Policy, campaigns & research

Magic money helps George ease the Spending Review pain

In a Spending Review that was perhaps less severe than many had feared, how did charities fare? Rachel Cain, DSC Researcher, takes a close look.

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Rachel Cain, DSC Researcher

The overall picture presented by George Osborne was broadly more positive than many predicted, following the Office of Budget Responsibility’s (OBR) optimistic forecasts of public finances being around £27bn better off than expected by 2020.

Perhaps the biggest sigh of relief for many was the announcement that the widely opposed cuts to tax credits would be completely scrapped, at least until Universal Credit kicks in – this is not so much a U-turn as a temporary diversion. However, the Chancellor remains committed to achieving £12bn in welfare savings, the detail of which was fairly thin on the ground in his speech.

There were also big announcements around health, and a heavy emphasis on housing (‘build’ or ‘building’ featured almost fifteen times in Osborne’s speech). Overall, central government departments will also be cut far less severely than was forecasted in March, with for example further cuts to the police avoided.

So which announcements should charities take particular notice of? The analysis and debate will continue over coming days, and we are sure to unearth a few rotten apples, but here’s a handy roundup at first glance…

Ripoff averted – the Big Lottery Fund is safe (for now)

The biggest and most welcome news for charities was that a much-feared cut to the Big Lottery Fund was averted.

A couple of weeks prior to the Spending Review, the anonymous Save Big Lottery group revealed claims that the government was set to cut £320m from Big Lottery, diverting funds into sports and culture. DSC and many other voices across the sector have been campaigning to protect Big Lottery from what would have been devastating cuts.

As the largest single funder of the voluntary sector in the UK, with many of its grants going to small community groups and charities, this week has demonstrated that value of the Big Lottery is widely and passionately appreciated across the third sector, across political divisions and across the UK. Osborne’s announcement that Big Lottery ‘will continue to support the work of hundreds of small charities across Britain’ was met with great relief.

Direct implications for charities – including goodies for a select few

Military charities will welcome another windfall from the Libor fines, with £25 million being distributed to organisations including Guide Dogs for Military Veterans, Care After Combat and the Invictus Games.

On the International Day for the Elimination of Violence against Women, with many MPs wearing a white ribbon in support, the Chancellor also announced that donations equalling the £15m raised each year from VAT on women’s sanitary products would be given to women’s charities, until negotiations on with the EU to remove the tax can be achieved.

The government’s plans to extend the right-to-buy to tenants of social housing will also begin with immediate effect, under a new pilot scheme enabling the tenants of five housing associations to buy their own homes.

There will also be a further expansion of the Government’s National Citizen Service volunteering programme for young people, with an additional 300,000 places created by 2019/20.

Charity Commission budget freeze means more squeeze

Funding for the Charity Commission has been held at £20m for the five year period, though in real terms this will translate into a cut due to inflation.

In response, Chairman William Shawcross said this was a ‘recognition of the importance of the Commission’s work’ but that, nevertheless, the freeze will ‘put more pressure on staff’ and ‘there is little more we can do to reduce our costs without it affecting our regulatory work’. The commission is likely to consult on charging charities for some services and functions in the next few months, possibly before Christmas or early in the new year

Business rates – kicked into only slightly longer grass

As part of the Chancellor’s ‘devolution revolution’, it was announced that powers to raise or cut business rates would be passed from central government to local councils and elected mayors. By 2020, councils will keep all the receipts of business rates. A consultation planned for the end of 2015 has been moved into next year – so there is still uncertainty about how this will evolve. However, charities should be keeping a watchful eye on developments to see how they will be affected, as they benefit from rate relief to the tune of £1.5bn annually.

Local government – a Spending Review sleight of hand?

There was a lot riding on this statement for local government, particularly in the area of social care, where many care providers and councils fear a serious funding crisis.

Although the Chancellor announced an increase for the Better Care Fund, alongside eye-catching powers for local authorities to increase council tax by 2% to raise money for social care, the overall financial picture still leaves many local councils with difficult decisions to make. Councils in more deprived areas will continue to find it harder than others.

In the Local Government Association’s response to the Spending Review, Chairman Gary Porter said the consequences for communities of a £4.1 billion overall cut to local government funding ‘should not be underestimated’. He raised concerns for services such as children’s centres, libraries, museums, and care for the elderly that are ‘already buckling under growing demand’ and facing a ‘financial black hole’ by 2020.

Further clarity will have to wait until early next year, after the Local Government Finance Settlement is worked out. But it is safe to say that decisions made by local authorities over the coming months will have a big impact not just on local charities providing services to councils, but the people falling into the gaps left by council services that are scaled back or scrapped.

Some other useful blogs on the Spending Review: