Sector realistic on Chancellor’s Autumn Statement
Written by Andrew Holt
The sector has responded realistically to the Chancellor’s Autumn Statement.
While the Autumn Statement contained very little that was specific to charities, there were some welcome announcements.
The most notable announcement relates to a review of digital giving, while a number of policy announcements made in Budget 2011 and Budget 2012 were also restated.
But overall, the sector focused on the harsh realism of the economic situation and the negative impact on the sector of extended austerity.
CFG: Increased period of austerity
Caron Bradshaw, CEO of CFG said on the Autumn Statement: “We all know life is extremely tough, and it’s not going to drastically improve for some time. The Chancellor’s statement has reflected this bleak outlook.
"Government needs to recognise the impact an increased period of austerity will have on the sector and work with us to ensure that long term damage is not done to charities who are the bedrock of their local communities. Cuts to departmental and local government budgets will affect inevitably charities.
“Our much needed local voluntary sector is suffering and Government has to deliver on its promises to work with us if we are to avoid shattering the foundations of organisations working on the ground.
"We have to try and curb the effect this has on vulnerable people that rely on these services, especially as cuts to benefits in real terms are going to take their toll on many of those in our society that need support."
Within this, Bradshaw said that charities had to really promote the importance of charities and the sector.
"Giving is stagnating at best, and at worst decreasing quite dramatically. We have to demonstrate to the public why giving to charities and local communities is even more important now than ever.
"As a sector it’s important that we focus on managing our assets, explore new financing options where appropriate, and we need to engage with the public at every possible opportunity," she said.
NCVO: Sobering assessment
On this wider picture presented by the Autumn statement, Ben Kernighan, deputy CEO of NCVO, said: “The sobering assessment of the state of the country’s finances will provide little comfort to vulnerable people in our society and the charities that support them.
“As charities tighten their belts, or worse close their doors, it is ultimately the people they support who will suffer. Many charities help people find and keep a job, while others provide support to some of the most vulnerable people in our society, easing pressure on the Chancellor’s welfare bill.
“Charities are facing increased demand at the same time as falling incomes and rising costs. The real term cuts to the welfare support announced today will put further pressure on the charities who support people who are struggling.
“Relieving the pressure on charities is crucial and so the review of digital giving is welcome. We have already spoken to Treasury about how our members can feed into this process, as well as the 2013 spending review.”
Tax avoidance: cracking down
The Chancellor said he was committed to “leading the international effort” to prevent international companies transferring profits away from major economies, including Britain, to tax havens.
On the tax avoidance issue, Bradshaw said: “I am pleased the Chancellor has not repeated the tax cap debacle and instead has shifted focus onto cracking down on genuinely concerning areas of large scale tax avoidance and our confusing tax system.
"Hopefully the additional resource within HMRC will enable them to take a more proportionate approach so that higher risk areas are addressed rather than pursuing softer targets.
"But as this is as much about culture as it is about resource I am not inclined to hold my breath. We do however have concerns that any anti abuse rule may impact on charities, judging from previous experience where the sector has got caught up as an unintended victim, and we’ll be interested to see the final detail once the legislation comes out later this month’”
CAF: Gift Aid Reform
On another positive note, the Government has backed calls from the Charities Aid Foundation for reform of the Gift Aid system to make it fit for the 21st century.
The Autumn Statement document stated: “The Government will examine whether the administration of Gift Aid can be improved to reflect new ways of giving money to charity, in particular digital giving.”
John Low, chief executive of the Charities Aid Foundation, said: “It’s good news that the Government has responded to our call to modernise the Gift Aid system and has made a clear pledge to make it fit for the digital age.
“We need Ministers to act quickly to make Gift Aid fit for the 21st Century so people can give more easily online and using mobile technology.
“But we need the Government to go further, make it easier for people to give through the payroll and ensure charities do not face disproportionate cuts.
“Falling donations and the public spending squeeze mean many charities are facing increasing deficits and are having to dip into reserves to maintain services. Charities also contribute significantly to the UK economy and employ 765,000 people. Now is the time to back Britain’s charities so they can continue their vital work.”
IoF: Gift Aid vital to fundraising
On whether the administration of Gift Aid can be improved to reflect new ways of giving money to charity, in particular digital giving, Peter Lewis, chief executive of the Institute of Fundraising (IoF) said: “Gift Aid income is vital to fundraising and our members.
"The Institute of Fundraising has been pushing for simplification of Gift Aid and reductions to the administrative burden for charities for some time. We welcome the announcement of a review, and look forward to continuing our work with Government and charities to identify ways to modernise and improve Gift Aid.”
CFG: Exciting to expand Gift Aid
Bradshaw added on digital giving: “Hidden in the detail is reference to a fact finding exercise to examine digital giving platforms and gift aid. We are really excited that the Government wants to look at how we can expand gift aid to new types of giving.
"We have been calling for this for a long time and we look forward to working with HM Treasury and to hopefully come up with some exciting ideas for budget 2013 that can bring Gift Aid into the 21st century.
CTG: Welcome how Gift Aid can be improved
Charity Tax Group chairman John Hemming added: “We welcome the Government’s announcement that it will examine how Gift Aid can be improved to reflect new ways of giving money to charity and in particular digital giving.
"CTG looks forward to working closely with HMRC to explore changes to the Gift Aid system for different forms of giving including text giving and online giving.
"We also welcome the confirmation by the Government that the matching criteria and eligibility criteria for the Gift Aid Small Donations Scheme has been improved and the announcement that the planned increase on Fuel Duty has been scrapped”.
CAS: Cuts in support for the most vulnerable families
The Chancellor announced that benefits excluding the state pension but including income support, child benefit and housing benefit, will rise by just one per cent a year until April 2015. The Chancellor said that this was “fair”, because working people’s pay had risen at half the rate of benefits since 2008.
Citizens Advice Scotland (CAS) though said the Chancellor’s Autumn statement will push more households into poverty, and that the Chancellor’s ‘divisive’ language adds insult to injury for those who are losing out.
CAS chief executive Margaret Lynch said: “We have had yet another set of real-term cuts in support for the most vulnerable families in our society. So once again, the burden is falling on those who are least able to bear it.
“For all the talk of recovery, the Chancellor doesn’t seem to understand how bad things are for people on the lowest incomes. Five thousand Scottish families have had to rely on food parcels in the last 6 months.
"People are already coming to their CAB every day because they are struggling to be able to afford essentials like food and fuel. They may have thought things couldn’t get any worse – but for many of them they just have.
“What makes matters even worse though is the Chancellor’s language. To contrast working people with those on benefits is divisive, and is also insulting to the many people who are out of work through no fault of their own.
"Many of those who are currently on benefits are actually in work. And the vast majority of those who are unemployed would love to work, but there are not enough jobs for them. These are the families who are losing out today.
“Pushing vulnerable families into poverty is bad enough, but to do it with such rhetoric adds insult to injury.”
4Children: Families stretched to make ends meet
On this, Anne Longfield, chief executive of 4Children, said: “Families right across the country are stretching every sinew to make ends meet. The reality for many families this Christmas will not be how much they spend on presents but rather whether they can afford to eat or heat their homes.
“The measures announced in today’s Autumn Statement will provide little cheer for those families who are already struggling to cope with the rising cost of living.
"Small changes such as reducing the uprating of benefits can make all the difference to vulnerable families, tipping many into poverty or breakdown - a consequence that will see our welfare system ultimately pay a higher price in the long run.
"It has never been more pressing to start putting families at the heart of the economic recovery. Investing in families now is the only way to get our economy back on track and offer thousands of families a lifeline before their financial difficulties become irreversible crises.”
SCVO: Push poorest to breaking point
On this theme, Martin Sime, chief executive, Scottish Council for Voluntary Organisations, (SCVO) added: “A real-terms cut in most working age benefits when people are already struggling to make ends meet will push our poorest and most vulnerable people to breaking point.
“Businesses will benefit from a 1% cut in corporation tax while it’s the poorest families which will be worst off. This clumsy attempt at ‘voodoo’ economics will not boost economic growth.
"This is nothing more than an ideological attempt to steal from the poorest to compensate for Westminster’s failings.
“Charities and other third sector organisations are already struggling to meet sky high demand for services. With 80% of these criminal welfare cuts still to kick in and no sign of any let-up on the biggest assault on the poor in generations, we are working together to do everything we can to mitigate the devastating effects these cuts are having on people across Scotland.”
CFG: Business bank and fuel duty
The Chancellor gave small and medium sized businesses a boost, unveiling government plans to form a £1bn-backed ‘business bank’.
On this, Bradshaw commented: "This autumn statement has cemented the notion that this is a new era and the ability to change and adapt is now part of the necessary fabric of charities who will survive.
"It will be interesting to see whether charities are able to benefit from the new Business Bank; hopefully opportunities to work with the voluntary sector as well as small business will be explored again increasing the range of financing options available in the UK."
Breaking the issues down further, on fuel duty Bradshaw noted: "Measures such as freezing the fuel duty are positive for charities as well as families and small businesses. It is a shame the Chancellor does not recognise this and look how else he might be able to help the sector to deal with increasing costs of running services."
UKSIF: Mute the Green Investment Bank
As national debt will not start falling now until 2016-17, according to the Office for Budget Responsibility's forecasts, this means the recently launched green investment bank will not be able to borrow until then.
The UK Sustainable Investment and Finance Association (UKSIF) warned that news of the missed UK debt target in the Autumn Statement could mute the Green Investment Bank's ability to boost investment in the low carbon economy.
Caroline Escott, UKSIF programme director and Head of Government Relations, said: “Today's Autumn Statement seemed like a missed opportunity to boost green growth. We were particularly disappointed that any boost to the Green Investment Bank's borrowing powers will apparently be delayed as a result of the new debt forecasts.”
Work Foundation: Welcome, populist and wasteful
Given his verdict, Ian Brinkley, director of The Work Foundation, said: “The Chancellor’s Autumn Statement was a mix of the welcome, the populist and the wasteful. Ultimately however, it was another missed opportunity to make a real difference to the UK’s economic prospects.
“The capital spending package was very welcome, especially increases for science and higher education. However, the cuts in fuel duty were populist and without economic merit. Similarly, the corporation tax cuts and higher capital investment allowances were wasteful and ineffective.
“Instead, the Chancellor could easily have doubled the capital investment package and made this an Autumn Statement to remember.”
Autumn Statement overview
In his Autumn Statement the Chancellor of the Exchequer said the Government’s economic strategy is focussed on reducing the deficit, restoring stability, rebalancing the economy and equipping the UK to compete in the global race.
In his statement, Osborne set out how this strategy will be maintained by taking further action in three areas: Protecting the economy; Growth; and Fairness.
Because of the ongoing impact of the financial crisis, the euro area crisis and the effect of inflation on incomes and business costs, the OBR is predicting a more subdued and uneven recovery than expected with growth weaker and inflation higher than forecast. In response, Autumn Statement sets out:
A further £6.6 billion package of savings from welfare, overseas aid and Departmental spending - funding £5.5 billion of additional infrastructure investment and support for businesses;
A spending envelope for 2015-16 consistent with the announcement in 2011 that spending for 2015-16 and 2016-17 will continue to fall at the same rate as the Spending Review 2010 period;
Tax measures that support growth, reward work, help with the cost of living and ensure that those with the most contribute the most.
To enable the UK to compete with emerging economies such as China, India and Brazil, the Government is taking action to rebalance and strengthen the economy while supporting those who want to work hard and get on, including:
Meeting the needs of businesses with a £5.5 billion infrastructure package and support for long-term private investment in new roads, science investment, free schools and academies;
A further one per cent cut in the main rate of corporation tax from April 2014, to 21 per cent;
A significant temporary increase in the Annual Investment Allowance, from £25,000 to £250,000 for two years to support small and medium-sized businesses;
Devolution of a greater proportion of growth-related spending to local areas from April 2015, in response to Lord Heseltine’s review of economic growth;
Creation of a £1 billion Business Bank to help smaller businesses access finance and support;
Enabling UK Export Finance to provide up to £1.5 billion in loans to finance small firms’ exports;
Increased funding for UK Trade and Investments and extra support for the GREAT campaign to showcase Britain’s capabilities.
Fairness is a fundamental aspect of plans to reduce the deficit and protect the economy, said Osborne. And The Government will help to ensure that it pays to work, supporting pensioners and those most in need, and delivering a progressive tax and welfare system that is affordable and encourages growth, by:
Supporting those on low and middle incomes by increasing the personal allowance by a further £235 in April 2013, taking it to £9440;
Cancelling the 3.02 pence per litre fuel duty increase that was planned for 1 January 2013. The 2013-14 increase will be deferred to 1 September 2013 – meaning fuel duty will have been frozen for nearly two and a half years;
From 2014-15, reducing the lifetime allowance for pension contributions from £1.5 million to £1.25 million and the annual allowance from £50,000 to £40,000;
Uprating most working age benefits and tax credits by one per cent for three years from April 2013 - excluding disability and carers benefits;
Increasing the higher rate threshold for income tax by one per cent rather than inflation in 2014-15 and 2015-16;
Increasing the basic State Pension by 2.5 per cent;
Targeting the promoters of aggressive tax avoidance schemes and the closure of loopholes;
Tackling offshore tax evasion by the creation of a dedicated HMRC unit, maintaining the momentum from the Government’s recent agreements with Switzerland and the US.
Editor Matt Ritchie covers the final Budget for this Parliament, and the official start of the 2015 election campaign