan.
The timing of the donations announcement – soon after Mr Hunt began addressing the Leveson inquiry – was, according to one coalition official, intended to reduce the impact of dropping the charity tax.
But after a bruising few days for the government, the news has fed perceptions that Downing Street is panicking after a badly received Budget triggered a slump in the polls.
Mr Hunt was last night backed by Number 10 after a seven-hour session during which it emerged he was often in contact with both James Murdoch and Frederic Michel, a News Corp lobbyist during the process.
He sent James Murdoch a text hours before he assumed the quasi-judicial role in the UK’s largest media bid, congratulating the man leading it for successfully getting over a regulatory hurdle.
Mr Hunt said he would not send that and other texts if in that position now, but robustly defended his handling of the takeover bid, saying he had taken the appropriate action at each stage.
Labour called for an independent investigation into Mr Hunt’s behaviour – a call which was swiftly rejected by David Cameron, who wants to keep his culture secretary in place to oversee this summer’s London Olympics.
But the chances of Mr Hunt winning the promotion for which he was being widely tipped just weeks ago now look non-existent, with the controversy having stalled the career of one of the Conservatives’ fastest rising stars.
One Conservative backbencher said: “There is only one piece of good news from the last 48 hours – surely it can’t get any worse than this.”
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