Controversial plans to cap tax relief on charitable donations have been scrapped by Chancellor George Osborne.
This is another big Budget U-turn, this time on the charities tax.
Justice Secretary Kenneth Clarke has defended the Government's tax U-turns, saying the changes came as a result of listening to taxpayers.
The former Tory Chancellor Lord Lawson has welcomed the Government's u-turn on the charity tax.
He said he believes the Chancellor George Osborne has "taken his eye off the ball" in this case, in part because of the need to negotiate everything with his Liberal Democrat Coalition partners.
He told BBC Radio 4: "The great thing is that George [Osborne], on charities in particular which in my judgment was the most important thing - the biggest error, he has done the right thing and has had the courage to do the right thing. I am delighted."
Chancellor George Osborne has conceded that the proposed plans to cap tax relief on charitable donations would have damaged charities.
Roland Rudd, Founder of Legacy 10, an independent campaign that encourages charitable giving has praised Jeremy Hunt for his role in the Government's u-turn on charity tax.
Great news for Legacy10 campaign that charity tax cap scrapped; a personal victory for Jeremy Hunt who listened to philanthropists
A major Tory donor who withdrew his support for the party over the charity tax relief proposals welcomed today's U-turn.
Venture capitalist Jon Moulton, who has given the Conservatives £300,000 since 2004, told BBC Radio 4's World At One: "The idea that we charge into the sources of income for charities without very much thought was just not right.
"It was a bad decision. I am pleased they have had the nerve to actually reverse it.
"It seems to reflect a lack of proper consideration before the stuff was put out. Nobody had thought through the implications of doing it."
David Bull, the Executive Director of UNICEF UK, has welcomed the Government's u-turn on the charity tax. He said:
Today’s Government announcement on charitable tax relief is great news for vulnerable children. Donations from wealthy people are hugely important to UNICEF UK during humanitarian emergencies and this announcement will mean that we can continue to respond quickly, such as in the current food crisis in West Africa where one million children are at risk of severe malnutrition. The announcement shows the Government has been listening to charities during the consultation and we very much welcome today’s decision.
As I said.. RT @edballsmp: It seems G Osborne has lost control at the Treasury - tax u-turn after tax u-turn as economic plan collapsing..
Labour has accused George Osborne of trying to "bury bad news" by unveiling his latest climbdown while Culture Secretary Jeremy Hunt was giving evidence to the Leveson Inquiry.
– Labour charities spokesman Gareth Thomas
"This decision has already done considerable damage and has been responsible for the toughest year in a generation for Britain's charities and community groups.
"If ministers understood the work charities did, the vital difference they make for some of our most vulnerable and the important contribution they offer to make our communities stronger, this policy mess could have been avoided.
"Instead we have the spectacle of George Osborne trying to bury bad news on the day one of his rivals is in hot water at the Leveson Inquiry."
The Chancellor has explained the Government's U-turn on charitable tax relief:
– George Osborne
"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. So we've listened.
"Frankly, at a time like this the Government is going to focus on the big issues like the worsening eurozone crisis and Britain's deficit, and not get distracted with unnecessary arguments.
"We're going to concentrate our efforts on what really matters: keeping Britain safe in the gathering storm."
George Osborne's decision to scrap the charity tax cap came following weeks of talks with charities.
Since the Budget announcement, the Treasury has been holding discussions with charities and major donors to discuss the impact they believed the cap could have on charitable giving.
Meanwhile, more than 1,000 charities signed up to a call by the Charities Aid Foundation (CAF) for the Government to think again.