It may well be the case that the Chancellor’s best hope for addressing the nation’s finances is a tax on blogs that comment on Budgets. Our brief survey suggests even a small charge would net considerable gain. So, with no little trepidation, here’s our contribution of the 10 things you might usefully want to know following the 2013 Budget.
1. The economy: we’re in for the long haul
The Office for Budget Responsibility halved its estimates for growth for this year, which you would have had to have been on another planet to have been surprised by. Pretty much every commentator has remarked on just how difficult the next few years will be: and as theBBC’s Paul Mason notes, with 2017-18 now appearing in the medium term forecasts, were now looking at the equivalent of Japan’s ‘lost decade’. This is going to be a difficult time for charity donors and beneficiaries alike.
2. Inflation: here to stay
Hot on the heels of the announcement earlier this week that RPI is no longer going to be a national statistic (the focus now being the lower CPI measure, which is being used to uprate benefits), the announcement of changes to the Monetary Policy Committee’s framework are more than just technical. They suggest economic growth is more important than inflation. And ‘non-normal’ low interest rates look here to stay for the medium term.
In short, prices will continue to rise more quickly than earnings. There is little cheer for savers – a majority of charities. And as prices rise more quickly than wages, living standards will continue to be squeezed.
3. Welfare spending: more caps and spending controls on the way?
NCVO’s members have uniformly highlighted their concern that the budget does little, if anything, for those most marginalised in society. Whilst the Chancellor made moves in areas such as raising the income tax threshold, Citizen Advice’s CEO Gillian Guy suggested the Chancellor ‘gave with one hand and took away with the other’, whilst JRF’s Julia Unwin said ‘the budget failed the anti-poverty test’. No big changes to the welfare budget were announced: but a technical announcement on a type of spending called Annual Managed Expenditure (the source of welfare spending) indicated a new control framework, to be announced at the Spending Review in June. We (and others) think this needs a watchful eye as it’s likely to be the mechanism to control further the welfare budget.
4. Department spending: winners and losers
It’s been widely trailed that health and education will continue to be protected from cash cuts in departmental spending. These further cuts will average 1% this year on top of those already announced. Add a dose of the aforementioned inflation, and the real-terms cuts are 2.4%, reckon the IFS. It’s worth repeating at this point that cuts already announced are still planned in: things look especially tight for the CLG local government pot. Even proportionate cuts from local government funders are going to bite hard. Within this context, it looks particularly admirable that the government has retained its commitment to spend 0.7% of national income on overseas aid. Many in the sector have welcomed this.
Departments as a whole have been underspending significantly. The Treasury has let them keep some of this money for next year, but another message to emerge from yesterday is that the tradition of increasing spending in the 4th quarter of the financial year is being clamped down on. Expect fewer funders to find the loose change from down the back of the sofa in future years.
Finally, what government calls ‘Total Managed Expenditure’ – or total spending – will continue to fall in 2016/17 and 2017/18 at the same rate as projected in the 2010 Spending Review. In other words: five more years. But probably not of the type crowds typically chant for at election rallies.
5. Employment costs: getting Britain growing
This was the rabbit out of the hat. The news that employers will get a National Insurance Contributions (NICs) subsidy worth up to £2,000 per employer (not employee), from 2014, is good news for the sector, as it includes charities. We reckon this is a good thing, particularly for small organisations looking to take on their first member of staff.
The Treasury told me today that they think 35,000 charities might collectively save £45m. Others, such as The Work Foundation and the Institute for Employment Studies, are less impressed (Policy Wonk alert: there’s likely a significant deadweight). We think this is potentially really useful given the sector’s place for many as a first step in the labour market.
6. Gift Aid: long-awaited reforms
After the experience of last year, I think we have to give the Treasury and HMRC real credit for trying to engage with the sector on reforming Gift Aid. The proposed consultation in relation to digital giving and the idea that you can a single declaration for all gifts you make via a platform such as JustGiving is welcome. After contributing to some of the workshops, I reckon this is a consultation that aims to achieve something, not kick an idea into the long grass. Something has clearly resonated on the issue of gift aid declarations and their increasing length and complexity. Again, HMT/HMRC’s desire to do something better is very welcome. Thank you, George.
7. Social Investment: another consultation, this time with purpose
After what feels like years plugging away at this issue via a number of consultations, it feels like the Treasury have taken note. We are now going to be consulted on proposals from government, rather than the sector. Put simply, the proposed tax incentives place investment in a social organization on the same footing as investment in a for-profit enterprise, a level playing field. We know that social investment isn’t for everybody: but it’s an important tool in the box for some organisations. These proposals are worth getting behind, as our partners (and here) in lobbying for this have noted. Here’s our report on this from last year.
8. Volunteers running events: improved guidance
We don’t in honesty know a huge amount about this. The budget announced that the new cross-government portal, gov.uk, will pull together clearer guidance for volunteers running events. But it sounds sensible if they are going to add to the guidance here.
9. Community budgets: joined-up government, savings on the way
What in old money was called Total Place and in new money is now called Whole Place aims to combine funding streams and involve neighbourhoods in deciding spending priorities. The four Community Budget pilots suggest that significant savings are possible; but just as important they highlight the potential for community engagement.
These are worth watching, both for their potential in terms of engagement, but also their risks: the loss of ringfencing arguably prioritises communities of place over communities of interest. More details around a proposed network for Whole Place, and its extension beyond pilots, will be part of the 2015-16 Spending Review, widely expected to be in June this year. No rest for the, er, wicked…
10. Regional Growth: the dog that didn’t bark?
There’s been much interest in Michael Heseltine’s report on regional economic growth and particularly the idea that spending is aggregated into a single pot controlled by Local Economic Partnerships (LEPs) – something akin to community budgets. The Chancellor today appeared to embrace this a little half-hearterdly (though IPPR North’s Ed Cox thought this was ‘a budget that would damage the regions‘).
Conclusion: Much ado about nothing?
The fate of all Chancellors is that budgets are invariably damned with faint praise at best and a within-days unraveling at worst. Commentators are arguing that this was a ‘fiscally neutral’ budget, uncharacterized by any significant changes that will grow demand in the economy. Changes therefore inevitably create winners and losers.
Voluntary organisations, it should be remembered, represent both camps (CAMRA, an NCVO member, noted the budget was ‘a momentous day for Britain’s beer drinkers’) . Whilst the measures aimed at voluntary organisations per se are good, we can’t but help notice that these good changes are small, whilst the situation for the people many of our organisations represent or work with – the poor, the disabled, the out-of-work, the homeless – remains difficult at best. It’s important to highlight that these issues dominate the collective response from the sector.
So, there you are. An important point to end on: I wrote this on the evening of the budget. There’s a long-standing tradition of details slipping out over subsequent days, so it might well be the case that you hear from us again…
Karl Wilding served as NCVO's chief executive from September 2019 to February 2021. 
