Spring budget 2020: Things to welcome, but questions remain

Yesterday the chancellor delivered his spring budget. As expected, he used the opportunity to deliver on promises made by Boris Johnson before the election to start ‘levelling up’ regions of the country with a £600bn spending splurge for roads, railways, broadband and scientific research.

But the announcement was largely dominated by the coronavirus outbreak. Amid growing fears of a recession, the tanking of stock markets across the globe on ‘Black Monday’, and calls for EU governments to provide financial support for their economies, the chancellor’s primary focus was understandably on setting out an economic action plan for tackling a potential crisis.

Managing the coronavirus outbreak

The chancellor announced a £12bn package to counter the UK coronavirus shock, including the following measures.

  • Statutory sick pay of up to 14 days for organisations with fewer than 250 employees, including those who self-isolate and people caring for them. Charities that are employers will benefit from this support.
  • A £500m ‘hardship fund’ for councils to support economically vulnerable people and households. Precise details of how the fund will operate were not provided, but the government expects most of it to be used to provide more council tax relief, either through existing local council tax support schemes, or through complementary reliefs.
  • A temporary coronavirus business interruption loan scheme, initially worth up to £1bn. It will guarantee 80% of the value of relevant loans worth up to £1.2m to give lenders further confidence in lending to small and medium-sized enterprises (which may in practice include some social enterprises). More details will hopefully emerge in the coming days.

There will also be a £5bn emergency response fund for the NHS, with the chancellor adding that the government stands ready to provide any support needed in the event of an emergency.

In a joint letter with other sector bodies, we asked the Treasury to also support the many charities that will play a vital role in supporting individuals and communities, and which may be equally affected by cashflow problems and medium-term financial sustainability.

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There were also other announcements of interest to charities.

Scrapping the tampon tax

The ‘tampon tax’ will be abolished, marking the success of a 20-year campaign by women’s rights activists. The 5% VAT currently added to tampons and other women’s menstrual products will be scrapped when Britain leaves the EU at the end of the year.

While welcome news, the announcement will leave many charities wondering about the fate of the tampon tax fund, which has used the tax revenues to provide £62m of grants for organisations supporting disadvantaged and vulnerable women and girls.

Environment and low-carbon economy

The government has committed £1bn in funding for a range of green transport solutions, including electric vehicle use. There will also be £640m for tree planting, an increase in the climate change levy on gas, and a new plastic packaging tax from April 2022. A nature recovery network fund will also be established, partnering with local communities to protect wildlife.

Consultation on business rates

There will be a review of the business rates system amid concerns that it penalises high street retailers by not reflecting an increasingly online world. It’s rumoured this will examine proposals for a land value tax levied on landlords, instead of tenants.

In 2018/19 business rates relief was worth around £2.2bn for charities, representing at least a third of the value of all reliefs received. Any change could have serious consequences for the support and services charities deliver, so we’ll be urging government to ensure any new system doesn’t leave charities any worse off and recognises the important contribution charities make to the high street.

NHS and social care

There will be £6bn of further funding for the NHS in England and £1bn for social care over the next year.

Rough sleeping

The government will provide £643m for accommodation and support services to help people off the streets and start rebuilding their lives.

Increase in national insurance threshold

The national insurance threshold will increase to £9,500 by April 2020, which would save a typical employee over £104 per year.

Changing Places fund

Changing Places fund will provide £30m to Changing Places, a consortium including charities, to build fully accessible toilets with enough space and equipment to meet disabled people’s needs.

Abolishing VAT on e-publications

From December 2020, VAT on e-publications, including e-books, e-magazines and academic journals will be abolished.

Support for veterans

The government will provide a £10m to deliver charitable projects and initiatives that support veterans with mental health needs.

Preventing domestic violence

The government is allocating £10m in 2020/21 to innovative approaches to domestic violence prevention, which may be of interest to charities working in this area.

Review of Treasury green book

The Treasury is also reviewing the so-called ‘green book’, which sets out how public investments should be decided and directed. Changing the rules could be important for the government’s levelling-up agenda, with potential implications for communities down the line.

Employment allowance

Employment allowance will be increased from £3,000 to £4,000, saving money for charities who pay more than £3,000 in employer national insurance contributions.

What was missing?

Yesterday’s announcement gave us some indication of the direction that Boris Johnson’s government wants to take the country in. The considerable investment in infrastructure spending certainly suggests a break from the Conservative orthodoxy of the past decade.

However, it was disappointing that the issues we highlighted in a joint letter to the chancellor weren’t addressed. There is an urgent need to reduce the significant financial strain that many public services are facing by increasing funding for local authorities if all communities are to thrive from the government’s ‘levelling up’ agenda. More details about the long-awaited UK shared prosperity fund (UKSPF) are also needed if the programme, scheduled to be launched as early as April 2021, is to deliver for disadvantaged communities.

We hope the spending review and budget later this year will address these issues. In the meantime we will continue to speak to officials in government about the importance of supporting social, not just physical, infrastructure.

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Paul joined NCVO over seven years ago after working for a leading public affairs agency. Since then he’s led our policy work on a variety of issues, including welfare-to-work reforms, volunteering, the Compact, public service commissioning and procurement regulations. He now leads our work on funding and finance with a particular focus on charity tax relief and safeguarding EU funding post-Brexit.

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