Spending Review 2013 – a two minute guide for charities

Unsurprisingly, the Chancellor didn’t pull a rabbit out of his hat today: most of the cuts  were anticipated. Reform, growth and fairness were the key principles for the Spending Review, Mr Osborne said. However, the devil as always is in the detail. Furthermore, the fact that something is expected doesn’t make it any less difficult to deal with. The cuts are steep and will compound the impact of those already made.

Some of the Chancellor’s key announcements…

Local government

As predicted there will be a further 10% cash cuts, over and above the 33% real terms cuts made so far (see LGA for more).

There will however be various pots of money that will apparently bring the cuts down to 2% (such as the £2bn ‘Single Local Growth Fund’ that LEPs can bid for, and £200m extra for the troubled families initiative).

The graph below is from our Counting the Cuts report earlier this year, and shows projected cuts to central and local government budgets from 2010 until 2018. How councils deal with the next stages of these cuts will be one of the most significant questions for voluntary organisations arising from today’s Spending Review.

Government said it wants to eliminate the “something for nothing culture” in the welfare system. The Chancellor also drew a distinction between welfare beneficiaries and taxpayers, although we know that this distinction is a false one. In reality there is a significant overlap, as highlighted by a number of organisations such as JRF and the National Housing Federation.

So on top of the £18 billion a year in cuts already made, the Chancellor now proposes further welfare reforms:

1. A new cap to the welfare system as a whole. The cap will be set in cash terms every four years, starting from April 2015. Housing benefit, tax credits and disability benefits will be included, but the state pension won’t.
2. Winter fuel allowance will be linked to a new “temperature test” so pensioners living abroad in warm countries will not be able to claim it.
3. A seven-day wait before jobseekers can claim benefits will be introduced.
4. Claimants who do not speak English will have to attend language courses or their benefits will be cut.

The impact of a new welfare cap could be highly significant and we will produce further analysis of this shortly.

The Treasury and the Cabinet Office

The Treasury and Cabinet Office resource budgets will be cut by 10%, but there will be extra support for the National Citizenship Service.

The Cabinet Office settlement includes continued funding of £56m to support Government programmes which encourage social action and help VCSE organisations play a bigger role in communities and public services. This mean OCS will receive the same in cash terms in 2014/15 as it will in 2015/16.

Charity Commission

Its budget will be reduced from £21.4m in 2014/15 to £20.4m in 2015/16.

Culture, Media and Sport

The department will face 7% cuts, although funding for community sports, the arts and museums will be reduced by just 5%.

The Government will also work with English Heritage to consult on establishing a charity to care for the historic properties in the National Heritage Collection on a self-financing basis, supported by a Government investment of £80 million.

Gift Aid

Mr Osborne also outlined how the Government would continue to back the Charity Research Support Fund and look into making it easier for these organisations to benefit from gift aid. Watch this space for more detail.

Our conclusions so far

So despite the emphasis on growth and fairness, this is potentially a strong blow to the sector. Falling funding, along with the likelihood for some organisations that welfare changes will see more people seeking their advice and support, mean that many charities will be in a precarious position. In particular, now more than ever it’s essential that local government is sensitive about how it finds its savings. Given that charities play a major role in preventing social problems and therefore reducing costs, councils looking to balance their budgets will need to have meaningful discussions with the voluntary sector about how they can support their communities.

Over the next couple of weeks NCVO will be discussing with relevant government officials about how these changes will impact voluntary and community organisations across the country, and what needs to be done so that the impact can be lessened as far as possible.