Spending review 2020

Throughout this year we’ve become accustomed to Rishi Sunak delivering economic statements, but today’s spending review was arguably the most anticipated yet.

Spending reviews set out how much the government is going to spend on public services for the years ahead (and sometimes other things). In more normal times, they span three or four years.

But this year has been anything but normal. The economic uncertainty created by covid-19 and the end of the Brexit transition period persuaded the chancellor to hold a single-year review. Longer-term decisions have been postponed for when the world becomes a more certain place.

The economic outlook

The spiralling costs of covid-19, coupled with a reduction in tax revenues to pay for those costs, have left the UK poorer. By the end of 2020 the UK economy is expected to be more than 11% smaller than before the pandemic took hold – the steepest decline in centuries.

This economic hardship has inevitably impacted on the voluntary sector. Three-quarters of charities expect demand for their services to rise over the next year while more than 80% expect income to fall. The sector is facing its toughest challenge in decades.

Today, we’re publishing the second wave from our barometer as part of the #RespondRecoverReset project. We can start to look at trends of how charities, community groups and social enterprises have been affected by Covid-19.

Full report https://t.co/XBaa6h0g9g

Summary below 1/ pic.twitter.com/sqBXk2FqJC

— Lisa Hornung (@LisaHornung_) November 25, 2020

Announcements of interest to charities

Charities may find some comfort in the chancellor keeping to his promise that people ‘will not see austerity’ in his announcement (although the effect of a decade of cuts to public services continue to linger for many communities).

Employment support

The Office for Budget Responsibility expects unemployment to peak at 7.5% in the second quarter of 2021. In an effort to stem the rising tide of unemployment the chancellor announced plans for a new £4.6bn package to help people back to work, including:

• £2.6bn for Restart scheme to support those out of work for 12 months
• £1.6bn for the Kickstart scheme to subsidise jobs for young people
• £375m skills package, including £138m to provide Lifetime Skills Guarantee.

Health and social care

The health budget in England will rise by £6bn, including an extra £3bn for the NHS to cope with covid pressures. £500m will be provided for mental health services in England and there will be £300m extra grant funding for councils for social care.

Education

There will be a £2.2bn uplift for core schools budget, including investment in buildings, £300m for children with special educational needs, £83m for further education provision and £44m for early years support which many charities provide.

The UK Shared Prosperity Fund

The chancellor confirmed the launch of the UK Shared Prosperity Fund (UKSPF) which will replace money formerly provided through EU structural funds. This will begin with £220m next year for local areas to pilot programmes before ramping up to ‘at least match receipts from EU structural funds, on average reaching around £1.5bn per year’.

The UKSPF will focus on:

• investment in people and skills tailored to local needs
• investment in communities and place including cultural and sporting facilities, civic, green and rural infrastructure, community-owned assets, neighbourhood and housing improvements
• Support for people most in need – including specific cohorts of people who face labour market barriers – through bespoke employment and skills programmes tailored to local need.

Although this sounds promising, some significant questions remain:

• How much of the UKSPF – including the £220m for next year’s pilots – will go to marginalised communities, as opposed to supporting existing state provision?
• Will charities play a meaningful role in the pilots? The sector’s knowledge and expertise will be particularly important given the lack of consultation on the UKSPF’s design.
• Who will be responsible for distributing funding and identifying need for the UKSPF? We’d like to see this determined by local boards consisting of key stakeholders, including charities.

NCVO recently published a paper setting out how we’d like to see the UKSPF designed and delivered which looks at these and other questions. We will be providing analysis on the programme’s design as details emerge.

New ‘Levelling up’ fund

A ‘levelling up’ fund worth £4bn has been announced – on the face of it, this looks like it will be mainly targeted at economic development in places that are facing particular challenges or have had limited investment in recent years. The government does however suggest the fund will support community infrastructure, something which we know is a problem in certain areas from the Civil Society Futures report and the Community Wealth Fund Alliance. The apparent role of local MPs in supporting bids for funding has also raised some eyebrows, after the Towns Fund – £300m of which has been allocated to this new fund, was primarily targeted at Conservative held and target seats. Again we’ll have to wait for more details to see how this will work.

Local authority funding

Alongside additional covid funding, the government announced a 4.5% increase in core spending for councils next year. Given the substantial cuts experienced over the previous decade and the additional demands of the pandemic, the announcement has received a lukewarm reception from councils. The Local Government Chronicle estimates that today’s announcement amounts to a £2.5bn cash injection, which is likely to fall short of what is needed to avoid the financial failure faced by around 50% of councils.

https://twitter.com/LGAcomms/status/1331627684594675712?s=20

International aid budget

As widely trailed, the overseas aid budget will be cut from 0.7% of national income to 0.5% next year. This follows a £2.9bn reduction to the budget because of a fall in national income this year. The UK’s foreign aid policy is hailed by some as one of the greatest moral achievements of the past 20 years. That’s why along with nearly 200 charities and individuals we signed an open letter urging the government to reconsider its plans.

The cut in the aid budget – made worse by no set date for restoration – is shameful and wrong. It’s contrary to numerous Government promises and its manifesto.

I join others in urging MPs to reject it for the good of the poorest, and the UK’s own reputation and interest.

— Archbishop of Canterbury (@JustinWelby) November 25, 2020

Domestic violence

There will be £40m of additional support provided for victims of crime, including domestic abuse. There will also be £98m more for local authorities to support the delivery of a new duty to support victims of domestic abuse and their children in safe accommodation.

Charity Commission funding

Funding for the Charity Commission will be increasing from £24.9m in 2019–20 to £28.3m in 2021–22. This will likely be seen as a step in the right direction by a sector that think its regulator is currently under-resourced, but it could also raise expectations about the Commission’s performance.

What was missing?

Like many others, we were hoping for more details on Boris Johnson’s recent promise to do ‘much more to support the voluntary sector‘ over the winter, as it deals with the financial fallout of the pandemic. Along with our sector partners, we will continue to push the government for an update on this pledge.

It was also disappointing that other issues highlighted in our submission to the chancellor weren’t addressed, including calls to:

• use of money from the next wave of dormant assets to establish a Community Wealth Fund,
• 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.

Where next?

The government has the unenviable task of trying to navigate some very choppy economic waters created by the pandemic and the forthcoming end of the Brexit transition period. But the failure to focus more on social infrastructure and recognise the financial hardship that the voluntary sector is facing will be seen by many as a missed opportunity for a government attempting to ‘level up’ communities.

There were some welcome announcement in today’s statement. In particular, the sector will be eagerly awaiting more details about the UKSPF and the new ‘levelling up’ fund. But as ever, the devil will be in the detail.