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Budget 2021 - a digest for foundations

The Chancellor of the Exchequer Rishi Sunak has presented this year's Budget. Ahead of the Budget, charity sector bodies working together as the #NeverMoreNeeded campaign urged the government for additional support for charities. What did the 2021 Budget deliver and what does it mean for foundations? ACF's Director of External Affairs, Richard Hebditch, summarises some key points.

 

The Government continues to spend massively on support for workers and business affected by Covid with £80bn on Covid related income support schemes for individuals in the year just ending, plus another £24bn next year again on these schemes.

Support for business include continued massive loans to large companies and another £5bn package of support for small businesses and businesses closed due to lockdowns. These ‘Restart Grants’ in England are for of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses. The government is also providing all local authorities in England with an additional £425 million of discretionary business grant funding). The furlough scheme ends in September but with employers having to contribute more in the summer. Support for business also includes a Help to Grow package of advice. This will not be open to charities, but there is apparently going to be some sort of package later from DCMS with advice for charities.

Other support for business includes a “super deduction” for firms to cut their tax bill on capital investment. Firms are sitting on £118bn of surplus cash built up during the pandemic. This change is expected to bring forward investment in the short-term to boost the economy but not to make any long-term difference to the low levels of capital investment in the UK (and the static productivity in the UK for the last decade or so)

Support for those on universal credit was boosted by £20 a week during the pandemic. This will end in October, sooner than was expected in pre-Budget guesses from commentators. This will push more people into poverty and likely lead to demands on voluntary organisations like food banks.

Despite the increase in spending, the announcements today will not boost public services and the Chancellor is actually cutting everyday revenue spending by an additional £4bn a year on top of £10bn cuts from 2022/23. Government spending on voluntary sector has tended to track overall public spending so this is likely to squeeze charity income from government further. These cuts would leave day to day public service spending outside of protected areas (eg NHS) almost one-quarter below its 2009-10 level in real terms by 2025-26. Organisations like the IFS have said maintaining existing services with this level of cuts is not sustainable – either the state will need to withdraw fully from areas or else raise taxation to fund them at a more sustainable level. Again, this could have implications for the work of charities and community groups and the foundations who support them who may face rising demand for their services or face choices about stepping in to secure provision of services which might otherwise be cut.

DCMS gets £300m to continue the Culture Recovery Fund, £90m for national museums and cultural bodies and £300m for a sport recovery package, easing pressure on arts and culture organisations.

There was no package of support specifically for charities apart from £400K for armed forces charities (though there are other new relevant funding of £19m for domestic abuse programmes; £10m to support veterans with mental health needs and a £40m down payment for victims of the Thalidomide scandal with a guarantee for future funding). Households are also sitting on £150bn of excess savings but there was no equivalent Gift Aid proposal to the “super deduction” tax relief for businesses. The lack of any mention at all of support for charities does seem intentional and is a disappointment. We had backed calls for the introduction of a Gift Aid Emergency Relief Package; an emergency fund for charities; and more funding for councils.

The government will continue to support social enterprises in the UK that are seeking growth investment by extending the operation of Social Investment Tax Relief (SITR) to April 2023. This will continue availability of Income Tax relief and Capital Gains Tax hold-over relief for investors in qualifying social enterprises, helping them access patient capital. This measure will be legislated for in Finance Bill 2021, and a summary of responses to the consultation held in spring 2019 will be published on 23 March.

There are new funds that local areas and communities can bid for. This includes:

  • £150m Community Ownership Fund to help communities (not councils) take over community assets. It will require communities to match fund proposals, so there is likely to be a role for foundations and other funders in helping communities in areas with less financial and social capital to put proposals together
  • £220m for a one-year Community Renewal Fund to act as a bridge to the Shared Prosperity Fund (the post-Brexit replacement for EU funding). Applications need to be in by mid-June for decisions at end of July. Projects need to spend all their money by March 2022, so at most projects will only be running for seven months. Applications need to meet around 13 different criteria and be “innovative”, which is a lot to ask for such a short project life.
  • The details of the Shared Prosperity Fund from 2022 (talked about since 2016) are still not clear but will include a place-based portion which will target places most in need across the UK and an employment and skills programmes portion. We will be working with colleagues in NCVO and others to look at what the proposals might mean and how funders might engage in this, for instance making links with place-based collaborations we are beginning to list on the Funders’ Collaborative Hub
  • More details were also announced of the £4.8bn Levelling Up Fund which will operate to 2025. This will invest in local infrastructure including local transport schemes, urban regeneration projects and cultural assets. The Fund is jointly managed by HM Treasury (HMT), the Ministry of Housing, Communities and Local Government (MHCLG) and the Department for Transport (DfT). Bids will be from local authorities but will be based on Westminster constituencies and will expect to see MPs backing their local bids, as well as expectations of local community and stakeholder engagement. In Northern Ireland, bids can come from community groups. Bids must be in by 18 June.
  • For both the Community Renewal Fund and Levelling Up Fund, the Government has published which areas will be prioritised. These are based on different criteria to the index of multiple deprivation, with some reasonably well-off areas seeming to have a higher priority.
  • The Levelling Up Fund will be UK wide, with the UK Government (rather than devolved governments) deciding on what gets funded, an example of the more interventionist “union” policy from Ministers.

The Treasury also published an accompanying growth strategy document, which includes a short outline of the what the levelling up policy is. This is summarised as being about four objectives:

  • Where people live shouldn’t be a barrier to their life chances: everyone should get a fair chance to get on in life, wherever they live.
  • We need to address regional economic disparities.
  • We need to ensure people can access opportunities.
  • We need to embed lasting change in outcomes across the UK.

The Office of Budget Responsibility also published its forecasts on the back of the changes in the Budget. Real household disposable income will fall slightly in 2021 but start to rise a little in 2022. It expects household consumption to rise slightly this year but to increase by 11% in 2022, presumably funded by savings built up in the pandemic. Unemployment is expected to peak in 2022 at 2m but to start to fall back slightly after that. With spending cuts and tax rises due from 2023/24, it may be the case that the Government will choose to call an election before the full-term ends in 2024. Charities’ fundraising from the public tends to track public confidence in the economy, and with falling household incomes this year and rising unemployment into 2022, it may take some time for donations and trading income to recover. However, if charities can find a way to unlock the £150m excess saving from middle- and higher-income households, then this could be avoided.

Overall, there was little on social policy in the Budget. The Chancellor did not really talk about public services or the value of local government or charities as intermediaries between the central state and individual people and businesses. Regeneration funding is focused on skills and capital spending. Risks to growth from a failure to tackle social issues more generally are not mentioned in the Budget or the accompanying Build Back Better growth strategy.

On the environment, there is a stronger emphasis on this across policy areas, with a clearer expectation that funded projects should be consistent with getting to net zero, and clearer links between social policy and the natural environment and climate change in the new funding streams. The Bank of England’s monetary policy remit and the new National Infrastructure Bank will also have a stronger focus on the environment.

More details on the Budget documents can be found at Budget 2021

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