Chancellor Rishi Sunak MP gave his Spending Review on 25 November, setting out government spending for 2021. Due to the ongoing uncertainty around the pandemic and associated deep economic recession, this review had already been downgraded from the usual three years to just an annual plan.
Sunak didn’t shy away from delivering sobering news about the devastating economic impact of COVID19 and its effect on the public finances. The economy has contracted a staggering 11.3% in 2020, we’re borrowing an additional £394bn this year to deal with the crisis, and debt is now forecast to reach 95% of GDP by 2025. This is unlike anything we’ve seen in peacetime.
Still, the Chancellor confidently sprayed around billions of pound signs in multiple directions during his statement, from the NHS, to transport, to housing and local government. There were also significant announcements that will be of keen interest to the charity sector or sections of it – a selection of which follows.
1. Cuts to international aid spending
As was widely trailed in the run-up, sadly the Chancellor announced that Britain’s spending on international aid would drop from 0.7% of Gross National Income to 0.5% during 2021. Hundreds of charities and aid NGOs had signed an open letter against this move and mobilised opposition in Parliament, but Sunak defended the decision by saying that even with this cut the UK would still be spending £10bn annually and would remain the world’s second-greatest aid donor. The prioritisation of domestic spending and public finances comes at a time when the much of the developing world has yet to feel the full brunt of the pandemic, and sends a negative signal to other wealthy countries who will be facing similar choices.
2. UK Shared Prosperity Fund
Since the Brexit vote, successive governments have promised to replace funding that would have been provided under various EU structural funds, typically for skills, employability, regional inequality and the low-carbon economy, as a ‘shared prosperity fund’. DSC and other members of the #NeverMoreNeeded campaign have argued that the UKSPF should invest in services that support people and communities experiencing disadvantage and discrimination that are neglected by mainstream state provision, and that local communities and civil society organisations should be involved in its design and delivery.
The Spending Review document included a bit more detail about how UKSPF would work in a ‘heads of terms’ section on page 37. This states that government will ramp up funding so that matches ‘receipts from EU structural funds, on average reaching around £1.5 billion per year’ and that it will provide ‘additional UK-wide funding to support communities to pilot programmes and new approaches.’ It will focus investments on people (particularly skills), communities and place (community facilities and assets) and local business. The government will publish an ‘investment framework’ in the spring.
3. Levelling Up Fund
One of the most intriguing lines from the Chancellor’s statement was the planned creation of a £4bn ‘Levelling Up Fund’ to ‘invest in local infrastructure that has a visible impact on people and their communities and will support economic recovery’. The fund will ‘prioritise bids to drive growth and regeneration in places in need, those facing particular challenges, and areas that have received less government investment in recent years.’
The #NeverMoreNeeded campaign has joined hundreds of other civil society organisations in calling for a Community Wealth Fund to help ‘left behind communities’, using up to £2bn in dormant financial assets. Danny Kruger MP also picked up this idea in his recent Levelling Up review, calling it a Levelling Up Communities Fund.
It’s quite unclear what if any overlap there is between the Chancellor’s ideas and those proposed by civil society groups. The aims appear similar, but the mechanisms and provenance of funding could be different in important ways. Tellingly, in his statement the Chancellor said local areas would need to bid for funds to the Treasury and other central government departments, and that projects would need the support of their MP, and ‘demonstrate impact’ – which frankly doesn’t sound terribly empowering or decentralising. As with the UKSPF, more details are expected ‘in the new year’.
4. Charity Commission budget
One small but positive bit of the Spending Review document which will have gone largely unnoticed concerns the budget for the Charity Commission in the coming years. The table on page 90 shows the Commission’s budget rising from £24.9m in the 2019 spending review to £27.3m in 2020/21, and then to £28.3m in 2021/22. This means that the Commission’s budget is now getting back nearer to the levels it was prior to the massive cuts it endured following the banking crisis and 2010 election (when it dropped much closer to £20m annually). Whether this level of resource will be sufficient to support the necessary regulatory activity and support for charity trustees remains to be seen.
5. Local government funding?
The Spending Review document acknowledges that ‘Covid-19 has placed additional pressures on local authorities who play a crucial role in enabling an effective response to the pandemic’ and promises to provide ‘over £3 billion of additional funding to local authorities’ to handle the crisis. The spending review document mentions ‘an additional £254m to help rough sleepers and those at risk of homelessness during the pandemic.’ The tables on page 30 of the document confirm that spending on local government will rise substantially in 2021 and 2022 compared to the pre-COVID-19 period. The Chancellor also announced that he will change rules allowing councils to raise more revenue from council tax and social care precepts.
Local authorities are under massive financial pressure which predates the current crisis, which has serious collateral effects on local charities and voluntary groups, in terms of reduced funding and increasing demand. That’s why the #NeverMoreNeeded campaign’s five-point plan asks that local government finance be put on a more sustainable footing, which doesn’t exacerbate existing inequalities. The Chancellor’s announcements will likely be welcomed but many will question whether they’re sufficient given the huge budget cuts local government has sustained over a decade.
There were positive and negative aspects to this Spending Review and as with any government set-piece announcement like this, it can take days, weeks or even years for the full details to be unravelled. Many of the announcements which appear positive or interesting at first glance may not look so great on closer inspection, and many others will be found to have few ‘further details’ in existence at all because the work has not yet been done.
You can read the full Spending Review 2020 document here.
So stay tuned to www.dsc.org.uk, @DSC_Charity and www.nmn.org.uk for the latest updates on these and other important policy issues affecting the charity sector!