Another year, another budget, another round of austerity and cuts. Tightening of purse strings is now business as usual for the small-to-medium organisations we work with, who rarely feature in the standard ‘How The Budget Affects You’ calculators done by the major media outlets.
ThirdSector.com does a decent job here, but we thought we’d give our own take on how the budget may affect the average small to medium size charity Pilotlight works with.
General overview
The budget news was less gloomy than was floated beforehand, so the main critique may be the lack of anything to help charities and reduce need rather than something specific which negatively affects them. This is the major point made by both the gist of Scope and The Children’s Society comments. However, as the Institute of Government put it in their pre-budget analysis, “there is wisdom in waiting a month or two before deciding whether the 2016 Budget is a triumph or a miscalculation” given the Chancellor’s indubitable presentation skills.
Two key things fall out of the scaling back of growth projections from 2.4% to 2.2% which charities may want to be mindful of:
- Knock-on effect for public spending. No large amount of cynicism is required to acknowledge that when the government takes in less than it hopes for it is generally the Local Authority budgets and new departmental projects which take the hit. The 50% drop in the value of the Local Sustainability Fund between its announcement in 2014 and launch in summer 2015 is testament to this. Given the profile and protection given to major areas of spending such as the NHS, education and once again pensions, expect the hit to be taken by the less immediately necessary projects instead. Since most of these are already down to the wire, Local Authority funding for smaller charities who provide services such as advice, advocacy, youth work or key work that supports the effective operation of statutory services but doesn’t provide them, may find themselves in the firing line.
- Effect on confidence. For companies confidence is everything and, when growth is lower than expected, corporate confidence tends to follow. The drop in the value of the pound was immediate (see the BBC at 12:58), and with ongoing concerns about the international economy, the worry is corporate partners will not be in the mood for opening their wallets or putting more staff time toward local community projects – something smaller charities already struggling to build partnerships with the private sector will be mindful of.
Disability benefits
Although specific changes to disability benefits appear to have fallen out of the budget in the end, at least £1.2bn of the non-specific £3.5bn extra savings by 2020 are expected to come from a reduction in the Personal Independence Payment (PIP) component of disability benefit, affecting a possible 600,000 people.
If this happens it makes things significantly harder for charities working with those affected by disability. It will be particularly sour for the organisations who have been encouraged to look at enterprising ways of covering costs through such schemes as charging from personal budgets. Indeed, Pilotlight has helped a number of charities embed this approach into their organisation as a way of diversifying their income. A change to the value of the PIP will obviously impact on this potential income source, as people with disabilities have less cash to spend on services offered.
School budgets
The chancellor likes to pull rabbits from his hat and this budget’s ‘rabbit’ was the sugar tax, closely followed by plans to extend school hours for extracurricular activities. Proceeds from the former will go to primary school sports activities, while the secondary schools will be able to bid for cash to do the latter.
For charities who work closely with schools delivering programmes around sports and arts in particular, this could be an excellent opportunity to expand their partnerships (and be paid properly for doing so!).
Homelessness and women’s organisations
The other two areas to have specific mentions in the budget and highlighted in Charity Times’ analysis, were women’s organisations (who were already due to receive the proceeds of the ‘Tampon Tax’) and homelessness organisations, for whom a specifically targeted social impact bond is being doubled to £10m and who may be able to benefit from investment in low cost second-stage accommodation.
Tax
The retreat from proposed cuts to pension tax relief, increase in the threshold to pay top rate income tax and reductions in capital gains tax are all good news for higher earning individuals. This group doesn’t tend to access voluntary sector services so much, however. So, is this good news for smaller charities?
I say yes, mainly because I want to end on a good note, but also as a call to action. Let’s turn this decision into a chance for higher earning individuals and companies to increase their philanthropy and give back to the good causes in their communities for whom there isn’t much let up. For instance - saving £400 on your tax bill now you aren’t in the highest rate tax bracket? What a good opportunity to set up a £10/quarter standing order and give 10% back to charity!