The Chancellor sprang his first and last ever ‘Spring Budget’ on us on 8 March (he’s changing the big event to the Autumn from now on).
Amidst multi-dimensional global messes, what did we make of mild-mannered Mr Hammond’s modest monetary remarks? Could ‘Mr Spreadsheet’ Phil the Accountant compete for airtime with the likes of Trump’s Twitter? (thankfully he didn’t go down that road, but did have a few gags at the opposition’s expense).
Here’s the low-down on what it means for charities – we’ve annotated ‘Red Book’ sections where appropriate, which refer to the actual Budget document, linked at the bottom of the page.
The economy, stupid
The economy – and more specifically the political economy of the public finances – affects us all. The Chancellor predictably packaged up some good news: increased economic growth forecasts compared to his Autumn Statement last year, dropping unemployment, wage growth, improving tax receipts. As a result he expects to borrow billions less in the near term.
However, he also acknowledged that the UK still faces a £1.7 TRILLION debt mountain, and as a result is paying a whopping £50bn a year in debt interest. Further, inflation is set to rise in coming years, which will eat away at disposable income. This, plus continued uncertainty over the ultimate implications of Brexit, means for the time being he is sticking to his previous plans on public spending: in other words, no end to austerity for the foreseeable future (or as the Chancellor puts it, ‘discipline on public spending’).
The State of services
Apart from Brexit, some key policy issues that directly or indirectly affect millions of charity beneficiaries dominated the debate in the run-up – particularly state services like social care, the health service, and to a lesser extent the viability of local government.
Social care (probably rightly) got top billing. The Chancellor offered an additional £2bn stop-gap funding over three years for England – far less than many were calling for, but potentially it provides some breathing space until a better solution can be developed. He also announced a Green Paper consultation for ‘later in the year’ (Red Book 5.5-5.6).
Whether the Green Paper materialises in time for the Autumn Budget remains to be seen. Fundamental reform on social care will take years to implement, assuming politicians have the political will. Either way, it’s important that the charity sector is involved in shaping the way forward.
Central funding for local government will continue to be hammered over coming years, which is the other side of the social care problem. The DCLG budget line for Local Government expenditure drops from £8.2bn in 2017 to £5.4bn in 2019 (Red Book Table 1.6). Although the plan to allow councils to keep more of their business rates over this period may help make up some of the shortfall, without alternate revenue sources councils will continue to be under serious financial pressure for years. We’re likely to see more strained relationships, upheaval (and also potentially new opportunities and partnership working) between councils and local charities, social enterprises and community groups.
As an example, a councillor from Sefton Council was on Channel 4 news following the Budget. He said his council faces a £28m funding shortfall for social care in coming years, and that continued provision would require closer working with the voluntary sector. Ok, but how will that be funded? A share of the £2bn? Voluntary services may be effective, and even cost-efficient, but they aren’t free. The sector needs to keep making the case for the value and effectiveness of grants in these policy decisions.
We wondered too whether there would be any news about the Charity Commission, which has been in discussions with the Treasury about a consultation on charging charities, but it didn’t appear anywhere in the Budget document (read DSC’s view here). The lack of news might be considered good news, but who knows? For now, we can assume that the current long-term settlement of £20m p.a., with no annual inflationary increase, and £8m for ‘transformation’ the Commission’s digital delivery remains in place.
Any look-in for charity specifically?
Not really, apart from an announcement of £20m over the course of the Parliament to ‘support organisations working to combat domestic violence and abuse, and to support victims’ (Red Book 5.13). This will surely be welcomed by many charities working in that area. But is it a drop in the ocean compared to what has been cut already?
Hammond also announced £12m funding from the so-called Tampon Tax Fund for a range of women’s charities across the UK, with successful projects to be confirmed in March (read my colleague Rachel Cain’s take on the Tampon Tax.)
There are some figures on ‘Gift Aid Reform’ (inclusion of which in perennial Budgets is almost a standing joke in sector policy circles) which indicate increasing expenditure from £10m up to £20m by 2022. We think this is mostly forecasting the implementation of the Gift Aid Small Donations Scheme, but there’s no detail.
It is possible too, that some charities will benefit from the social care funding announcement, in addition to the Chancellor’s announcement of a £300m discretionary relief fund to help businesses cope with recent rates revaluations (particularly hitting London and the South East – see Red Book 3.15). Overall charities are less exposed to the revaluation hikes, but it remains to be seen whether those which are will be eligible for these reliefs.
What was missing?
Brexit oddly – it was the elephant in the room, but Hammond did his best to avoid speaking its name. Unlike in the Autumn Statement, there was no update on Government commitments to translate billions from various EU funding programmes to domestic programmes after Britain leaves.
In the run-up, the Minister for Civil Society had made a big announcement about his review of dormant assets, claiming that up to £2bn could be made available to the social sector in coming years – but this didn’t feature anywhere in the Budget.
Also, after being a major feature of so many of George Osborne’s budgets, welfare reform didn’t get much play. The main Red Book section (Red Book 1.51-1.53) restated policy announcements like the Welfare Cap from previous budgets; it’s worth remembering that the full effect of £12bn in previously announced cuts is still to come.
Read the full Budget Red Book documents and some other useful blogs:
- HM Treasury Red Book
- Charity Finance Group Live Blog