Comprehensive Spending Review - VCS Budget analysis

Big Lottery Fund raid called off

The good news for many voluntary organisations is that the expected £300m raid on BLF’s funding didn’t happen.  Instead the chancellor and prime minister both spoke about the importance of maintaining BLF funding for community organisations, as well as protecting current levels of investment in the arts, sports and heritage sectors. NCVO are to thank for quickly organising a campaign to lobby MPs using a data tool to show the potential of cuts in their areas.

Tax credits u-turn

The chancellor surprised many by doing a full u-turn and cancelling his plans to cut tax credits, causing him to breach his self-imposed welfare cap. He plans for welfare spending to fall back in line with the cap by the end of the parliament, largely as a result of further changes to housing benefit, so he will still get his desired outcome of £12bn cuts in welfare spending but via another route. We have yet to see what impact this will have on low-income households.

LIBOR fines and ‘Tampon Tax’ windfalls for certain charities

The chancellor announced further LIBOR fines allocations to armed services charities, museums, and a children’s hospital, amounting to £25m over three years. He also announced the creation of a new annual £15m fund to support women’s charities taken from the so-called "tampon tax", in lieu of being able to change the tax rate on women’s sanitary products. £5m of this year’s fund has already been allocated, with the remainder to be administered by the Treasury.

Departmental spending cuts

The real impact of the chancellor’s spending review for the majority of the sector will be felt in the cuts to departmental budgets. The local government budget is going to fall by £6.1bn in cash terms over the next five years, with forecasts predicting this will be offset by significant increases in council tax and business rates revenue increases. We await further analysis on what this will mean for public services regionally.

The LGA nationally has previously indicated that significant cuts are likely outside of their statutory responsibilities for children, adult social care and waste management. We have also heard from local authorities in the region that across all services they are predicting a significant budget gap and given that many of the sector services fall into the non statutory envelope there are likely to be cuts directly impacting on the sector.

The NHS nationally will still be expected to make a previously announced £22bn of efficiency savings, but is receiving £10bn of additional funding, with the majority frontloaded in 2015/16. However, the rest of the Department of Health (DH)  is seeing a 25% cut and  we await the potential impact of these cuts on DH the Voluntary Sector Investment Programme  and wider funding of the sector delivering on health and wellbeing across England. 

Funding for the Charity Commission is being held at £20m in cash terms but once inflation is taken into account, this is effectively an 8% real terms cut by 2019/20 and consequently the Commission is expected to consult on charging for some of its services in the near future.

We don’t yet have a definitive picture of the Office for Civil Society’s budget, other than confirmation it will continue to exist, albeit with reduced headcount.

Apprenticeships and volunteering

The previously announced apprenticeship levy will now be introduced in April 2017. It will be set at a rate of 0.5% of employer’s pay bills, but only for employers with payrolls over £3m a year. At first glance, it looks like on average, the largest charities  with a payroll over £3m, of which they are very few based in the North east, will see a payroll cost increase of around £30,000 a year – although the picture is complicated by how much they already spend on apprenticeships.

In volunteering news, the chancellor also announced further funding for the National Citizen Service, expanding it to deliver up to 300,000 places by 2019-20.

Business rates and the Small Donations Scheme

Local authorities are to be allowed to keep the receipts from business rates, but the chancellor made no announcement on the safeguarding or otherwise of the 80 per cent mandatory relief that charities currently receive. Having heard the business rates review would report before Christmas, it would now seem we will get no clarity on charitable reliefs until the March budget. DCLG is expected to consult on changes to the local government finance system, including the implementation of business rates changes.  It’s important for charities to explore and understand how any changes to reliefs, particularly mandatory relief would affect them and respond to the consultation.

Finally, the 2016 review of the gift aid small donations scheme has been brought forward, and will be launching a call for evidence from this December.

Sector reaction – government “agnostic”

Karl Wilding, NCVO director of public policy, said that the announcements demonstrated the government was "agnostic" over the voluntary sector.

"I think we have a government that appears quite sector-agnostic," he said. "If you look at the big spending announcements, the expansion of the NCS and the funds for social impact bonds, these are platform-neutral announcements – in other words they are independent of the sector in which they take place."

Caron Bradshaw, chief executive of the Charity Finance Group, said:

"This spending review has not changed the fundamentals for charities, with significant cuts still coming down the line. But we welcome the Chancellor’s decision to smooth the profile of the cuts to give charities more time to adapt their budgets."

Neil Cleeveley, chief executive of local infrastructure body Navca, said:

"The spending review announcement is a welcome easing back on austerity but not an end to it. What would improve things most for charities would be a complete rethinking of austerity so re-balancing the budget is done more fairly with a greater burden on those who can afford to help most."