Public Policy

All budgets are a judicious mixture of good news and bad. This one was no exception. The main positive development for community affairs was the change to tax status of training. Until now, a concession avoided the ambiguities of whether employee community involvement with a skills development spin-off is a business expense, a charitable donation or a taxable personal benefit. By clarifying this, the Chancellor has not just removed a disincentive, he has also signalled that this activity is a mainstream part of business, recognised as such by Parliament and the government.

The list of bad news is longer. To achieve his headline cut in personal taxation, the Chancellor has shifted the burden from individuals to companies and from direct to indirect taxation. One consequence is that charities lose out on the tax back on covenants and Gift Aid. The cumulative effect since 1979 of tax cuts and VAT increases is very severe. In fact charities are net contributors to the Exchequer, because of the ?350 million bill for irrecoverable VAT.

The phasing out of profit-related pay was also disappointing. Some companies were undoubtedly just cutting tax bills and those who are really committed to profit-sharing will no doubt carry on. But the whole employee involvement movement has taken a blow and it would have been better to tightened rules, not abolish the schemes. All in all, this year's budget has not helped, especially when compared to last year's innovations: the introduction of the private finance initiative, the extension of 'challenge' partnership funding, a shift towards 'green' taxation with the landfill tax and big rise in the payroll giving upper limit.

Corporate Citizenship Briefing, issue no: 31 - December, 1996