Oxford University may be set to lose millions of pounds if government plans for a cap on tax relief on charitable donations are realised.
The Vice-Chancellor of the University, Andrew Hamilton, has written a letter to the Chancellor of the Exchequer, George Osbourne, expressing his concern at the proposals.
The government plan to cap tax relief at 25 per cent of income or £50,000, whichever is higher. Higher tax rate payers can currently claim relief of more than half the tax they pay on income which is donated to charity.
However, they did appear to climb down in the face of opposition from charities, with Downing Street announcing that a “formal consultation” on the measures will take place in the next few weeks. The Treasury previously said that it would discuss the measures with charities.
Oxford and Cambridge accounted for more than 44.2% of new philanthropic funds given to universities in 2010-11, so are set to be particularly affected by any reduction in donations.
A spokesperson for the university commented, “We are certainly concerned about the potential impact in higher education, where the government’s own policy emphasises the role of private and philanthropic investment rather than the public purse. A step that penalizes the government’s own approach seems ill-considered.
“Oxford’s fundraising campaign recently passed its initial target of £1.25bn and we are continuing to seek support. The generosity of Oxford’s donors provides huge public benefit, contributing to teaching, research and student bursaries. We have done our best, along with other universities and charities, to foster a culture of giving in the UK, and this move risks undermining that culture.”
David Gauke, the Exchequer Secretary to the Treasury, stated on the BBC Radio 4 Today Programme that the change might raise between £50 million and £100 million for the Treasury. He also said that the government would work closely with charities to minimise negative impacts on philanthropic giving.
Mr Gauke defended the measure, claiming “at the moment people are able to give to charities and indeed make use of other reliefs within the tax system that gets their rate down and the concern that we have [is that] we don’t think it is fair that people are able to get the rate down that low, even when the donations are to perfectly legitimate charities.”
In a bid to dampen criticism, the Treasury has released statistics showing the extent of tax avoidance in the UK, which show that almost 1,000 UK tax payers earning more than a million pounds a year pay less than 30 per cent tax on their income.
Oxford has received at least 11 donations of more than a million pounds in the past two years – five of these in 2009/10, and six in 2010/11. This does not include donations from those who wished to remain anonymous nor those from foundations, which a spokesperson for the university claimed would account for considerably more donations of above one million.
According to a Philanthropy UK report on charitable giving to universities, more than 3,500 donors gave gifts in excess of £25,000 to Oxford in 2010/11, with 500 of them donating above £250,000. James Martin has donated £95 million to the university since 2005, and Leonard Blavatnik donated £75 million in order to found the Blavatnik School of Government.
Last term, the University received more than £26m from Ms Mica Ertegun, in what it described as “most generous gift for humanities students in the University’s 900-year history”.
Martha MacKenzie, the OUSU President, commented, “Philanthropic gifts are incredibly important to student support in Oxford. Donations are a vital source of income for undergraduate bursaries and one of the only sources available to help plug the gaping hole in graduate funding.”
She continued, “I believe it is right for Oxford to protest against these changes as they make it far less attractive to donate; the largest donors will give less to the University as it will now cost them more to do so.
“It is also slightly strange that the government would choose to equate charitable giving with tax evasion whilst simultaneously encouraging us all to donate more and become more involved with the third sector.”
Anthony Breach and Kevin Feeney, co-chairs of the Oxford University Labour Club, expressed similar concern against the plans, stating, “At a time when Government is slashing state funding to universities, OULC believes that choking off private funding to universities will undoubtedly harm both the student experience and the world-class academic performance of Oxford and other British universities.
“Whilst the best American universities have developed extensive alumni and philanthropic networks in the absence of state funding, this move by the Government will cripple any such attempts by Oxford and its colleges to encourage donations.”
“We also do not believe that it will have any substantial effect on tax evasion, and that any comprehensive strategy to tackle tax evasion would need to include putting pressure upon tax havens to ensure that those revenues which belong to the British Government are appropriately collected.”
