Looking ahead to Autumn Statement 2014

Next Wednesday, George Osborne will be delivering the last Autumn Statement before the General Election. This is the government’s last ‘fiscal event’; civil servant speak for ‘the time the government announces spending giveaways’. Last month NCVO, alongside other bodies, wrote to the government ahead of the Autumn Statement with suggestions for how the Chancellor could support the sector.

Next Thursday between 3:30-5pm, NCVO will be hosting an online discussion, about the Autumn Statement with members to give their views and ask questions. You can also follow NCVO’s immediate analysis as it happens next Wednesday via the hastag #volsecAS14.

But what should we be looking out for  and what may be the impact on voluntary organisations and their beneficiaries?

There may be trouble ahead…

Despite strong growth over the past year, everyone expects the Office of Budget Responsibility (OBR) to report that the government will struggle to meet its deficit target for this year. This is because tax receipts (the money that the government gets in through taxes) have not grown due to poor wage growth, provoking concern about a ‘tax free recovery’ (and sadly, that isn’t a good thing!).

The OBR may conclude that this is just a temporary blip, in which case, there may not be any long term impact. However, if the OBR concludes that this is a long term trend, this will make the structural deficit (the deficit that will not go away as the economy grows) larger and this will mean that the government will have to plan for more cuts in order to meet it’s deficit reduction targets.

This could force the government or any successor to cut departmental budgets or further squeeze welfare budgets. It will also mean that the government has less flexibility about spending and any ‘giveaways’ to voters or key sectors will have to be small in scope.

Moreover, given that we are only half way through reducing the deficit, with around £37.5bn additional cuts (or tax rises) still to come, any changes to the size of the deficit could create significant pressure for charities already dealing with the effects of spending cuts.

Watch out for welfare spending

The Chancellor has previously used the Autumn Statement to be ‘tough’ on welfare spending, and the Conservatives have already proposed an additional £12bn of cuts to welfare if they form the next government. However, cutting welfare has not proved to be as effective for reducing the deficit as the Chancellor had hoped.

According to the Institute for Fiscal Studies, the Chancellor has only made £2.5bn worth of savings instead of the £19bn that he had hoped. This is because the costs of providing housing benefit and disability living allowance have risen and cuts to tax credits have not been met. The government has also created a ‘welfare cap‘ which is supposed to limit the amount that can be spent on welfare, but further unexpected rises in spending could cause a breech

So watch out for the Chancellor’s comments about welfare and whether he announces further cuts in order to meet his target. Any additional cuts will put further pressure on charities and their beneficiaries.

FOREX fines & local sustainability

The Chancellor cryptically stated that fines paid by banks for alleged manipulation of foreign exchange markets (Forex fines) would be used to support those that represent the ‘very best’ values in our society. So there may be some ‘giveaways’ to select groups of charities, similar to the government’s use of LIBOR fines to support armed forces charities.

One of the last major acts of the Nick Hurd as Minister for Civil Society was to announce a £40m Local Sustainability Fund which was consulted on over the summer. The government has not yet confirmed the size or scope of the fund, but this is likely to be central to the government’s offer for the sector in the Autumn Statement – so look out for this. Perhaps the government will use the Forex fines to pay for this fund or to increase its size?

Tinkering with charity tax

It wouldn’t be an Autumn Statement without some proposed changes to charitable tax reliefs and there may be an announcement on Gift Aid following recent research into the behaviour of donors, which I recently wrote about.

There may also be announcements regarding donor benefit rules, which determine what value of gift and tokens you may provide to donors and keep Gift Aid eligibility, following consultations between HMRC and the sector.

It is also likely that the government pronounce its view on how it will expand the Social Investment Tax Relief, following a consultation over the summer. A significant increase in threshold for how much organisations can raise through the tax relief would make this much more useful for charities.

Voluntary organisations have continued to raise concerns about the Gift Aid Small Donations Scheme (GASDS) and there is a possibility that the government may use the Autumn Statement to start a consultation on how to fix the scheme. Improving GASDS could be worth tens of millions for small charities. However, tax policy is not central to the Autumn Statement and Wednesday will merely set the platform for Budget 2015.

Prepare for the unexpected

There has been significantly less pre-briefing of this Autumn Statement than last year, probably because the Chancellor has less room for manoeuvre given the state of the public finances. This means the chances for surprising policy announcements are higher, so organisations should prepare for the unexpected.

I’ll be writing about the announcements on the day and tweeting live updates, but if you have any comments or questions ahead of Wednesday’s statement please leave a comment below.

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Andrew was NCVO’s senior policy officer. He covered issues around funding, social investment, tax and the impact of the economy on the voluntary sector. Andrew has left NCVO, but his posts are kept here for reference purposes.

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