Would a ‘clean’ Brexit really be good for charities?

‘What’s the best way to leave the European Union?’ is a question currently engulfing the political classes, who, it would be fair to say, are not in a state of agreement on the best way forward. Pick your adjective from a chocolate box of choices: hard, soft, fudge(d) or, as our colleagues at CFG have just reported, ‘clean’. Meanwhile the Article 50 clock is ticking, quickly, leading to arguments about transition and how long will be needed. These are difficult, complex arguments framed by ideological positions and emotive language. The challenge facing charities, keen to stand up for the communities they serve, is how to engage in the debate.

What sort of Brexit would benefit charities?

I think anyone reading this would assume such a question is a proxy for what we are all interested in: what is the best way of leaving the European Union so that we can preserve or enhance the future of the communities we serve, whether those be communities of interest or place?

CFG have argued that a clean break – leaving the single market and customs union – would give the UK government more latitude to ‘cut red tape’ and set its own policy in areas including tax and state aid rules, and that this would benefit charities. Maybe. But we have been here before domestically, as those who remember the much-trumpeted Red Tape Challenge will remember. Much ‘red tape’ derived from Europe is in the interests of achieving regulatory parity, allowing us to trade frictionlessly with the rest of the bloc, or in the interests of protecting workers, consumers or the environment.

A common message we hear from charities is that they are concerned that Britain sees its future in a competitive world based on low regulation. Many charities tell us they are concerned that removing regulation could come at the cost of trade and the wellbeing of people and the environment. For this very reason, anything that frames Brexit as an opportunity to cut ‘red tape’ – even if well-intentioned and restricted to certain regulation – sends entirely the wrong signal to government. Indeed, the loss of hard-won regulatory protections is perhaps the single biggest cross-cutting concern of the charities we talk to, and something they’re desperately trying to prevent.

The Single Market

The issue of a future trade deal with the EU is also a discussion point. The terms of any EU trade deal will have profound impacts on the economy and the subsequent wellbeing of British society, especially the most vulnerable. The priority for the UK has to be getting the best possible trade deal with the EU.

Crucially, that deal will depend on a number of complex trade-offs. For instance, a requirement of a favourable trade deal might be that regulations governing state aid or VAT stay harmonised, on the grounds that this prevents one party gaining a competitive advantage over the other. In an ideal world VAT rules would be changed to allow charities to recover VAT, and state aid rules might be redrafted to favour charities. But this should clearly not come at the expense of securing a favourable trade deal with the EU. The wider prosperity of the UK is far more important for charities and their beneficiaries than an additional £1.5bn in VAT rebates, nice as that would be.

Less money to Europe equals more money to charities?

A final issue to consider is whether leaving the EU without paying for future access to the single market is beneficial for charities. As CFG note:

’A clean Brexit which did not involve a trade deal and a payment from the UK towards the European Union would mean that the UK government would have more funds available to directly support charities which are delivering public goods.’ – CFG report.

This argument has appeal. However, it is based on a number of assumptions: we do not yet know if a trade deal with the EU will require making future payments for access to the market. Canada has just finalised a trade deal with the EU without making any payments. Moreover, there is no reason to believe that government would make more money available to UK charities if it no longer had to pay into the EU budget.

We are keen to stand up for charities and their beneficiaries, and in doing so we have asked ourselves the question: should the UK’s relationship with the EU be determined by some hypothetical grants to charities? Or can we best achieve our aim of standing up for charities and their beneficiaries by supporting the best trading outcome which will determine the health of our whole economy, the charity sector and our beneficiaries included? We believe the latter.

What really matters in the Brexit debate

We’ve been working very hard to bring together NCVO’s members and many different parts of government over recent months, to ensure that the sector’s voice is heard in Brexit policy.

The priorities as we see them are getting a good trade deal for the good of the UK economy, its people and the charities and the causes they work for, and maintaining a robust regulatory framework that protects consumers, the environment and vulnerable people in our society.

Achieving these goals will require a great number of trade-offs. The direct interests of charities should of course be a factor, and we will be fighting hard to get the best deal for charities in respect of specific issues such as funding and regulation, but not even NCVO thinks the particular interests of charities should frame the UK’s negotiating strategy. Moreover, charities do not operate in a vacuum and focusing on their interests, in isolation, wouldn’t be in the best interests of the sector. The biggest threat to charities would be a diminished economy, and the impact that would have on charities and the people they support. Brexit should be negotiated in the best interests of the general public. Ultimately, this is in the best interests of charities too.