LIVE BLOG: #SR2015

November 25, 2015 at 11:06

On Wednesday the Chancellor, George Osborne, will deliver his joint 5 year Spending Review and Autumn Statement in what is being referred to as, Super Wednesday, here at CFG.

The announcements, far from being ‘super’, are set to spell out continued difficult times ahead for the charity sector.

In this live blog the CFG policy team will be updating you on developments as they come through over the next couple of days and during the Chancellor’s Speech.

First though we will give you the rundown of what charities can expect from the Chancellor’s announcements and some analysis of what impact they are likely to have.

Also keep an eye on the following twitter accounts: @CFG_OBrien; @AnjelicaSeason; @CFG_McLoughlin.

What can charities expect?
Updates leading up to Wednesday
Live updates as the announcements unfold

Live Updates

19:27 – AF

That’s a wrap folks.

Overall, I think charities will be walking away with a sense of relief as Osborne announces a slow down in cuts, and a number of targeted giveaways. Whilst this is mostly positive, CFG will continue working to put forward a positive agenda for government’s strategic investment in the charity sector to ensure that it is not just individual charities that benefit but the sector as a whole.

You can read more about what charities need to know about the Spending Review on our blog and our more detailed briefing with additional comments from our corporate subscribers.

13:55 – AF

The table below shows that the Charity Commission’s budget will stay steady at £20 million over the course of this Parliament. Whilst this is positive, the commission has still had a 50% cut in it’s budget over the last six years.

Charity Commission

13:49 – AF

The document is out now – first thing we notice on p118 is the announcement of a review into the Gift Aid Small Donations Scheme. A call for evidence will be launched in December 2015.

13:39 – AF

So the Chancellor has sat down. Now the CFG team will be reading the document and writing more detailed analysis.

Some initial thoughts however:

  • The cuts have been back-loaded until later in the Parliament. This will in theory give charities more time to adapt. However, this does need to be accompanied by meaningful support by the government, as outlined in our joint submission to the Chancellor ahead of the Spending Review.
  • It’s great to hear that the Big Lottery Fund has been protected but it is unclear where the extra money for arts and heritage charities will come from.
  • The devil will be in the details in the devolution of Business Rates.

13:35 – AF

From midnight right-to-buy will be extended to housing association tenants in five pilot areas. We have written previously about the challenges that this will pose to housing associations and the wider voluntary sector.

13:32 – AF

JSA claimants will need to attend the job centre every day – for those charities that support unemployed people on benefits this may mean greater need for advocacy work.

13:30 – AF

Apprenticeships – The chancellor wants to see 3 million more apprenticeships by 2020.

BIS has been tasked with setting a Business-led body to set standards for apprenticeships. Charities are also a major employer in the UK (employing over 820,000 people) and should not be excluded from standard setting practices.

The apprenticeship levy will be introduced for all employers with a pay bill over £3 million. These employers will pay a levy of 0.5% of their pay bill and will receive a £15,000 allowance with a view to offset the levy.

13:23 – AF

Big Lottery Fund protected. Fantastic news and shows what the sector can achieve when working together and making a noise about

Osborne announces some targeted giveaways for military charities and museums. We have written before about the fact that these giveaways are positive but risk creating a hierarchy of charities.

The Chancellor says that the £15 million raised from on tampon tax will be used to fund women’s charities. Whilst this can be seen a positive step this again reinforces the assumption that women’s safety is a women’s problem.

13:15 – AF

Chancellor announces an extension of the Small Businesses Business Rate relief. Nothing yet on the Business Rate Relief for charities but as soon as the document is published we will check this and provide updates.

13:08 – AF

Continuing on Devolution: Councils will be able to keep 100% of any money raised through selling off local government asserts, which currently total£1 trillion.

He has also announced that local councils will have a cap on their reserves – as Andrew talked about earlier in this blog. Charities should engage now with their councils to discuss how local government can invest in the voluntary sector to deliver vital preventative services.

Together these announcements, Osborne says, “amounts to a big package of new powers but also new responsibilities for local council. It’s a revolution in the way we govern in this country.

13:04 – AF

Devolution now:

Local authorities will be able to levy a 2% council tax precept to pay for social care.

Business Rates reforms have been confirmed. Local government will be able to: keep 100% of revenue raised, cut rates to encourage business to the area and raise rates provided that they fund local community.

Additional responsibilities will also be devolved: for example, the funding for temporary accommodation will no longer by distributed through the benefit scheme, but councils will receive £10 million to fund it locally.

13:00 – AF

Pension news now:

Auto-enrollment – we will align next two phase of contribution increase in tax years. Pension age will rise in line with life expectancy. This allows the continuation of the triple lock on state pension.

State pension will rise to £199.30 – Osborne argues that pensioners, will be over £1,000 better off than when the Conservatives took office.

12:57 – AF

Moving onto Healthcare now – 25% of Whitehall budget for the Department of Health will be cut.

12:56 – AF

As predicted the Cabinet Office are to a significant cut to their budget – 26%. No announcement was made about where these cuts might fall within the department and so questions remain about the fate of the Office for Civil Society. We will be keeping a close eye on this.

12:55 – AF

New Penalties on tax avoidance will be brought in. This could result in tougher audits on Gift Aid and VAT for charities.

Gift Aid is a vital source of income from the charity sector, worth over £1 billion.

12:48 – AF

So onto welfare: because of improved tax receipts and lower debt interest payments the Chancellor says that he can ‘listen’ to the calls for a halt in tax credit cuts.

Universal credit taper rate and threshold will remain unchanged and payments will rise with NMW. This will mean that they will not be in the welfare cap in the early years but will achieve the £12bn later in the Parliament.

12:43 – AF

Osborne announces that OBR data shows that the UK has grown faster than all other G7 countries. He suggests that this comes from increased employment across the country, not just in London and the South East but also the midlands and the South West.

However, unemployment in the North East continues to be high. Regional differences in employment figures should not be ignored. In relatively deprived areas, such as the North East, there are fewer voluntary organisations in proportion to the population. In terms of demand, charities providing services in this region are likely to experience greater pressures on their services.

12:35 – AF

The Chancellor says that he has found the £12 billion savings in the welfare budget as he pushes for ‘high wage, low welfare’ society.

Updates

25/11/2015- 10:44 – AF

Workie - The bizarre embodiment of the workplace pension

Workie – The DWP’s bizarre embodiment of the workplace pension

So, we haven’t made any mention of pensions yet, which is very unlike CFG’s policy team.

With radio silence from the DWP on the Section 75 consultation, the introduction of Workie, and the delay in the publication of the government’s response to the pensions tax consultation (quietly announced in July) to March 2016, it is unlikely that the Chancellor will include a great deal about pensions in today’s announcements.

However, if Osborne is going to forgo reducing the pension tax relief (worth £48 billion a year – £34 billion in tax relief and £14 billion of national insurance subsidy) we cannot rule out that the removal of salary sacrifice.

Salary sacrifice is where employees agree to reduce their contractual earnings by an amount equivalent to the value of their pension contributions.

In exchange for this, employers agree to pay the amount by which the earnings have been reduced into the pension scheme. As the employee’s contractual earnings will have been reduced, employer and employee national insurance contributions will be lower.

A removal of this could see increased cost burden on charities. Coupled with the increases in national minimum wage (costing the sector at least £500 million by 2020) and the introduction of mandatory workplace pensions contributions, this will add increased financial burden on charities.

25/11/2015 – 9:45 – AOB

An interesting point made in the Financial Times this morning was that the Chancellor may decide to use ‘user charges’ to ease the pressure of cuts. In plain English this means you and I paying for services that we haven’t before or paying more for services we currently pay for. In the charity sector, charging for services has been a growing source of income. In fact according to the NCVO, CFG et al financial sustainability review this has been the main source of income growth for charities since the recession. If the government starts uses this method, will this put more pressure on charities to charge for services? Or will it put pressure on charities to do the opposite to compensate for the increased cost of government services?

So far we have only heard about changing maintenance grants into loans for students as an example of this approach, but could there be other hidden surprises in the Spending Review? We’ll have to wait and see.

25/11/2015 – 9:00 – AOB

One piece of news that went a little under the radar yesterday but could factor into the Spending Review today was announcement from Four Seasons Health Care (the UK’s biggest care home operator) that it was going to make a big pre-tax loss and that the social care industry was in crisis. The group is facing a £10m bill to pay for the National Living Wage and their CEO said that if the cost of the NLW was not met by increased funding then around 37,000 beds are at risk across the country or that charges would increase on residents.

CFG has been raising concerns about the NLW’s impact on charity budgets since the July Budget – but it isn’t only charities that will be effected. The LGA yesterday raised concerns about the NLW which will cost councils £1bn by the end of the decade and want the government to meet the cost.

Will the Chancellor bend to the demands of business, local government and charities and set aside funding for public sector contracts/grants to increase to pay for the NLW? Fingers crossed…

25/11/2015 – 8:30 – AOB

Good morning everyone, its Spending Review day today so there will be a lot of information flying at charities thick and fast. We’ll be doing what we can to look through it to and get you the latest information.

However lets start the day off positive – here are some things that could come out of the Spending Review that would be positive for the sector:

  • Councils to get the power to raise council tax to pay for social care – it has been heavily trailed that alongside the front loaded investment into the NHS, that Mr Osborne will give councils the chance to raise council tax by up to 2% to pay for social care. This would ease pressure on other budgets and give councils some respite from the relentless pressure of rising social care costs (as demonstrated by the LGA’s graph below)Local-Government-Funding-Envelope
  • The government is going to delay hitting its budget surplus – it looks like that the Chancellor will probably delay and reduce the size of his budget surplus into the last financial year of the Parliament and reduce its size from the initially proposed £10bn. This is a positive development as a smoother trajectory of cuts will ease the pressure on public bodies to cut spending and give them more to adapt (and in turn, charities more turn to adapt). The problem with the last Parliament for many local charities was the ‘frontloading’ of cuts to local government. If the Chancellor decides to backload his cuts today, that would be a positive development. However, this is politically risker (the later he makes the cuts, the closer to the election they will be and the less forgiving the electorate may be) so he may decide to pull the same trick again as in the last budget by making local government and other departments rush through cuts now.
  • Drop the Welfare Cap – A piece of news that has emerged is that the government is likely to breach the infamous ‘Welfare Cap’ that it introduced in the last Parliament (primarily as a trap for the Labour Party). The Lords’ decision on tax credits has meant that the Chancellor will find it a struggle to hit the gap because he decided to make  sharp welfare cuts and push down the welfare cap to the levels of welfare spending forecast in the July Budget by the Office of Budget Responsibility – £115bn in the 2016/17 financial year. A vote is likely in the Commons shortly, but will George decide to drop it? Unlikely but we can hope…

24/11/2015 – 15:07 – AF

There is currently a Westminster Hall debate on ‘Funding for the community and voluntary sector’ which is discussing issue pertinent to tomorrow’s Spending Review. You can watch it on Parliament TV now.

Issues around the tough funding environment for charities have been discussed. These have so far included:

24/11/2015 – 12:22 – AF

One of the impacts that the #SR2015 is likely to have is more job losses in the public sector. According to data from Experion, the impact of this will not be felt evenly across the country. Here are some of the top places relying on the public sector for employment in England and Wales are:

  • Derbyshire Dales;
  • Maidstone;
  • Preston;
  • Swansea;
  • Exeter;
  • Sefton.

This will have a detrimental effect on the capacity of the public sector in these areas to engage with their local charities. Furthermore, those charities that provide practical and emotional support to people on low incomes or benefits in these areas are likely to see an increase in demand of their services as public sector workers are made redundant.

24/11/2015 – 11:33 – AF

Good morning. More reports coming in about tomorrow’s announcements.

It is being reported that the NHS will have an above inflation increase in its budget of £3.8 billion next year. With a cursory glance this is good news, however, dig a little deeper and it seems that this injection of cash may have a sting in its tail.

This funding will not apply across the entirety of the Department of Health’s budget, but instead will be given to NHS England. It is predicted that other public health services will be cut in order to pay for the increased funding to the NHS, for example, funding for local authorities to deliver sexual health services, stop smoking initiatives, health visitors and so on.

This will potentially impact charities in two ways. First, for those organisations that deliver such public health services may see a reduction in the funding available. Second, if these public health services are cut charities may see an increased demand as people look to charities for support.

Coupled with rumors that funding to the Big Lottery Fund budget is being cut to replace reductions in the Culture Media and Sports budget, we will have to pay close attention to whether announcements of increased funding are indeed an increase in spending, or revenue neutral.

23/11/2015 – 18:08 – AF

The BBC have just published their overview of which government departments will be the winners and losers in the Spending Review.

At first glance it is possible to be buoyed by the fact that the Cabinet Office, which houses the Office for Civil Society (ONS), has seen an increase in its budget of 4.9% since 2010.

However, the Cabinet Office covers a range of different functions across government – as well housing the OCS, it is a conduit for cyber security funding.

So, whilst the Chancellor has announced that the Cabinet Office will receive an injection of £1.9 billion by 2020, this will not be evenly distributed across all the department’s function, but instead will fund cyber security.

23/11/2015 – 17:50 – AOB

Hello, this is my first update on our Live Blog on Spending Review 2015 (#SR2015) – I hope that everyone finds this helpful and my colleague, Anjelica has already given a great overview of the things to look out for.

Things that have developed over the past few days that may be useful for charities to note, however:

  • Apprenticeships Levy – it looks like the government is in a bit of a disagreement over its approach according to the FT. On the one hand, there is a move to keep the Levy for large employers (250+ employees) and set at around 0.5% of payroll costs. This would be a significant burden. However, the Skills Minister is said to prefer a lower rate but have it paid by more employers (all those with 150+ employees) at around 0.3% of payroll costs. This is a significant change in policy and could catch a lot more charities. So we need to watch this announcement closely.
  • HMRC struggling in clamp down – we have been warning about this for some time, but it looks like HMRC may be exhausting all the so-called ‘low hanging fruit’. Extra corporate tax from collected by tax inspectors for the UK’s biggest companies fell by 13% last year. This means that HMRC will have to try a lot harder to make the £5bn in additional revenues that the Chancellor asked for in the July Budget. With additional savings needed due to other spending commitments, could this figure increase? And will this mean more scrutiny of charity tax reliefs and tougher audits/inspections?
  • There is no wiggle room – over the past couple of statements, we have been used to the Chancellor easing up a bit on cuts because he has had higher levels of growth to pay down the deficit. However last week’s figures found that the deficit had grown by 16% from a year earlier. This means that the Chancellor will not be able to use better than expected deficit reduction performance to ease cuts or make giveaways. It confirms what we already expected for charities – a tough Spending Review for all.

Keep checking in tomorrow for more updates and analysis.

What can charities expect?

The BLF’s budget faces a £320 million cut

Rumors have been circulating that the government plans to cut the Big Lottery Fund’s (BLF) budget by 50%, since an anonymous blog appeared online last week. Our CEO, Caron Bradshaw, has today written about the consequences such a reduction in funding could have on the charity sector.

Grant funding is a vital part of the sector’s income. Charities have already weathered significant cuts in government grant funding over the last decade, falling from a peak of £6 billion in 2003/04 to little over £3 billion in 2012/13.

The BLF is the largest single grant making body for the charity sector, as such a cut of any amount in its budget is very concerning for charities – especially small and medium sized organisations that use this funding to provide essential support and services to local communities.

BLF grants enable charities to innovate and adapt to the needs of their beneficiaries by starting new projects. Cuts in its funding will lead to greater competition for ever dwindling grant streams, thereby threatening the sustainability of many charities.

Significant press attention over the weekend has prompted the minister, Oliver Letwin, to have an urgent meeting to discuss the issue today. Whilst this is promising news the sector needs to continue putting pressure on government to protect BLF’s funding in its entirety.

Any loss of its income is another blow to the charity sector’s finances. You can find out how much your constituency has benefited from the BLF through NCVO’s data tool.

Office for Civil Society and the Charity Commission set to lose out

The Office for Civil Society (OCS) has been reported to lose around £11 million a year in the spending review.

The Office for Civil Society holds responsibility for charities, social enterprises and voluntary organisations in the Cabinet Office and provides much needed funding to support and strengthen the charity sector with initiatives such as the Local Sustainability Fund, and the Small Charities Fundraising Programme.

The Charity Commission too is likely to face further cuts on top of the 50% reduction in funding it has experienced over the last six years. If these cuts are announced, this will raise concern over the commission’s ability to effectively regulate the sector without compromising important guidance and support functions for charities and trustees in meeting charity law requirements and thereby damage public trust in charities.

Jointly with DSC and NAVCA, CFG has written to the Chancellor to return the Commission’s budget to 2009/10 levels.

Cuts to local government budgets

Funding from local government makes up around 50% of the sector’s funding and as such is a vital source of income. The LGA predicts that local government funding for everything outside of statutory services will be cut by 40% in real terms.

This will have the effect of both seeing an increase in demand on services as local authorities remove non-essential services, and a reduction in available funding for services for charities to bid for.

There are rumours that the Treasury is considering placing a cap on councils’ reserves. As CFG’s Head of Policy, Andrew O’Brien, wrote last week, a number of councils are building up their unrestricted reserves. A cap could encourage local authorities to consider investing this funding in much needed preventative services, and charities are the obvious partners in delivering such services. Charities will need to be proactive with engaging with councils if this is announced.

Business Rates under threat

During the Conservative Party Conference, the Chancellor announced that Business Rates will be devolved to local authorities and launched a review. Although government have until the end of the year to report on this review, we believe that the issue will be raised on Wednesday.

In the absence of assurance from the government that Business Rate Relief for charities will be protected, we are concerned that local authorities, under continued pressure to make savings, will reduce, or remove the relief for charities in their local area. Worth £1.7 billion to charities, business rate relief is a vital source of income to the charity sector. Without this, many charities will have to close or at least cut back on provision.

For more details, see our briefing on Business Rate Relief.

Pressures on low income families will lead to increased demand on services

With George Osbourne’s plan to cut Tax Credits defeated in the House of Lords, the Chancellor has been searching elsewhere for £12 billion worth of cuts in the welfare budget. These are expected to come from the housing benefit – which will hit many of those that would have been caught out by the tax credit cuts – and IDS’ flagship welfare reform, Universal Credit.

For those charities that provide advice and support around benefits, and deliver a wide range of practical and emotional support services for vulnerable groups and people on low incomes, these cuts are likely to lead to an increased demand on services.

In the Summer Budget an increase in the National Minimum Wage (NMW) was announced and we might see further spending announcements around this on Wednesday.

In October, CFG along with other sector leaders raised concerns on the impact of the increase in the NMW which is set to cost the sector £500 million by 2020, excluding subsequent increase cost of employers’ National Insurance and mandatory workplace pension contributions. Without strategic investment in existing public service contracts, charities face the very real prospect of closure with vital services for some of the most vulnerable people in society being lost.