Making the government’s covid-19 support schemes work better for charities

When the government launched its covid-19 business support measures last month, it quickly became apparent that many of the schemes – despite being open to charities – included design features that would restrict the ability of charities to access the financial support they desperately needed.

The need to address these challenges became even more urgent following the chancellor’s announcement of the £750m charity support package. This amount, although welcome, will not be enough to prevent good charities around the country from closing their doors. Even many that survive will look very different in a few months’ time, with a severely reduced capacity to provide the support that people rely on. In recent weeks, NCVO has been working with the Charity Finance Group and Charity Tax Group to think about how the various support schemes can be made to work better for charities.

Below is an update on each scheme, including the recommendations we’ve put to government officials, and the positive changes that government has responded with so far.

Coronavirus job retention scheme

Charities that are on the frontline helping communities during covid-19 need to be mobilised, not mothballed. Yet many are facing a perverse incentive to furlough staff at a time when supporting the most vulnerable in society is needed more than ever.

Meanwhile, staff that have been furloughed are not permitted to volunteer for their own charity. This means that people with skills to volunteer in roles that can directly support with covid-19 are unable to undertake these vital tasks.

The scheme is not available for charities receiving public funding that covers staff costs. This is obviously to prevent double-funding but can cause difficulties for charities whose funding comes from a number of sources, or whose staff are partially funded by public money.

To make the scheme work better for charities, we’ve asked the government to:

  • relax the volunteering rules to enable charity workers with specific skills that can help respond to the crisis to be redeployed within their charity as a volunteer. This would mean for example that a head office employee at St John Ambulance who is also a St John Ambulance volunteer could volunteer in that capacity at a Nightingale hospital
  • enable not-for-profit groups that cannot furlough staff but which have suffered a reduction greater than 30% of income to qualify for payment under the scheme
  • allow furloughed employees to check in one day a week so organisations can be prepared for when operations restart. This will also be helpful where there is a need to maintain properties and do securing checks
  • provide more clarity on ‘public funding’ criteria, particularly where staff that are partially funded by the public sector are concerned.

Coronavirus business interruption loan scheme (CBILS)

Since CBILS was launched, we’ve been urging the government to remove the eligibility requirement that an organisation generate more than 50% of its turnover from trading, as it would prohibit the majority of charities from applying under the scheme.

Last week the government responded by removing the 50% trading requirement, potentially opening the scheme up to thousands more charities.

While a welcome development, feedback from charities that have applied to the scheme is that even if they meet all the eligibility criteria, they have still been refused finance from accredited lenders under the scheme. Even private sector organisations – for which the scheme was designed – have been refused loans by lenders, with take-up to date falling well below the government’s initial expectations.

Another challenge for charities is that their financial models may preclude them from taking on debt finance at such a precarious time. And even if it is possible, not many charities will have an appetite to take on liabilities.

To make the scheme work better for charities, we’ve asked the government to:

  • underwrite 100% of loans, as has been done with the bounce back loans scheme for small businesses
  • cap interest rates for charities when the initial 12-month interest free period is over
  • publish separate guidance for charities on whether loans are a suitable method of finance, and if they are eligible to use the scheme.

Small business grant fund

One of the key changes we’ve been urging government to make is to allow charities to apply for a small business grant of up to £10,000. For organisations unable to take advantage of the other schemes on offer, or the government’s £750m support package, accessing this support is particularly important at a time when a lack of liquidity is their primary concern.

Over the weekend the government responded in part by announcing a £617m discretionary fund for small businesses – including charities – that previously fell outside the scope of the small business grant fund.

The allocation of funding will be at the discretion of local authorities, with priority given to businesses in shared spaces, market traders, and small charity properties that would meet the criteria for small business rates relief.

We’re still waiting for more detail on the scheme to emerge, but it looks like this could provide a much-needed shot in the arm for many smaller organisations struggling during the pandemic. Charities will want to start thinking about applying as soon as possible.

Retail, hospitality and leisure grant fund (RHLG)

Although the retail, hospitality and leisure grant fund benefits certain types of charities, such as charity shops, art galleries theatres, museums, sports clubs and several others, this is a relatively small part of the overall charity sector.

The practical value of the scheme will also be limited because the government considers it to subject to European Union state aid rules which restrict payments to €800,000 (roughly £700,000) per undertaking.

While this may sound like a lot, it will restrict charities reliant on income from a larger retail network, because the scheme may only benefit up to 30 outlets despite them having hundreds of shops in some cases.

To make the scheme work better for charities, we’ve asked the government to:

  • reconsider whether the retail, hospitality and leisure grant fund should be regarded as state aid, on the basis that the beneficiaries of the funding are unlikely to distort competition between traders in European Union member states. This would not only benefit charities but would also support struggling high streets
  • expand the definition of eligible retail, hospitality and leisure properties to include community buildings that are required to close during the lockdown such as community centres.

PAYE and NICs deferral

It is possible for charities to request a deferral of payments of Pay As You Earn (PAYE) and National Insurance contributions (NICs), if they are encountering difficulties in making payments due to covid-19. However, deferred payments incur an interest rate of 2.6% from HMRC. This creates additional financial challenges for organisations already struggling with cashflow.

To make the scheme work better for charities, we’ve asked the government to:

  • automatically grant all businesses and charities the option of deferring PAYE and NICs payments and remove the interest payable to bring it in line with the VAT deferral.

Conclusion

The government’s stimulus package to help the UK economy deal with the covid-19 emergency has provided a vital lifeline for many businesses and workers while social distancing measures prevent them from generating an income. However, much of this support was designed with the private sector in mind, meaning charities have been unable to take advantage of the support on offer.

While government is listening by responding positively to some of our calls for reform, significant financial hurdles remain, both now and looking forward to the country’s post-covid-19 recovery effort.

Along with our sector partners, we will continue to push government for further support in the coming weeks. In the meantime, check out NCVO KnowHow for guidance on how to prepare for the potential impacts of coronavirus on your charity’s operations and finances, and Funding Central for funding opportunities that are currently available.

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Elizabeth Chamberlain Elizabeth is head of policy and public services at NCVO. She has been part of the policy team since 2008, as the expert on charity law and regulation. Her policy interests also include charity campaigning, the sector’s independence, transparency, and accountability.

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