Autumn Budget 2017 – key points for charities

Budgets invariably involve difficult decisions, but with pressure mounting from both sides of the Commons to turn on the spending taps, the widely anticipated downgrading of the Office for Budget Responsibility’s outlook for the public finances today has dealt an already beleaguered Chancellor a particularly tricky hand.

Following March’s ‘quiet budget’, Mr Hammond thought he’d have a rainy-day fund set aside for a potential economic slowdown – money which could be spent without compromising his self-imposed deficit reduction targets.

However, there is now substantially less capacity for grand giveaways, particularly of the sort that some Conservatives had perhaps hoped for in response to their poor showing in the General Election.

There have been some improvements to government borrowing figures. However, these have been offset by the OBR’s gloomy forecast and concerns about Brexit.

Raising revenue from additional taxation could have been one way around this. Indeed, tax rises shortly after a General Election are customary in British politics. However, with MPs understandably cautious of supporting tax increases for an unpredictable electorate, the Chancellor would struggle to win parliamentary support for even moderate reforms, as the self-employed NICs U-turn earlier this year demonstrated.

Given these financial constraints, it’s perhaps unsurprising that the Chancellor, already noted for his sober style, chose to focus more on long-terms goals, such as eliminating the deficit by 2025, rather than exciting giveaways.

There were, however, some commitments in today’s announcement (PDF, 782KB) that will be of interest to charities and the people they serve.

Some relief for beneficiaries

As widely trailed, the Chancellor announced a seven-day cut to the six-week waiting period new claimants of Universal Credit have to wait to receive payment. This follows a report last week from the Peabody Trust which said new claimants’ having to wait 42-days will result in 60,000 households, with over 40,000 children, receiving no income until after Christmas.

There is also an attempt to address the growing issue of rough sleepers. The chancellor unveiled what he called the government’s ‘first steps’ towards its commitment to halve rough sleeping by 2022, and to eliminate it by 2027. They include the launch of a Homelessness Reduction Taskforce, which he says will develop a cross-government strategy to work towards this commitment.

Some £28 million is to be invested in three Housing First pilots in Manchester, Liverpool and the West Midlands. The ambition is to support rough sleepers with the most complex needs to turn their lives around.

Meanwhile, £20 million of funding will go towards schemes to support people at risk of homelessness to access and sustain tenancies in the private rented sector.

The government has proposed that funding for supported housing, such as refuges, hostels, and shelter for people with mental health issues, be provided by local authorities. However, with council budgets already facing significant strain, many in the sector are sceptical of this approach. The lack of support for local authorities in today’s announcement will do little to allay these concerns.

Relief for smaller charities

The current VAT threshold of £85,000 will remain in place for the next two years, despite a recent report by the Office for Tax Simplification which recommended that government examine the current design of the VAT registration threshold. This means that small charities and social enterprises won’t be drawn into the VAT regime.

The chancellor also announced an Accident Rescue Charities Grant Scheme to to help accident rescue charities meet the cost of irrecoverable VAT. Further details of the scheme will be published in due course, but we do know that applications will open from Spring next year and that grants will only be available for ‘frontline activities’.

After several years of consultation, the government has confirmed that it will simplify the Gift Aid Donor Benefits regime by reducing the number of thresholds from three to two, increasing the generosity of the upper threshold, and legislating all extra-statutory concessions from April 2019. While welcome, it’s disappointing that the government has not appeared to take forward proposals for a low-level disregard that would have pulled small benefits out of the complex system altogether. This would have been a boon for small charities.

And the government has committed a further £36 million of banking fines over the next three years to support Armed Forces and Emergency Services charities and other related good causes. This completes the LIBOR Charity Funding scheme, bringing the total of funding committed since 2012 to £773 million. While this has been a significant boost for charities working in these areas, it’s a shame this money wasn’t spent more strategically on sector wide priorities.

Health, but not social care

There will be £6.3bn of new funding for the NHS over the next five years. On the investment side, this breaks down as £2.6bn for Sustainability and Transformation Plan areas, targeted at more integrated care for patients, more care out of hospital and reduced waiting times; £700m of bailout for ‘trusts facing the biggest performance challenges’; and £200m for efficiency programmes. There’s also £2.8bn of ‘resource funding’ (ie money for day-to-day spending), £335m of which will be going immediately to the NHS this winter to help ease the usual spike in demand.

For charities working in health related sectors, this will be a welcome announcement. However, it will be important that extra funding is allocated intelligently and targeted where it can be most transformative.

There was, however, no mention of much needed boost for the funding of social care, despite the LGA estimating that there will be a £5.8bn funding gap for councils by 2019/20.

A green paper will be published setting out the government’s plans to transform mental health services for children and young people. Charities calling on the government to improve care and support for children with mental health problems will welcome this opportunity to have their voice heard.

Looking forward

Pressure is mounting from across the political spectrum to ease austerity. Today’s Budget and the additional cuts to public service spending planned for the next couple of years, suggest charities struggling to balance the books aren’t out of the woods yet.

Meanwhile, inflation running at a five-year high combined with low wage growth, is creating more clouds on the horizon. Average earnings are set to fall over the next five to six years, despite a continued rise in the income tax allowance and the National living wage rising to £7.83.

Therefore, the disposable income of many households will become increasingly squeezed. This could have a negative impact on the levels of donations received by charities, while increasing demand for some of the services they deliver, such as debt support, social services and foodbanks. High inflation also means donations are worth less.

We recently wrote to the Chancellor, calling on the government to create a successor to the European Social Fund (ESF) and use dormant assets to bolster local grantmaking. However, like the Spring budget earlier this year, there was little in the way of giveaways specifically aimed at charities in today’s announcement.

That said, there weren’t any fiscal bombshells for the sector either. Another review of business rates and an overhaul of the VAT threshold were both tipped as potential announcements today, so in some respects a quiet budget was a good budget. Nor was there an increase in Insurance Premium Tax.

There was no strategic vision for sector, but then you wouldn’t necessarily expect a budget to provide this. We’ll be looking to help develop a longer-term vision by engaging with the government’s forthcoming development of a civil society strategy, Julia Unwin’s review of civil society, and the recently launched Charity Tax Commission.