June/July analysis: A political marriage destined for a nasty divorce

David Cameron and Nick Clegg have taken their vows of matrimony, and promised the most modern of civil partnerships with a “new politics”. But for the sector, the new governmental marriage raises many questions about its commitment to the sector.

Where does the sector fit into this arranged marriage? It was hardly top of the agenda before, given the state of the nation’s finances, but the Conservatives’ Big Society vision did have a defined central place for the sector. Does that place remain? Cameron and Clegg committed themselves whole-heartedly to the Big Society vision with a big sector love-in at Number 10 on May 18.

At this, Cameron said: “During the election campaign I extended an invitation to everyone in this country to join the government of Britain. I said that the idea of the Big Society would be marching through the corridors of power – and it’s happening right now. Today is the start of a deep and serious reform agenda to take power away from politicians and give it to people.” Grand talk, even for Cameron. The policies Cameron and Clegg outlined, were those included in the original Big Society document.

Pre-election, shadow charities minister Nick Hurd committed himself to keeping the Office of Third Sector, an important indication of how the Conservatives did not look to reshape the sector when in Government. After the election, this has now become the Office of Civil Society, replacing the Office for the Third Sector and thankfully Hurd, not a compromise candidate, became the minister for
Civil Society.

Hurd set out three central tenets of his role going forward: making it easier to run a charity, social enterprise or voluntary organisation; getting more resources
into the sector and strengthening its independence and resilience; and making it easier for sector organisations to work with the State. As statements of intent these are as vague as they come. Hurd has yet to really flesh out what these
will mean.

It was many days into the coalition before Hurd was finally confirmed. This could be see as either a possible worrying sign that the sector will be low down in this government’s priorities, or evidence that agreement could be reached by the coalition partners on the sector and therefore left it until the more difficult issues were agreed upon.

The whole way the coalition was reached had many suggesting it brought the political system into disrepute and presented a strong argument against “voting reform,” as this type of circus would become the norm. Lord Norton of Louth, former chairman of the Lords Committee on the Constitution, made the point that proportional representation produces not a people’s Parliament, but a politicians’ Parliament, with policy emerging not from manifestos, on which people voted, but from post-election bargaining, on which the people have no say. That is certainly the case on this occasion.

One time deputy Prime Minister Michael Heseltine on the night of Cameron being knighted PM made the comment that the youngest Prime Minister in 198 years agreed on the coalition deal in the national interest.

This of course is nonsense. Cameron made the deal because he wanted to get into number 10, and this was his only real path into Downing Street after the
election result.

Lib-Dem backed cuts
On the Liberal Democrats side Nick Clegg looked opportunistic (although which politician is not) seizing the trappings of power while not extracting any significant compromises from David Cameron. No Liberal Democrat holds any of the main posts in government. The promised referendum on alternative voting may well be batted away into the distance by a united majority of Conservative and Labour supporters unhappy at the coalition. Then the question will be left: what has Clegg committed to being part of the government?

The schisms that exist between the coalition partners, in theory, are huge. The left-wing of the Liberal Democrats and right-wing of the Conservatives are oceans apart. Within both parties there is enough opposition to the coalition to slowly pull it apart.

One gets the sense that the greater long-term damage will be done to the Liberal Democrats. They have accepted cuts on a scale Clegg said he would not embrace pre-election, and for that he and his party are likely to pay a heavy price. The irony therefore, is that the Lib Democrats’ eagerness to pursue power could cost them heavily and push the system more back to a two party system. From “new politics” to status quo in one short journey.

It is not a progressive alliance, as the coalition mantra: “freedom, fairness and stability”, alludes, but an alliance of convenience and necessity, given the result of the General Election.

The Lid Dem job in cabinet that will come under the most scrutiny is chief secretary to the Treasury, held for a short period by David Laws, until he quite rightly resigned after wrongly claiming £40,000 of public money.

As the understudy to Chancellor George Osborne, what cuts the chief secretary to the Treasury rubbers stamps, will be crucial to the impact on the sector, wider society and the success of the coalition. And in Danny Alexander, who replaced Laws, the coalition got another young professional politician whose only real job has been in PR.
Then came the cuts and the challenge to the Lib-Dems within the coalition. The first cuts totalled £6.243 billion, with local government spending cut by £1.2bn as part of this.

More seriously came the Emergency Budget, which walloped charities with a big rise in VAT – with the standard rate of VAT rising from 17.5% to 20% from 4 January 2011. A left field attack that hardly fits with Hurd’s first tenet that he will look at making it easier to run a charity.

Challenge for charities
The increase will mean the tax burden of charities will increase by at least £150 million per year, according to the Charity Tax Group (CTG). A massive hike. The freeze on Child Benefit, rather than means testing it, appears at odds with the “we’re all in this together” rhetoric espoused by the Coalition. Chancellor Osborne proposed to knock £113 billion a year out of the deficit by 2014-15.

Stephen Bubb, chief executive of ACEVO, summed it up well. “The scale of the challenge facing charities as a result of this Budget is enormous. The spending cuts outlined will impact on frontline services. The vulnerable will likely receive less support, charities will be asked to do more, and will have to do so at a
time that their cost base is rising due to the VAT rise.”

And as the CTG and CAF’s John Low points out: it is smaller charities which are disproportionately affected, as VAT accounts for more of their charitable expenditure than for larger charities.

On a more positive, though speculative note, the 10% increase in Capital Gains Tax for the higher paid could 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.

So much though for the “Big Society”. The position of Hurd as Minister for Civil Society is put into sharper focus under the cloud of the Emergency Budget. He is boxed in by his masters’ desires in Number 10 and 11 Downing Street. What they say goes, and as the Budget showed, this is looking increasingly at odds with a real commitment to the Big Society and the sector as whole.

Hurd could become more of a Rosencrantz and Guildenstern, nothing more than an innocent observer in the wider drama of real events.

It was a Budget made out of ideology not necessity. The desire to shrink the state below 40% of GDP is Thatcherism writ large. Clegg, Cable, Alexander and Huhne are all Thatcherites now. Professor Colin Talbot of Manchester Business School estimated that a fifth of public sector jobs will go: one million jobs. You also had Lib-Dem MP Simon Hughes bumbling around trying to find progressive lines in the Budget which did not exist.

Opportunities lost
Much of the present predicament in the nation’s finances is focused on the legacy left by Labour. The reality is that the crisis is of global scale, and to say anything other is political posturing. Looking back though on the Labour Government, its 13 years in office did produce the Office of Third Sector, and some real benefits to the sector, but its real record in government was of opportunities lost. While Britain is not broken, it does suffer from cracks that derive from Labour Party policy, or lack thereof.

Ed Miliband is still rightly regarded as the star of the sector, driving forward the sector as the first, and still best, minister of the Office for Third Sector, showing genuine passion, commitment and involvement in the many facets the role demands.

He was then followed by a group of mediocrities, with the later exception of Angela Smith, who then seriously damaged her reputation by pulling the Campaign Research Programme. Going forward, it would good to see Ed Miliband return to frontline politics, this time as leader of the Labour Party.
From here it will be tough for the sector: it was always going to be, given the economic environment, but the Budget has ensured that some charities will
now have hurdles it will be difficult to overcome.

The coalition is destined to be a marriage that will not last the arranged five years. The Budget has shown some cracks. But exactly how long it will be with us, is more difficult to assess.

One thing is for sure, when it does end, there will be plenty of blood on the carpet of Number 10. And of most that will belong to the Liberal Democrats. The worry is the sector may have suffered serious damage by the mentality of deep cuts by then.

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