There was little cause for optimism for the charity sector in the Government’s 2013 Spending Review, with a few niche giveaways overshadowed by more details on planned welfare reforms and further cuts to local government.
What’s it all about?
The 2013 Spending Review divided up a pre-determined amount of spending between departments for the 2015/16 financial year, aiming to make total savings of £11.5bn on 2014/15. It also outlined future changes to ‘annually managed expenditure’, which is made up largely of welfare and debt interest payments and accounts for just over half of total government expenditure.
This round of cuts was not planned when the Coalition came to power, but was forced upon the Chancellor by the lower than expected tax receipts due to the poor performance of the economy.
As in the previous Spending Review in 2010, the NHS, schools and international aid budgets were protected from cuts, with budgets remaining at least flat in real terms. However, together these areas account for around 60% of total departmental expenditure, so the burden of cuts this time round fell on departments which, in many cases, have already made significant savings.
What were the eye-openers for charities?
Welfare cap: Total expenditure on welfare will be capped from April 2015. While the state pension and benefit payments that vary strongly with economic cycles (primarily Jobseekers Allowance) will be excluded, all other social security spending will be included, such as disability, housing and pensioner benefits, and tax credits.
For charities this is the most worrying and potentially significant announcement from the Spending Review. Few details have been released of how the cap may be implemented, but it seems inevitable that demand for charities’ services will increase as pressure on the people they serve grows.
Deeper cuts to local authorities: Local authorities have already seen their budgets cut by an average of more than 35% since 2010/11, and this latest round of cuts saw a further 10% reduction confirmed for 2015/16, although other pots of money should mean actual cuts to spending of only around 2%.
This latest round of local authority cuts seems likely to lead to further cut-backs in public services, driving up demand for the charities’ services. What’s more, local government accounts for around 1 in 6 pounds of the sector’s income – these cuts are likely to result in continuing reductions in grant funding and more stringent contracts.
What else should charities be aware of?
10% further cuts to Charity Commission: The Charity Commission, whose budget has already declined by around 50% in real terms from the 2010 Spending Review, will see a further 6% (£1m) cut from its budget in 2015/16, possibly forcing it to consider alternative funding options – charging charities for registration and top slicing Gift Aid have both been mooted.
Office for Civil Society escapes further cuts: OCS funding will remain static in real terms in 2015/16, but at £56m, it is a huge step down from the £191m it received in 2010/11.
Integrated health and social care: Under new ‘Community Budgets’ £3.8bn of services will be jointly commissioned by local authorities and the NHS from 2015/16, aiming to increase efficiency and avoid duplication.
5% cuts to museums, arts and community sport: The commitment to free museum entry was also maintained, and a four year pilot to increase operational freedoms to museums was announced.
£80m for new English Heritage charity: The new investment will enable a self-financing body to be set up to look after the National Heritage Collection from March 2015.
Oh, and charities did get one mention in the Chancellor’s speech – the Government will continue funding the Charity Research Support Fund, and will look into ways to make it easier for these charities to claim Gift Aid. Not much in the scale of the major changes outlined above, but a welcome token gesture, at least.