Policy, campaigns & research

Summer Budget 2015: evolution rather than revolution?

Despite the surprise election result in May, the first Budget of the new Conservative government seemed more like evolution than revolution – a modification of the existing direction of travel set out in the last Coalition Budget in March, rather than a radical change of course.

Jay Kennedy, DSC Director of Policy and Research

For charities, the Budget was mostly a dud in policy terms but then again didn’t offer any immediately evident fresh threats (always a possibility). The Chancellor yet again played the self-styled philanthropist, redistributing another £70 million chunk of LIBOR banking fines to a handful of no doubt worthy Armed Forces charities (see Red Book 2.47 for the full list below).

But again, we wondered: why does he get to decide which causes are most deserving? And why always the Armed Forces or other people wearing uniforms? There’s a disturbing sense that this state philanthropy is less about social need and more about using charity to boost the Government’s populist appeal. In fairness, there was a tweak in George’s beneficence this time round, as he announced a £3 million fund to support victims of domestic abuse (not from LIBOR fines – see Red Book 2.50 below).

Apart from that there were no substantive initiatives to help out a charity sector being squeezed by increasing demand from beneficiaries, spending cuts, and potential pressure on public donations prompted by political / press paroxysms about telephone fundraising. We didn’t even get the usual non-committal boilerplate about ‘working to reform Gift Aid.’

The big surprise of the day was the new ‘National Living Wage’, forecast to raise the minimum wage to £9 per hour by 2020. This could help many people on low wages but may significantly add to some charities’ costs. In order to lessen the likelihood that employers will hire fewer people if they have to pay them more, the wage rise is counter-balanced for the smallest employers by raising the National Insurance Contributions (NICs) Employment Allowance by £1,000 to £3,000 from April 2016 (see Red Book 1.127 below).

The more substantive long-term impact of this Budget was always likely to be around welfare, and the long-anticipated £12billion in cuts. A number of changes to working age benefits were included, which will affect many charitable beneficiaries. The Budget announced freezes to working-age benefits and Local Housing Allowances for 4 years, plans to reduce rents in social housing by 1% a year for 4 years, a further reduction in the ‘benefit cap’ which limits the total value of benefits that individual families can claim, and further changes to tax credits and Universal Credit.

The Welfare Reform and Work Bill, introduced the day after the Budget, contains a bit more detail – advice and support charities in particular will no doubt be scrutinising this with fine-toothed combs.

Young people look set to take a particular hit in the welfare cutbacks, particularly as those under 25 will not qualify for the new National Living Wage. Also, the Budget introduced a new ‘Youth Obligation’ for 18 to 21 year olds on Universal Credit. From April 2017 young people out of work for 6 months must ‘apply for an apprenticeship or traineeship, gain work-based skills, or go on a mandatory work placement’ to receive benefits – otherwise known as compulsory workfare.

Further, from April 2017 the Budget will remove the automatic entitlement to housing support for new claims in Universal Credit from 18-21 year olds who are out of work. It says that there will be exemptions for vulnerable young people who cannot live with their parents, but how will these function? Will it be possible for those vulnerable young people (or those charities helping them) to navigate? The view which comes across is that the Government believes younger people should be at home with parents if they are unable to support themselves – but this presumes that a) there are parents and homes to go to and b) those parents are not the cause of the young person’s vulnerability – for example through abuse. (see especially Red Book 1.158 and 1.159 below).

The next big political set-piece is the Spending Review in the autumn, when another £20 billion in cuts to departmental spending will be laid out. Whitehall civil servants are already working through the review process, and one likely outcome will be continued heavy cuts to local government spending, which will have a knock-on effect on charities. Already at the bottom of the priority list, local government’s position is likely to worsen even further in the review as the Chancellor announced an increase to the Defence budget – effectively making it another ‘protected’ department alongside health, education and international development. This will mean a larger burden of cuts to be shared out by the rest.

 

You can find the full Summer Budget 2015 ‘Red Book’ document here.