On Wednesday 16th March at 12:30pm the Chancellor, George Osborne, will deliver his 8th Budget.
If you can’t tune into the Chancellor’s speech, then do follow this blog for key announcements and early analysis of how they will impact on the charity sector.
In this blog you will find:
- Useful links to CFG’s early analysis on what charities can expect
- Updates leading up to 12:30pm tomorrow when the Chancellor steps up to the dispatch box
- Live updates as the announcements unfold
18:26 – AF
That’s a wrap for the #Budget2016 Live Blog.
We have already provided an early analysis of the announcements which you can read on CFG’s blog and the CFG policy team will continue to pour over the OBR report and Treasury document to make sure that you are fully up-to-date with announcements and how they might affect your charity.
As ever, if you have any questions about the announcements please contact firstname.lastname@example.org, or leave your comments in the comment box below!
18:17 – AF
Some good news – the government’s response to their consultation on following the business energy efficiency tax landscape acknowledges CFG and CTG’s concerns and have said:
“3.21 [The government] understands concerns from charities on the impact of new reporting requirements and therefore will consult on de minimis arrangements to exempt small or low energy-consuming charities, with details explored in the consultation launched later this year.”
CFG will of course be engaging with our members and the wider charity sector and responding to this consultation.
17:55 – AF
CFG’s policy officer, Heather McLoughlin, is putting the final edits on our Budget 2016 Briefing. It will be winging its way to your inbox this evening and will go up on CFG’s policy updates.
16:30 – AF
I have now posted an early analysis of the Budget on CFG’s blog site. As ever, please feel free to leave your comments and questions in the comment section.
15:00 – AF
Responding to the Budget our CEO, Caron, said:
“Today’s Budget was a massive missed opportunity. Like the wider economy, charities are facing a dangerous cocktail of cost pressures such as the National Living Wage and Apprenticeships Levy as well as disappearing grants and more challenging contracting. Yet cuts for private businesses were not met with a similar package of support for charities. Small businesses play a vital role in communities, but the Chancellor needs to recognise the role that charities play – providing supported for marginalised, vulnerable and voiceless. Charities are also a big economic actor – employing hundreds of thousands of people and generate billions for the economy every year.
The Government needs to adopt a more strategic approach when it comes to investing in the charity sector and recognise that supporting our sector is the one of the best ways for it to achieve positive social change. We are also seeking assurances on business rate relief and a categorical commitment that it will be protected in the midst of devolution to local councils.”
13:52 – AF
I’m off to write our ‘initial response to the Budget’ blog.
In the mean time here our the headlines & analysis that charities should take away:
- No mention of Business Rate Reliefs in the Treasury document. The Treasury have stated that there are no plans to change the 80% mandatory rate relief for charities. We will wait until we have confirmation that rate relief for charities will be protected before we completely relax. But it looks relatively positive.
- Growth forecast down to 2%.
- Debt to GDP up to 82.3% in 2016/17 from 81.7%.
- Government spending to be cut by £3.5bn by 2020 – charities have previously been hit by such cuts, and it is never good news for us a sector given that government income is one of the two top contributors to the sector’s income.
- More targeted giveaways: £45m to support military charities, children’s hospital charities and other good causes.
- Pensions and Salary Sacrifice: HMT have confirmed that they are considering scrapping this scheme. If this is scrapped charities that have paid staff and use salary sacrifice will see an increase in their NIC bill.
Also, if you work for a charity on the Isle of Man, good news! “The government will legislate to ensure charities subject to the jurisdiction of the High Court of the Isle of Man are capable of qualifying for UK VAT charity reliefs (Finance Bill 2016).”
13:45 – AF
So some good news: there are no plans to change 80% mandatory rate relief and there was nothing in the Treasury’s document. We will still need to have this confirmed but early indications are positive.
13:40 – AF
My main question is who are the losers in this budget. The money has to come from somewhere for the massive tax cuts.
We need to look through the Treasury and OBR documents to see how the improvement in finances in the last two years of this Parliament will work.
13:37 – AF
So – what can we take from the increase in personal allowance and lifting the higher rate threshold?
Well, it might mean more disposable income and so more donations for charities. But I think it’s a bit early to be that optimistic.
13:30 – AF
Pensions up now…..
This Lifetime ISA sounds expensive, even if most people under 40 won’t be able to save the maximum of £4,000.
13:28 – AF
The Chancellor wants to “light the fires of enterprise”. This sounds terrifying.
Some of the ways he will do this is are:
- Class 2 NIC will be abolished. This will help the self-employed.
- Cutting Capital Gains Tax to 20% from 28%. Brand new 10% rate on long term investment in listed companies.
13:27 – AF
So, fuel duty will be frozen. This is for the 6th year in a row.
13:25 – AF
£12m from the money collected through the Tampon Tax. Charities including Breast Cancer Care to the White Ribbon Campaign will benefit. There will also be “donations” to Rosa Funds.
I really want the chancellor to stop referring to donations when talking about allocating public funds.
13:24 – AF
£520m raised from the sugar levy to double the level of funding for sport to every primary school.
There will be enough resources for 1/4 of secondary schools.
13:21 – AF
So some key developments for charities whilst the Chancellor talks about sugar:
– Growth forecast down to 2%
– Dept to GDP: up to 82.3% in 2016/17 from 81.7%
– Government spending to be cut by £3.5bn by 2020
– Libor fines to fund air ambulances in Northern Ireland
13:19 – AF
Extra funding – every primary and secondary school will be an academy.
The government will focus on driving up standards the “northern powerhouse” (*cough* #volsecbudget bingo *cough*).
Look out for the White Paper from the Dept. of Education tomorrow for more details.
13:19 – AF
Insurance Premium Tax increased by just 0.5% to 10%. The £700m raised by this will got to flood defenses.
This 0.5% is much lower than expected. Good news for charities as we cannot afford in today’s volatile funding environment to cut back on insurance.
13:13 – AF
Devolution of Business Rates up now. No mention of charitable rate reliefs but he does say that the Greater London Authority will have complete control of it’s business rates by April next year. 3 years early.
13:13 – AF
LIBOR FINES ALERT
Libor fines to support Air Ambulance service in Northern Ireland.
Osborne really likes Air Ambulances.
13:06 – AF
BUSINESS RATES ALERT
630,000 small businesses will pay no business rates at all from next year.
The Chancellor says that this will mean “a corner shop in Barnstable will pay no Business Rates”.
This will be a £7bn tax cut for businesses.
Nothing about Charitable Rate Relief.
13:03 – AF
Corporation tax will fall to 17% by April 2020.
This will raise £9bn.
Everything that is collected from these tax changes will be ploughed back into small businesses.
This is yet further support for businesses to cope with increased costs from workplace pensions, National Living Wage increases and the Apprenticeship Levy costs. What are the chances that charities will be afforded a similar package of support.
12:58 – AF
The government will introduce a “low tax regime” to attract multinational businesses but they will pay tax in the UK. This will level the playing field which is currently against small firms.
12:54 – AF
Public sector employers will be required to do more to ensure that people are not avoiding tax.
The Chancellor states that the public sector pensions discount rate will be reevaluated.
Public sector employer pension contributions will rise. This will create extra costs for councils.
12:53 – AF
I feel like the lack of announcements are a bad omen….
12:52 – AF
Debt falls by 82.6% next year. It will fall to 77.2% in 2019/20 and down again the year after to 74.7%
12:47 – AF
Chancellor has asked pay master general to cut spending by£3.5bn in 2019/20. This is reported to be less than 0.5% of government spending.
12:46 – AF
So 1m new jobs sound good. As does wage growth. We will have to wait until the OBR report to see just how fast this growth is.
12:45 – AF
The OBR have announced that there will be 150,000 extra families with the security of work.
This is reported as the lowest proportion of people claiming out of work benefits since November 1974.
12:43 – AF
Chancellor says that the OBR has been clear the GDP figures will only stand if the UK stays in a “reformed EU”.
12:42 – AF
GDP is down this year from 2.2% to 2%. It will be 2.2% in 2017, and 2.1% in each of the three years to 2020.
The Chancellor says that “in these turbulent times” this forecast expects that we will grow faster than any other advanced economy in the world.
12:40 – AF
I am pretty sure this is the longest caveat I’ve ever heard. Let’s get started Mr Chancellor!
12:40 – AF
I’m pretty sure referencing global trends was on our #VolSecBudget Bingo card.
As expected The OBR has revised down growth of world economy and world trade. They also point to slower growth in China.
So, as expected potential UK productivity growth has been revised down. The OBR acknowledge that this revision is a “highly uncertain judgement call” but the Chancellor says that he stands by that call.
12:36 – AF
The Chancellor wants to help people to save and help them keep more of the money they earn. Does this indicate that the Chancellor will continue to pass the burden from the state to the employer? – see National Living Wage, Apprenticeship Levy, Auto-Enrolment etc.
12:35 – AF
The Chancellor reports that economy is set to grow faster than any other major economy in the world.
The deficit is down by two thirds and we are on course for a budget surplus.
12:33 – AF
And Budget 2016 is go! Hold onto your Charitable Business Rate Re…I mean hats!
12:28 – AF
David Cameron answering a question about the economy at PMQs: “We have got an economy that is fundamentally strong but facing a very difficult set of circumstances”.
12:06 – AF
PMQs are up. Last chance to get a cup of tea before we finally find out what tax plans the government has in store for us.
16/03/2016 – 12:00 – AF
It has been announced that the Money Advice Service will be scrapped in the Budget. It will be replaced by a much smaller organisation that will deliver front-line support to people in financial difficulty.
Whilst the beleaguered service has faced criticisms over it’s approach to providing support online, rather than face-to-face, it is not clear what impact scrapping it will have.
Charity advice services are already under significant pressure. In my previous role, I wrote a report about how the voluntary sector responded to welfare reforms. The advice services that I interviewed unanimously reported increasing number of people needing support with their finances.
So there is certainly a need – let’s see what the Chancellor proposes to replace it.
16/03/2016 – 10:37 – AOB/AF/HML/KV
What if everything went well today? What if charities got everything they wanted from the Budget?
We’ve been thinking (if only to keep us going!) about what the ideal results for charities would be today. Here are three things that me, Anjelica and Heather would like to see in our Fantasy Budget 2016
UPDATE: now Kelly has joined in!
- Charity-sector wide Irrecoverable VAT rebate
- Apprenticeships Levy exemption for charities
- 100% Business Rate Relief for charities
- Apprenticeship Levy funding ring-fenced for charities
- Commitment to spend £15m on women’s health and support charities even if Tampon Tax is abolished
- National Insurance Contributions Allowance raised to £7000 for charities to help charities pay National Living Wage
- Scaling back of Payment by Results contracts
- Protection of business rates
- Scrap the anti-advocacy clause
- Compact funding renewed
- Reverse cuts to welfare
- More grant funding for charities, and fewer Social Impact Bonds/Payment-by-Results contracts
What would be your top three things you’d like to see in the Budget today? Let us know via twitter or in the comments below…
16/03/2016 – 09:15 – AOB
It isn’t strictly related to the Budget, only in the sense that it is to do with Gift Aid, but it is great to see that HMRC has seen common sense regarding so called ‘family donations’ and put in place an ability for up to four linked family members to claim Gift Aid.
Of course, there is still an issue for unrelated individuals where the donation may be from one individual but they put two names down in the message (for example, I might £10 but say it is from my partner and I). The central issue is surely the tax to cover and if I have £10 worth of Income Tax then, at that small level, really doesn’t matter if there are one or two or even twenty names on the list?
Hopefully, this will be the start of a more sensible approach to Gift Aid as we try to grapple with the digital age.
Of course much of the confusion around Gift Aid claims could all be solved by better promotion of Gift Aid – something that I have been talking about for some time…
16/03/2016 – 08:48 – AOB
Good morning everyone, its been relatively quiet in the papers today which, if you are Budget watcher like me, makes you nervous.
However here are some of the snippets from the newspapers that will be of interest for charities:
- £100m for homelessness including Social Impact Bonds – according to the Guardian’s Patrick Butler, the Chancellor is going to announce a £100m fund to tackle the growth of rough sleeping and homelessness including more funding for SIBs. Looks like the £1bn target for SIBs by 2020 is going forward a pace…
- Home Office, Local Government and Ministery of Justice in the firing line – The Daily Mail reports that these departments are likely to be asked to make additional cuts as the government looks to find £4bn in savings. Foreign aid will keep its protection. For charities working in these already hard hit areas, this is worrying news.
- Further welfare cuts likely – The Guardian’s checklist references that a review of personal independence payments (PIPs) is likely to be announced with the aim of saving £1.2bn. The newspaper says that this could negatively impact 600,000 disabled people. Charities are already struggling to adapt to welfare changes, as highlighted in this excellent report by my colleague Anjelica Finnegan, so further reviews could stretch the sector’s capacity to support people.
- Tampon Tax could be scrapped? – This is highly speculative, but the FT reports this morning that the European Commission is considering handing more power to national governments to set their own VAT rates. It isn’t likely to be announced in the Budget, but the Chancellor may make a nod towards ending it, if he feels confident about both Brussel’s seriousness and the outcome of the EU referendum. Scrapping the tax would be both a victory for many charity campaigners, but also could see £15m cut in funding as the proceeds won’t be used to fund women’s health and support charities.
Aside from this, we have the centre-piece of the Budget which is likely to be around schools. The forced ‘Academisation’ of schools will introduce hundreds of more exempted charities into the mix. Charities, but not as we know it, as Third Sector once noted…
15/03/2016 – 17:22 – AF
So, what will the CFG be losing sleep over tonight? The potential devolution of Charitable Business Rate Relief.
We are concerned that with the pressures on local government spending, localising reliefs would put councils in the impossible position of choosing to continue providing charitable reliefs to organisations that support local communities, or removing them to raise income for statutory services.
We hope that the government recognises the value and importance of this relief – worth £1.5 bn to the sector every year – and ensures that it continues to be centrally mandated and maintained at the exiting 80% level.
There is of course the possibility that the Chancellor will kick the issue into the long grass (again) and announce a consultation of Business Rate Relief to include the question of charitable rate relief.
This will not be a positive outcome for charities. It will create more uncertainty in the sector – it is such a vital relief to the sector that it would be akin to the government telling businesses that they do not know the future of corporation tax.
Unless the chancellor announces that Charitable Business Rate Reliefs will be unchanged, we will be calling on our members and the wider sector to defend it. Watch this space.
15/03/2016 – 15:30 – AF
What about targeted giveaways?
In the last Budget the Chancellor allocated £70m of banking fines to charities. This has become somewhat of a habit for the chancellor so we might expect to see such giveaways again.
CFG, along with 9 other leading voluntary sector bodies called for a more strategic use of this income so as to avoid favoring individual charities – thereby creating an arbitrary hierarchy of causes – and providing strategic investment to the sector, helping to build long-term capacity.
15/03/2016 – 14:00 – AF
Well it seems that my hope that more information about the content of the Budget would be released throughout the day was misplaced.
Speculation is rife that the Chancellor will announce an increase in Insurance Premium Tax. Insurance is not a cost that charities can afford to cut back on – especially in today’s precarious funding environment. If Mr Osborne does make this announcement tomorrow the CFG policy team will provide an estimation of how much this will cost the sector.
This tax increase will be added to other mandatory increased costs such as the National Living Wage, the Apprenticeship Levy, mandatory workplace pensions etc. Whatever happens charities’ running costs will be increasing significantly over the next 12-24 months and we need to brace ourselves for it.
One of the key asks that CFG will continue to make to the government is to ensure that existing public service contracts and future contracts are uprated to account to cover the increasing core costs as a result of these policies. This is especially important for charities delivering public services who are less likely to have access to unrestricted funds to cover these costs. Moreover, charities are unlikely to make any profit on delivering contracted public services on which they can draw.
15/03/2016 – 12:10 – AF
It’s just over 24 hrs until we can all stop speculating and find out what Osborne has in store for us in the Budget. So whilst we still have time, let’s make some more educated guesses.
Whilst Osborne made a u-turn on plans to change the way that pensions are taxed, it is unlikely that pensions will be left alone entirely. One likely option is Osborne ending employers’ exemption from paying National Insurance on pension contributions, which is currently worth £13.8bn a year.
Although this will only account for about 50% of the £21bn that he could save by scrapping pensions tax relief, it is a more palatable option for Osborne as it is unlikely to affect voters.
This option also reflects the Chancellors move to pass costs from the state to employers. A theme that has been established through the introduction of the National Living Wage and the Apprenticeship Levy which has been publicly referred to as a payroll tax by the government.
The CFG policy team has been busy analysing the economic data and keeping abreast of rumours and announcements and has published our early analysis of what we can expect:
- Anjelica outlined what CFG would like to see in the Budget in her blog post last week. She presents the key policy proposals that CFG, with 9 other leading voluntary sector bodies, submitted to the Chancellor. You can download the full submission from CFG’s website.
- Andrew predictes that Mr Osborne will have to switch to bad cop again as the economy grew less than accounted for in the joint Spending Review and Autumn Statement last November. What a difference 4 months can make.
- Andrew outlines the Government’s new form of Austerity – Austerity 2.0 – for Third Sector magazine. This new approach to austerity will see fewer cuts – which the Chancellor has hinted will be around £3.8bn/year – and more tax increases.