Sector organisations have given their thumbs-up to George Osborne’s Autumn Forecast statement on shared services VAT cost sharing exemption.

ACEVO, NCVO and CFDG welcomed the Government’s plans to introduce the long-awaited VAT cost sharing exemption, announced today in the Chancellor’s Autumn Statement document.

Under the proposals, a VAT cost sharing exemption will be introduced from February 2012.

The exemption removes an additional VAT charge which can arise when organisations such as charities collaborate.

ACEVO: victory for the third sector
Sir Stephen Bubb, CEO of ACEVO, said: “Today’s announcement is a victory for the third sector and a positive step towards the removal of barriers to charities coming together to deliver public services.

“The doubling of VAT costs has too often prevented cooperative ventures and partnership working between charities, which is why ACEVO have been working with the sector in its long call for such an exemption.”

NCVO:delighted the government is taking action
Sir Stuart Etherington, chief executive of NCVO, said: "NCVO and others have long been pushing for Government to address the issue of charities not being able to recover VAT on shared services, as it presents a sizeable stumbling block to effective collaborative working.

"We know from our members that there is appetite within the sector to work together more effectively and efficiently, especially in these tough times, but the additional VAT charge acted as a major disincentive, at odds with the government’s drive to encourage more collaboration.

"We are delighted that the government is now taking action on what has been a longstanding issue. By removing this barrier, more charities will be able to access efficiency savings and provide better services with their beneficiaries’ needs in mind."

CFDG: pleased the Government has heeded calls
CFDG also said it was pleased at the Government’s plans to introduce the long-awaited VAT cost sharing exemption.

CFDG has been lobbying strongly for implementation of the exemption, which will help charities who want to keep costs down by joining together to share services.

Caron Bradshaw, CFDG’s CEO, said: "We are really pleased that Government have heeded calls to implement this extremely important measure. Coming together to share services is an efficient, common sense way of keeping down costs, yet the VAT hit prevents many charities from adopting such arrangements. The exemption will make a real, positive difference to charities in what is such a difficult funding environment."

As well as lobbying for the exemption’s introduction, CFDG has also pressed to ensure it is implemented in a way that is as useful as possible for charities.

A major concern is the requirement to set up a separate legal entity, controlled jointly by members – way beyond the means of many smaller charities.

While this requirement will be retained, the new proposals will provide the flexibility for well-resourced charities with existing staff and expertise to take the lead in facilitating these models, to the benefit of the wider sector.

Bradshaw added: "We raised our concerns with Nick Hurd MP and the exchequer secretary, David Gauke MP, and are really pleased that Government have not only been receptive to the arguments we put forward, but have clearly given a lot of thought to how this exemption could be implemented for the benefit of charities.

"While it doesn’t give us all we asked for, the announcement shows a real willingness to accommodate the needs of the sector, within the arguably difficult constraints HMRC and HM Treasury must operate within.

"We hope this support will continue and further progress will be made in addressing the wider problem of irrecoverable VAT for charities.

“Our job going forward will be to work with the sector to help charities ensure they can utilise the exemption to best effect.”

Autumn statement: updated forecasts for growth and borrowing
The Chancellor delivered his autumn statement alongside the publication of the Office for Budget Responsibility’s updated forecasts for growth and borrowing.

He announced permanent reductions in spending to ensure that the UK meets its fiscal targets, using some of those savings in the short term to fund infrastructure investment to generate long-term growth.

Alongside this, he announced measures to help households and businesses cope with higher inflation and to ensure that deficit reduction is implemented fairly.

As result of the ongoing impact of the financial crisis, the euro area crisis, and commodity shock, the OBR expect slower growth and higher borrowing in each year of their forecast.

Autumn statement: protecting the economy
In order to ensure it continues to meet its fiscal targets, the Government will:

Set plans for public spending in 2015-16 and 2016-17 in line with spending reductions over the Spending Review 2010 period

Set public sector pay awards at an average of 1 per cent for each of the two years after the current pay freeze comes to an end - Departmental budgets will be adjusted in line with the policy, with the exception of the Health and schools budgets, where savings will be recycled

Adjust the allocation of Official Development Assistance in line with the OBR’s revised growth forecast, meeting the 0.7% of GNI target in 2013

Raise the State Pension age to 67 between April 2026 and April 2028

Not increase the child element of the Child Tax Credit by more than inflation, and not up-rate the couple and lone parent elements of the Working Tax Credit by inflation next year

To complement the Bank of England’s active monetary policy, the Government will launch a package of up to £21 billion to ease the flow of credit to smaller and mid-sized businesses, including:

Up to £20 billion through the National Loan Guarantee Scheme to lower the cost of bank loans for smaller businesses

An initial £1 billion Business Finance Partnership, which will lend to mid-sized businesses and SMEs in the UK through non-bank channels.

Autumn statement: a stronger economy for the future
Building on the first phase of the Growth Review, the Government is taking action to accelerate its supply side reforms to invest in infrastructure, support enterprise and lay the foundations for strong, balanced growth, including:

£6.3 billion of additional infrastructure spending over the Spending Review period, of which £1.3 billion was announced earlier in the autumn. This includes:

Investing over £1 billion to tackle areas of congestion and improve the national road network

Committing £170 million of extra funding to allow more local transport projects to go ahead

Investing £100 million to create “super-connected” cities across the UK, with 80-100 megabits per second broadband and city-wide high-speed mobile connectivity

Increasing the Regional Growth Fund by £1 billion

£600 million of funding for an estimated 100 additional Free Schools, alongside an extra £600 million for Local Authorities with the greatest pressure on school places in England

Around £1 billion of new private sector investment in regulated industries supported by government guarantee

Commitments to £5 billion of capital projects in the next Spending Review as part of the National Infrastructure Plan

Targeting up to £20 billion of private sector investment in infrastructure through a memorandum of understanding with two groups of UK pension funds and establishing the Infrastructure Investors Forum with the Association of British Insurers

A new Seed Enterprise Investment Scheme (SEIS) from April 2012

100 per cent capital allowances in Sheffield, the Black Country, Liverpool, Tees Valley, North Eastern and Humber Enterprise Zones

A new build indemnity scheme for builders and lenders to the stimulate the construction of new homes.

Autumn statement: rebalance and strengthen the economy
Fairness, said the Chancellor, underpins the Government’s plan to protect, rebalance and strengthen the economy.

To ensure that the deficit reduction is implemented fairly, provide further support for families and businesses with high inflation, and support young people in the labour market, the Government will:

Defer the 3.02ppl fuel duty increase due to take effect on 1 January 2012 to 1 August 2012; the second increase planned for 1 August 2012 will be cancelled

Increase the bank levy to 0.088 per cent from 1 January 2012, consistent with the Government's intention that it raises at least £2½ billion each year, as set out at Budget 2011

Ensure employers making asset-backed pension contributions do not receive unintended excess tax relief

Proceed with the extension of Air Passenger Duty (APD) to flights aboard business jets, effective from April 2013 – details will be set out in the Government’s response to the APD consultation on 6 December 2011

Introduce a Youth Contract worth a total of £940 million over the Spending Review period to provide wage incentives for small firms to take on young apprentices and employees

Provide extra support for 18-24 year olds through Jobcentre Plus, and an offer of Work Experience or a Sector Based Work Academy for those on Jobseeker’s allowance for over three months

Fund a new £50 million a year programme to support some of our most disadvantaged 16-17 year olds into education, an Apprenticeship or a job with training

Invest a further £380 million a year by 2014-15 extending to 130,000 more disadvantaged two year olds the offer of 15 hours free education and care a week

CAF: voluntary sector will be impacted
On a wider sector level on and the freeze in fuel duty and the review of TUPE arrangements, John Low, chief executive of the Charities Aid Foundation, commented: “As a major stakeholder in the UK economy the voluntary sector will be impacted by many of the announcements made today by The Chancellor including the £1bn “youth contract.”

“The announcements on credit easing and personal investment could offer some assistance to charities struggling with limited funding and no access to capital.

“We hope that the Government will ensure that the £20billion National Loan Guarantee Scheme for SMEs is fully open to social enterprises and charities through both mainstream banks and specialist lenders.

"We also hope that the review of the existing Enterprise Investment Scheme and Venture Capital Trusts incentives will help to address some of the barriers to social investment which currently exist; in particular the exclusion of the sort of debt and quasi-equity finance that is currently preferred by social investors.

"Similarly the new Seed Enterprise Investment Scheme should try to avoid these known barriers from the outset.

“We are also pleased that the Government has announced the introduction of the long-awaited VAT cost sharing exemption.

“The increase from £20m to £30m in the amount of tax relief available under the new scheme for gifts of pre-eminent works of art and the acceptance in lieu scheme will be welcomed by many fundraisers.”

SCVO: Government to face up to the reality of long-term unemployment
Martin Sime, chief executive of SCVO, commented: "It's time for the UK Government to face up to the reality of long-term unemployment and its impact on so many families. These latest plans are just a drop in the ocean of need. We need a long term approach which enables people of all ages to contribute to their hard-pressed communities at least until the economy recovers.

"A new Community Programme could create 100,000 paid opportunities over the next three years in communities across Scotland allowing the unemployed to earn a wage, improve their employment prospects and provide vital support to community services hungry for resources.”

4Children: freezing tax credits is a major blow to families
Anne Longfield, chief executive of 4Children, the national charity that is changing lives for children and families, said today: “In his statement for growth and regeneration, the Chancellor has presented a very mixed bag for families. Freezing tax credits is a major blow to families who we know are struggling with rising prices, falling incomes and record unemployment. These families are already struggling to make ends meet and this will undoubtedly make life harder.

“However, for those low income families with a 2 year old, there is some comfort from the additional investment in free childcare places. Childcare is an investment in our social infrastructure, and today’s announcement – albeit in a limited fashion - signals a commitment to help parents get back to work and offer their children the best start.

“These are the kinds of measures for families we hope to see each year as our economy grows, demonstrating the government’s ambition to become the most family-friendly country in Europe. To meet its own family test, the government must reduce the financial pressures on all families as a priority and invest in their futures.”

NPC: welcome new measures
New Philanthropy Capital CEO Dan Corry added: “While there were a number of welcome new measures in the Autumn Statement, the main message is that the next few years are going to continue to be very tough with growth for 2012 now forecast at just 0.7%.

"Charities that have weathered the storm so far now know they will have to work very hard to cope as need increases and funding and contracts get harder to find. Running down reserves and making ‘easy’ cutbacks will no longer do. The worry is that it will be the very people that charities are there to help who will bear the brunt.”

The Work Foundation: Unemployment is likely to get higher
Ian Brinkley, director of The Work Foundation, added: “The Chancellor has signalled some of the right long-term priorities – investment in infrastructure, support for enterprise and more help for young people.

“However, there is little that will put demand into the economy in the short-term, and the longer term measures outlined are too small in scale. There is still too much reliance on a spontaneous revival of the private sector.

“There are huge risks this forecast will turn out worse than expected. The OBR’s outlook on jobs and unemployment looks far too optimistic. Unemployment is likely to get higher and remain higher than the forecasts assume.”

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