David Cameron has given a strong hint that he is ready to water down a controversial cap on tax relief for charitable giving, saying he was ready to listen to critics and take time to "get it right".
The Prime Minister said he wanted to see more philanthropic giving to charities - something which a Treasury minister conceded would fall under the plans announced by Chancellor George Osborne in the Budget.
Downing Street confirmed that a full consultation is to be held over the summer on Osborne's policy, which would see a limit on a range of income tax reliefs of £50,000 or 25% of income, whichever is the greater.
The Treasury has said that the move, announced in the March Budget and due to be introduced through the 2013 Finance Bill, will crack down on wealthy individuals who use reliefs to minimise their tax contribution. It released figures showing that 6% of £10 million-plus earners paid less than 10% in tax and another 3% came in below the basic 20% rate. Fewer than three-quarters paid more than 40%.
But charities denounced the Chancellor's policy as "a shambles" and warned it would hit good causes like medical research, education and help for the vulnerable, while raising "relatively small amounts" in additional tax. The policy has also been criticised by dozens of leading philanthropists and university professionals.
Lord Fink, the Tory party treasurer, said on Saturday night the cap would mean that he, along with other rich people, would end up giving less to charity.
Cameron is expected to be among ministers who will talk to charities and philanthropists over the coming weeks about their concerns. Speaking in Derbyshire, he said he wanted charitable giving to increase and that "lots of things" could be done to sort out the issue.
"This was never going to introduced until next year - plenty of time to get it right, plenty of time to consult and to listen," said the Prime Minister. "But the key principle is - more for charities and philanthropic giving - yes. Allowing people to drive their tax rate down to 10% when they are some of the richest people in the country - no."
Exchequer secretary David Gauke fuelled charities' anxieties over the cap when he confirmed the Treasury expected it to have an impact on their incomes. Mr Gauke said the measure was expected to bring in £300 million of additional revenue across the range of reliefs, of which between £50 million and £100 million would come from the charities cap.
The latest to join the outcry was Labour's former prime minister Tony Blair, in a blog on Huffington Post UK about the role of philanthropy.
"This is absolutely the right moment for government to do all it can to promote philanthropy; and certainly nothing to harm it," he said in a thinly-veiled swipe at the Government's plans.
Labour leader Ed Miliband made clear his intention to keep up the pressure on the Prime Minister on the budget, by forcing a series of votes in the Commons on controversial tax measures.
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