A look ahead to the 2020 Spending Review

Next Wednesday the chancellor will set out the government’s spending plans for the coming year. Both the unpredictable nature of the covid-19 emergency and potential disruption to trade at the end of the Brexit transition period in January make for a volatile economic environment.

It’s difficult to build an economic framework on shifting sand. So rather than the usual three or four-year settlement for departmental budgets, the chancellor has opted for a single-year review, with longer-term decisions shelved for when the economic environment becomes more certain.

What do we currently know about the review?

The government has said that the Review will focus on:

  • providing departments with the certainty they need to tackle covid-19 and support employment
  • giving ‘vital public services’ enhanced support to continue to fight against the virus
  • investing in infrastructure to help ‘level up’ the country and drive economic recovery

Possible announcements for charities to look out for

Boris Johnson recently promised to do ‘much more to support the voluntary sector‘ over the winter as it deals with the financial fallout of the pandemic. Many in the sector will be desperately hoping the Review contains something that makes good on the prime minister’s pledge.

Back in March – before the first lockdown – the chancellor committed to increasing departmental budgets above inflation up to 2022. The extent to which he sticks to this commitment will be of interest to charities delivering a range of public services, many of which were strained even before the pandemic took hold.

We understand there’ll be more details on the long-awaited UK Shared Prosperity Fund (UKSPF) which will replace EU funding. We assume this’ll provide details about who will be responsible for distributing funding and identifying need, which would mean that the long awaited consultation – promised since 2017 – is not going to happen. NCVO recently published a paper setting out why a consultation is important and how we’d like to see the UKSPF designed and delivered. We’d also like to see Local Enterprise Partnerships (LEPs) improve their engagement with the sector if they’re chosen as a key deliver partner for the UKSPF. As it currently stands, many are lacking in this respect.

We’re likely to see plans to increase infrastructure spending in line with the government’s ‘levelling up’ agenda. Charities will be hoping this includes investment in social infrastructure. NCVO’s response to BEIS post-pandemic economic growth inquiry sets out the importance of the voluntary sector to a more inclusive economy, and the part charities can play.

International charities should be aware of reports that the government is planning on cutting the overseas aid budget from 0.7% of gross national income (GNI) to 0.5% next year. This follows a £2.9bn reduction to the budget because of a fall in GNI this year.

Even if a vaccine is rolled-out soon, public finances will be suffering a hangover for some time to come. We could therefore see government create some sort of ‘covid reserve fund’ to help departments catch-up with backlogged work. The pandemic has put a great deal of pressure on schools and the NHS this year. It’s likely that budgets for these areas will be increased next year.

Around one-in-five young people, and over one-in-five BAME workers who were furloughed during the first lockdown lost their jobs. There’s a high chance the second lockdown will worsen this crisis. One of the government’s key priorities for the Review is supporting employment, so expect an announcement around this.

There could also be an announcement on whether or not to keep the current uplift of £20 a week to Universal Credit, currently due to end in April 2021. This’ll be important for charities supporting beneficiaries from an increasing number of households struggling to cope with the economic fallout from the pandemic. Similarly, the chancellor may take steps to address rising levels of child poverty in some regions.

What we’d like included in the announcement

In addition to more details on the UKSPF mentioned above, we’ve called on the government to:

  • provide additional core government funding to strengthen the long-term financial sustainability of local authorities. Many councils are experiencing significant falls in income, additional costs and problems with cash flow.
  • use money from the next wave of dormant assets to establish a Community Wealth Fund, a national endowment for the most deprived communities that haven’t benefited from economic prosperity.
  • Support the release of the National Fund for the benefit of UK charities. The High Court recently ruled that the £500m held by the charity could be released, but what the money should be used for is yet to be decided.

As is customary, we could see other possible announcements trailed in this weekend’s press – follow me on Twitter for updates. On the day, my blog will report on the key announcements for charities. If you think I’ve missed anything, drop me a line.

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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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