General Election 2017: Labour Manifesto Charity Analysis

May 12, 2017 at 09:52

CFG will be analysing all the manifestos to understand what impact they may have on the operating environment for charities. Here is our first analysis of the Labour Party Manifesto 2017.

Charity Sector Analysis

The Labour Party manifesto balances the budget through tax increases mostly aimed at business. For charities, VAT will be protected from tax increases which means that the irrecoverable VAT bill would not increase further. Increasing taxes for higher rate taxpayers could both push down level of donations from this group (as they have less disposable income) but would make Gift Aid tax relief more attractive. VAT relief on private school fees will be ended.

The manifesto also outlines using “best standards on government contracts” and protecting workers rights. For charities, which receive £12.4bn in contracts, this could have positive implications if it leads to strengthening of legislation such as the Social Value Act. However, the introduction of “pay ratios” (20:1) for those receiving government contracts may have an impact on pay structures within some charities, although we assume most charities will not be impacted. Labour would keep the Apprenticeships Levy and seek to get more apprentices hired through public contracting, we know that that this would be challenging for many charities. Labour would also ask all organisations delivering public contracts to recognise trade unions.

The cost of operating as a charity would increase through the introduction of £10 minimum wage, which is more than the £9bn an hour that it is expected to reach by 2020. Including taxes and pensions, this could increase the cost of an employee on the minimum wage by around £2260 per year. This would be a significant cost increase. There would also be the introduction of sectorial collective bargaining, which may impact the voluntary sector.

Key measures

Financial

  • VAT protection – should ensure that the cost burden of irrecoverable VAT isn’t increased
  • Higher rate of tax for £80k  – this could impact higher rate givers
  • Corporation tax increase – this may affect a small number of charities
  • Scrap VAT on private schools
  • More resources for HMRC to clamp down on tax avoidance
  • Stricter tax standards internationally – charities have already been caught by the Common Reporting Standards and stricter international tax standards could have an impact on the sector.
  • More borrowing for investment (£250bn) – this could affect interest rates in BoE feels it needs to increase them to ward off inflation
  • Labour will review business rates system over the longer run – it is hard to know whether this is positive or negative at this stage.
  • More investment in broadband and internet coverage – could be good for rural charities
  • Pay inequality reduced by levy on those with high numbers of staff with “very high pay” – it is unclear whether this would impact charities in its current form  
  • Labour will stop local bank branch closures where there is clear local need – could be good for small charities that are often affected by the loss of branch services

Public services

  • “Best standards on government contracts” – could be positive if it leads to strengthening of Social Value Act
  • More focus on training and apprentices through contracts – this could impact charities delivering services
  • All public contractors would have to recognise trade unions

Brexit

  • Labour will seek transitional arrangements if there is no deal
  • Deal focused on accessing single market and protecting workers rights – the former may impact charities if it leads to staying with EU rules on VAT and State Aid which hamper charities effectiveness
  • Guaranteeing the right to say of EU nationals – many charities are concerned about their workforce and this would be seen as a positive measure

Employment & Skills

  • Equal rights from day one
  • Ban zero hour contracts
  • Sectoral trade union collective bargaining – could have an impact on the sector if charities are included as a sector
  • More public holidays (4)
  • £10 an hour minimum wage
  • Equalities reps would have statuory rights
  • New National Education Service (cradle to grave)
  • Schools not to pay apprenticeships levy
  • Trade union representation on Institute of Apprenticehips- no comment on charity sector representation

Welfare

  • Significant benefit changes – reform to Universal credit (end bedroom tax, reinstate housing benefit)
  • New Social Security Bill to provide more funds to unemployed and carers and reform Access to work schemes
  • Scrapping sanctions for those breach benefit terms

Health

  • £6bn per year for NHS and new National Care Service, with £8bn overall in the Parliament
  • More for mental health and access to councillors

Constitution

  • Keep Human rights Act
  • More legal aid entitlement for judicial review
  • Constitutional Convention
  • Repealing Lobbying Act

Devolution & local government

  • More devolution to communities with economic development power and necessary funding
  • LGPS all local government employees to be given trustee status to reduce fees and charges and have power over investments – this could have a significant impact on the scheme and it is unclear whether charity employees that are part of the LGPS would be impacted.
  • New Minister for England and remove requirement for elected mayors in combined authorities

Culture

  • £1bn cultural capital fund
  • Labour cultural pupil premium – £1.6m per year boost
  • National creative careers advice service
  • New Minister for England and remove requirement for elected mayors in combined authorities

International aid

  • 0.7% aid target kept