Following Chancellor Jeremy Hunt’s Autumn Statement, various analysts have put together their assessments of the implications. DSC published our initial reaction last week, which looks at the statement in the context of key policies pushed by the Civil Society Group.
Below we highlight some other analyses by charities or for the charity sector which are worth reading for more information.
The big picture
The economic outlook is decidedly gloomy. Forecasters expect the next few years to see continued higher than normal inflation in the near term, rising unemployment, an increasing tax burden for most of the population, continued pressure on spending for public services, and household disposable income dropping by 7% – the biggest decrease since records began.
The Resolution Foundation continues to provide a valuable public service assessing the overall impact of hundreds of decisions taken by the Chancellor. Key findings from their analysis ‘Help today, squeeze tomorrow’ look at the tax and spending implications and their effects on different parts of the population.
The Foundation concludes that ‘Britain is getting poorer’ and that high inflation combined by the UK’s rising debt interest bill has led the Chancellor to implement ‘stealth taxes’ which mean ‘tax as a share of GDP is rising steeply, reaching its highest level since the Second World War…deepening the squeeze for all but the poorest quarter of the population (who gain more from increases to Universal Credit generosity than they lose from tax rises).’
The Institute for Fiscal Studies (IFS) also does a huge amount of work to analyse and explain the implications of these events and the wider economic context. They have produced four different slideshow briefings on the implications for tax, spending, public finances and support for households and living standards.
Living standards and benefits
The IFS’s Xiaowei Xu illustrates the forecast 7% decrease in household disposable income, which sadly puts us on track for another ‘lost decade’ in income that we’ve been experiencing since the financial crash of 2008. She also shows that despite the Chancellor’s welcome announcement that many benefits will be increased with inflation by 10% from April, out of work benefits will only return to pre-pandemic levels in real terms by April 2024. In other words, the increase confirmed in the Autumn Statement only puts back what was lost by in real terms by next year.
The Joseph Rowntree Foundation (JRF), which works to solve poverty in the UK, took a different approach by modelling the policy changes in the Autumn Statement to look at its effect on different types of example households. It concluded that in total, even with the various support measures announced by the Chancellor, the one-off payments and uprating benefits do not make up for rising rents, energy bills and other costs. Lower income individuals and families will be worse off in 2023/24 than they are now.
Charity sector-related briefings
Richard Sagar at Charity Finance Group has done a detailed briefing on implications for the charity sector, including relevant graphs from the Office for Budget Responsibility and the budget book. The briefing includes sections on what the Autumn Statement had to say about inflation, the government’s energy support schemes, benefits, departmental spending, local government, tax, National Living and Minimum wages and Levelling Up.
The Charity Tax Group has also listed the many different tax measures from the Autumn Statement that may affect charity employers. Richard Bray, CTG Chair, points out that with income tax thresholds frozen for several years it’s important that HMRC ensures Gift Aid operates as effectively as possible, and calls for reform to the VAT rules to benefit charities.
Without hope the situation is hopeless
Much of this makes for grim reading but it’s important to not lose hope. People across the country need so many services that charities provide maybe more than in at any time in recent memory, so we must persevere. Also, these are just forecasts; sure they’re formulated by people with expertise and based on lots of data, but they’re still ultimately predictions of the future – essentially educated guesswork.
Governments at the best of times have difficulty even predicting the amount of taxes they will collect in the future, which they’re directly in charge of. Their ability to predict inflation or economic growth, let alone to actually influence those things, is far less reliable and the effect of government policies is often over-stated. For example, it’s possible that inflation could drop more rapidly than expected, as global supply chains continue to recover from the pandemic. Or, that the war in Ukraine comes to some kind of resolution earlier than people expect, softening the crisis in energy costs.
Finally, there are things that we can and must keep doing to make a difference. Campaigning works – the voice of the charity sector and civil society was strong and united in advocating for the uplifting of benefits for example, and it showed – this clearly paid off in the Chancellor’s decision-making. Also, it was evident in making the case that charities needed to be included in the Energy Bill Relief Scheme. That effort is far from over – soon the Civil Society Group will be publishing survey data about charities’ energy needs to feed into the review that is underway of how the scheme might operate after March of next year.
So charities: keep calm and carry on campaigning!