Autumn Statement 2016 – Impact on the Charities Sector

Published: 24 November 2016

Whilst yesterday’s Autumn Statement delivered some positive news in terms of increased public spending on house building, transport infrastructure and high-speed internet, it is unlikely that this will result in increased Government income for charities or reduced demand for their services.

Caron Bradshaw, Chief Executive of the Charity Finance Group (CFG), believes the voluntary sector had been largely overlooked in the statement, rather than being seen as a contributor to the economy: “We have seen tens of billions promised in infrastructure spending, business rate cuts and personal tax cuts. Most of this has been financed by greater levels of borrowing. There isn’t a lack of money, there is simply a lack of political will to support the valuable work of our sector”.

Despite softening fiscal targets and sector specific funding, we should expect to see a considerable fall in income for households on benefits over the coming years due to changes in welfare and tax implications; resulting in  increased costs for charities. For most, universal credit will be less generous than the existing tax credit system in terms of the money households retain as they move into work, and will more than offset gains from the National Living Wage and changes to personal tax allowance. 

Plans to raise personal income tax allowance were well received, however this will not impact on lower-income households, many of which don’t meet the existing threshold. Therefore households on benefits will see considerable income reduction over coming years.

  • The National Living Wage (or minimum wage for over-25s) is set to rise from £7.20 to £7.50 from next April, which represents a significant cost to employers
  • National Insurance thresholds for employers and employees are also due to be ‘aligned’, at a cost to employers of about £7 per employee.
  • Insurance premium tax is also due to rise from 10% to 12%, and salary sacrifice schemes (e.g. gym membership) are also losing tax relief (although pensions, childcare and cycle to work will keep it).

Charities funding received positive response from the sector, but the view is that this is ‘too little, too late’:

  • No change to the distribution of Libor fines; over the next four year a further £102m has been consigned to armed forces and emergency services charities 
  • £3m from the tampon tax allocated to women’s charities
  • Museums and galleries tax relief to be extended to permanent exhibitions
  • A further £10m is being committed to heritage projects

Chief Executive of the Charities Aid Foundation, John Low, said that funds for charities supporting the armed forces, emergency charities and heritage projects acknowledged the “positive contribution” of charities in these important areas. “We know that during uncertain times charities are increasingly relied upon to support those in most need” he added. “In recent years charities have experienced rising demand for their services while resources have been increasingly stretched.  Charities have a big role to play in building a better society and a fairer economy and it will be vital that Government embraces their expertise and influence in shaping some of the new policies announced today.”

Anna Jay is a Consultant in the Not for Profit Practice 

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