Spending Review 2015 – What we heard from the Chancellor

A reprieve for the Big Lottery Fund

The best news for many NCVO members was a very welcome step back from a planned £300m raid on BLF’s funding.  The chancellor and prime minister both spoke about the importance of maintaining BLF funding for community organisations, as well as protecting current levels of investment in the arts, sports and heritage sectors. Our members’ work in drawing their MPs’ attention to the issue was invaluable in securing this outcome.

U-turn on tax credits

Perhaps the most notable wider announcement was the chancellor completely cancelling his plans to cut tax credits, causing him to breach his self-imposed welfare cap. He plans for welfare spending to fall back in line with the cap by the end of the parliament, largely as a result of further changes to housing benefit. Keep an eye out tomorrow for the IFS’s distributional analysis to see what the net effect on low-income households is likely to be.

Departmental spending cuts

In what is becoming something of a tradition, the chancellor announced further LIBOR fines allocation to armed services charities, museums, and a children’s hospital, amounting to £25m over three years. He also announced the creation of a new annual £15m fund to support women’s charities. £5m of this year’s fund has already been allocated, with the remainder to be administered by HMT.

While this funding will be welcome news for the relevant charities, the real impact of the chancellor’s spending review for the sector will be felt in the departmental spending settlements.

The local government spending picture is going to be particularly important. The DCLG local government budget is going to fall by £6.1bn in cash terms over the next five years, with OBR forecasts predicting this will be offset by significant increases in council tax and business rates revenue increases. We await further analysis on what this will mean for public services – the LGA has previously indicated that significant cuts likely outside of their statutory responsibilities for children, adult social care and waste management (see my previous blog).

The NHS will still be expected to make a previously announced £22bn of efficiency savings, but is receiving £10bn of additional funding, with the majority frontloaded in 2015/16. However, the rest of the Department of Health is seeing a 25% cut.

Funding for the Charity Commission is being held at £20m in cash terms – once you take inflation into account, this is effectively an 8% real terms cut by 2019/20. The Commission is expected to consult on charging for some of its services in the near future. We don’t yet have a definitive picture of the Office for Civil Society’s budget, other than confirmation it will continue to exist, albeit with reduced headcount

Apprenticeships and volunteering

The previously announced apprenticeship levy will now be introduced in April 2017. It will be set at a rate of 0.5% of employer’s pay bills, but only for employers with payrolls over £3m a year. At first glance, it looks like on average, the 1,000 or so largest charities with a payroll over £3m will see a payroll cost increase of around £30,000 a year – although the picture is complicated by how much they already spend on apprenticeships. We will be talking to government over the development of the new Institute for Apprenticeships about how this will affect charities.

In volunteering news, the chancellor also announced further funding for the National Citizen Service, expanding it to deliver up to 300,000 places by 2019-20. We’d like to see NCS providers do more to support and draw on the knowledge and expertise of local volunteer infrastructure, to help secure the best volunteering experiences for young people to support local charities and communities. It’s important that the additional funding is used to improve how well the scheme works as well as the number of volunteers.

Business rates and the Small Donations Scheme

Having heard the business rates review would report before Christmas, it would now seem we will get no clarity on charitable reliefs until the March budget, although we got reaffirmation of the chancellor’s previous announcements on 100% local retention. DCLG is expected to consult on changes to the local government finance system, including the implementation of business rates changes. We will continue to make representations to the government, and in the meantime, it’s important for charities to understand how any changes to reliefs, particularly mandatory relief would affect them.

In other charity tax news, the 2016 review of the gift aid small donations scheme has been brought forward, and will be launching a call for evidence from this December, to which we’ll be responding.