The sector has revealed its unease at the Con-Lib Coalition's Emergency Budget.

Acevo chief executive Stephen Bubb has highlighted how the most vulnerable will be worst hit by the Emergency Budget and the Charity Tax Group has warned that the increase in the standard rate of VAT from 17.5% to 20% from 4 January 2011 will increase the ax burden of charities by at least £150 million per year.

Urban Forum chief executive Toby Blume, added his voice to this disquiet, warning the Coalition Government’s emergency budget will hit poorer people hardest, and will place “tremendous strain” on services provided by charities and community groups.

Blume said: “For all the talk of ‘fairness’, an initial assessment of the Budget appears likely to hit poor people very hard. Raising VAT, rather than raising income tax, is deeply regressive and disproportionately affects poorer households.

"Similarly, a freeze on Child Benefit, rather than means testing it, appears at odds with the ‘we’re all in this together’ rhetoric. Everyone knew the government faced some terribly difficult decisions, but the Budget’s impact is likely to place tremendous strain on the demand for the services of charities and community groups.

“George Osborne’s statement that ‘people at the bottom of the income scale will pay proportionately less than people at the top’ would seem to be at odds with the measures announced, although we’ll need to assess the detail before coming to any final conclusions.

“The levy on banks is welcome, as is the increase in the income tax threshold, but the bank tax is expected to raise only £2bn per year. A drop in the ocean when set against the systemic risk banks pose, the profits they’ve generated and the size of the recent bailout.

“Also, the announcement of 25% cuts to departmental spending (and presumably to Local Gov) is huge. And the timing of the VAT increase (January) increases the risk of a double dip recession as consumers rush to spend at Christmas and then spending drops off in the new year.”

CAF: Smaller charities disproportionately affected
John Low, chief executive of the Charities Aid Foundation (CAF), also expressed concern at the Emergency Budget: “The Government’s moves to raise Value Added Tax (VAT) by 2.5 percent will severely impact on the charities. Furthermore, it is the smaller charities which are disproportionately affected as VAT accounts for more of their charitable expenditure than for larger charities.”

Low did find some positive light. "However, it is good news that the Government will be launching a formal consultation with the sector in autumn on removing the VAT disincentive for charities who share services.”

SCVO: VAT will hit the voluntary sector
Martin Sime, chief executive of the Scottish Council for Voluntary Organisations, though warned: “The rise in VAT to 20 per cent will hit the voluntary sector in Scotland hard. The Charity Tax Group has estimated that the rise could cost the sector as much as £14 million a year at a time when governments in both Holyrood and Westminster are asking us to do more and when income from other sources is already down."

IOF: VAT increase; significant cost for fundraisers
Louise Richards, director of policy and campaigns at the Institute of Fundraising, also commented: “The VAT increase to 20% announced in the Budget will have a significant cost for fundraisers and charities more widely. The rise in VAT will increase costs for some areas of fundraising and mean that there is less money to spend on beneficiaries.

"This in turn means that there will be more pressure on fundraisers to maintain income levels and return on investment. The Institute is concerned at the effects that the increase will have across the sector and supports longstanding calls for charities to be exempt from this increase. We would welcome any opportunity to work with Government to seek solutions to this issue.”

Railway Children: low-income families will be hit
The emergency Budget undermines the government’s pledge to protect the UK’s most vulnerable children, particularly young runaways, and put fairness at the heart of its agenda, warned the charity Railway Children.

The charity is calling for the Government not to sacrifice successful initiatives for vulnerable children by slashing unprotected departmental budgets by 25%.

According to the charity, low-income families and their children are already going to be hit hardest by the Budget’s VAT rise, welfare benefit cuts and child benefit freeze.

Although the Government has recognised the need for better crisis support for young runaways, massive budget cuts across the Department for Education and local authorities means vulnerable children who run away will find it harder to find safe places away from the streets.

There are currently just five beds available across the UK for the estimated 100,000 children who end up living rough each year, 30,000 of which are 12 or younger.

Railway Children is calling for the Government to support a network of emergency safe houses for children fleeing from violence, crime, drug abuse and sexual exploitation.

The preventive solution offered by emergency refuges for children is a cost effective way of tackling poverty and reducing spending pressures over time by allowing professionals to intervene early and reach children at risk in time.

This reduces the need for more intensive, specialist support in the long term, which will be more expensive. Research by Railway Children shows the cost to society if help does not arrive in time can now exceed £1 million for each child most at risk .

Terina Keene, chief executive of Railway Children, commented: “Cuts are inevitable but cutting off support for low income families is dangerously short-termist and unfair as it forces the poorest children to pay the long-term cost of clearing debts of the richest banks. Continued investment in successful initiatives for children will ensure future governments will not face greater costs and lower revenue from poor health, education and skills.”

LVSC: Marginalised are becoming more marginalised
Peter Lewis, chief executive of London Voluntary Service Council (LVSC), said: "LVSC's Big Squeeze report shows that those who are already most marginalised are becoming more marginalised due to the recession. We ask in our post election statement that any cuts should not adversely affect those already suffering the most.

"We will have to wait and see whether the combination of a rise in VAT and welfare benefits cuts, perhaps especially the housing benefit limits which will particularly hit London, are outweighed by the extra money for the poorest families through the changes to the tax credit system and rise in personal tax allowances."

CFDG: engage with government
The CFDG welcomed the delay in implementing the VAT increase. “While the increase in VAT is worrying for the sector, the delay will allow us time to engage with Government on minimising the impact on the sector,” Caron Bradshaw, CFDG CEO said.

Social Investment Business: Government must be mindful of challenges
Responding to the Budget The Social Investment Business chief executive Jonathan Lewis said: “As well as doing what it can to promote and protect business and steward public services through these tough times, the government must be mindful of the challenges a recession poses to the small local charities and social enterprises that we support.

"Especially as they will play a greater role in delivering public services as big spending government departments see their budgets cut. The needs of the people who charities support are constant, and indeed increase during times of economic hardship. Individuals and families who depend on the support of charities and local services need to know that they can trust those organisations to be there for them for life.

“Two separate independent evaluations have found that the method we use - grants, loans and business support - is a highly effective way of making civil society organisations financially sustainable. And moreover, money that is lent is repaid with interest and can be re-lent leading to an evergreen fund.

“We aim to work closely with the new government to ensure the sustainability of civil society organisations so they can build thriving local communities and deliver effective local services - realising David Cameron’s vision of a Big Society.”

CGT: Renew interest in charity giving?
On a more positive note, the 10% increase in Capital Gains Tax for the higher paid could well act as an incentive for higher rate taxpayers to give more generously to charity by donating gifts of land, property or shares, in an attempt to offset their increased tax liability.

“The increase in Capital Gains Tax (CGT) to 28 percent for higher rate tax payers could renew interest in share giving to charity. At the moment share giving is worth around £100m a year, but previous research undertaken by CAF suggests that only one in five are aware of this highly tax effective method of donating,” noted Low.

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