Budget 2011 – the Coalition wedding story continues

Chancellor George Osborne revealed his first post-spending review budget on 23 March.  With inflation rising, growth stagnating and figures for public borrowing looking worse than anticipated, pundits were playing down the possibility of any big giveaways in the run-up. 

As the Coalition wedding story continues, was there anything of note announced for the voluntary sector?  Is the Big Society fire still alive, or are there signs that David Cameron’s first love may be fading as the practical realities of married life in the Age of Austerity set in? 

The Budget usually has a few surprises, a few things smuggled through in the small print, some announcements of future announcements, as well as a number of announcements recycled from previous announcements.  Below we give our breakdown of the main bits of interest to the voluntary sector – something old, something new; something borrowed, and something blue… 

Something old (well, kind of)

• Local Enterprise Zones (yes, LEZs) are a bit of a blast from the past, having first been introduced in the 1980s.  The general idea is to encourage investment and business in deprived areas by simplifying planning rules and creating tax incentives.  LEZs will be tied to the new Local Enterprise Partnerships, designed to bring local authorities and business together to boost economic growth.  LEPs replace the functions of the now scrapped Regional Development Agencies in England.  The Chancellor announced the creation of 21 Enterprise Zones, predominantly in the Midlands and the North of England – including Birmingham, Liverpool and Sheffield. 

• Community Investment Tax Relief encourages investment in disadvantaged communities by giving tax relief to investors who back businesses and other enterprises in less advantaged areas by investing in accredited Community Development Finance Institutions (CDFIs).  It is relevant to many social enterprises and regeneration groups.  The Chancellor announced that CITR would be retained in the Budget, despite the Government’s wider programme to simplify the tax system.  However, the Budget document says the Government will ‘renotify CITR to the European Commission and consult in advance of renotification on how the scheme can be made more effective’, which implies possible future changes to the scheme.
   
• Fuel duty – the Chancellor’s big crowd-pleaser was the postponement of the previously scheduled 1p rise in petrol duty, and scrapping the ‘fuel duty escalator’, a legacy of Labour’s last budget which scheduled regular rises in petrol duty. The Chancellor also cut fuel duty by 1p per litre.  Instead, the Government is introducing a ‘fair fuel stabiliser’ to tax oil producers when oil prices are high. These changes could offer some limited benefit to community transport groups or other charities that rely on volunteer drivers, which have been hit by higher fuel prices. 
   
• The Landfill Communities Fund provides grants to environmental groups from charges for waste disposal.  Budget 2011 announced that ‘the value of the fund will rise in line with inflation in 2011-12 to £78.1 million. Future decisions on the value of the fund will take into account the success of environmental bodies in reducing the level of unspent funds that they hold.’

Something new 

The big news for the voluntary sector in the Budget was the announcement of a range of measures to encourage charitable giving and philanthropy.  Although taken individually none are terribly radical, and some are not very firm commitments, taken together they are arguably more significant than anything put forward in any recent Budget.  Osborne said these would be ‘a big help for the Big Society’.

• Promoting legacy giving – the rate of inheritance tax will be reduced by 10 per cent for those estates leaving 10 per cent or more to charity, from a rate of 40 per cent to 36 per cent. This is likely to mainly benefit larger well-known charities, as they are far more likely than smaller charities and community groups to receive legacy donations.
   
• Increasing the Gift Aid benefit limit from £500 to £2,500 from April 2011 to enable charities to give ‘thank you’ gifts (i.e. the ‘benefit’) and to recognise the generosity of significant donors. 
   
• Consulting on proposals to encourage donations of pre-eminent works of art or historical objects to the nation in return for a tax reduction (details still to be specified, presumably in part through the consultation process).
   
• A commitment to introduce a new and simpler system of online filing for Gift Aid.  The Chancellor said this would be in place by 2013, but that date is not in the text of the budget document.  The document also announced that ‘intelligent’ forms (which contain automatic checks) would be published ‘shortly’.
   
• A Gift Aid small donations scheme. This will allow charities to claim Gift Aid on up to £5,000 of small donations per year without the need to submit Gift Aid declaration forms.  Depending on the details, this has the potential to significantly boost fundraising for small charities, which are less likely to claim Gift Aid because of the paperwork.
   
• The Government will explore how to increase the take up of Payroll Giving, which allows individuals to give through their pay and reduce their income tax bills.
  

Some other ‘new’ proposals will affect the sector indirectly, or will affect certain parts of it:

• Government will consult on merging income tax and national insurance, with a view to reducing cost and complexity.  Osborne said ‘it will take a number of years to complete.’ This is a massive reform that is likely to affect charities which employ staff over the medium-longer term, but it’s unclear exactly how.
   
• £180 million for up to 50,000 additional apprenticeship places over the next four years, including 40,000 places for young unemployed people, in particular through progression from the work experience programme.

Something borrowed

• A Green Investment Bank (GIB) will be capitalised to support investment in low carbon technology and industry.  £1bn was already committed in the Spending Review to set up the GIB, and the Chancellor announced that it will now hold an additional £2bn from asset sales.  The GIB will open in 2012 and will be able to borrow more money itself from 2015/16.  This may be relevant to charities and social enterprises working on environmental policy or directly on green technology.

Something blue (or rather green…or perhaps blue in the face)

• The Green Deal to reduce domestic energy consumption by investing in energy efficiency measures is being retained.   Budget 2011 announced that ‘The Government is committed to the success of the Green Deal and will act to encourage and incentivise take-up so that the Green Deal will appeal to households, businesses and prospective providers alike, before it is introduced in 2012.
   
• A range of planning reforms were announced in the Budget, mainly to stimulate development and house building.  Osborne claimed that these would mean the ‘default answer to development was ‘yes’, whilst existing controls to protect green belt land were retained.  Conservation groups will no doubt want to look at these measures in detail.

Some wedding gifts we expected but didn’t get…

• More details about the Big Society Bank, which is intended to grow the market in social investment and to facilitate financing and capital investment for social enterprises and charities.
   
• More about the forthcoming ‘Open Public Services White Paper’, the Government’s plan to open up most areas of public services to competition.  In previous weeks David Cameron and others have claimed this would create the opportunity for charities to bid for £60bn of public sector service delivery contracts.
  

Download the full Budget 2011 document at:

http://cdn.hm-treasury.gov.uk/2011budget_complete.pdf