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Policy and insight manager Sam Mercadante considers the implications of the Autumn Statement for charities.
The voluntary sector, which gives so much to our communities and society, is facing a Cost of Giving Crisis this winter.
In a climate of climbing costs, falling income and increased demand, today’s Autumn Statement was an opportunity for the chancellor to extend a lifeline to struggling people and communities by addressing chronic underfunding of the charities that support them.
NCVO has joined others across the sector in campaigning for increased support for charities since inflation began rising in spring 2021.
While we welcomed the chancellor’s £100m commitment to the sector in the Spring Budget earlier this year, eligibility for most of this funding was limited to organisations providing cost of living crisis support. Many other organisations, including those delivering critical public services, continue to face very difficult decisions about how and whether they can continue supporting their communities.
Despite the backing of more than 1,400 charities, our call on the chancellor to address chronic underfunding of public services was overlooked. Not uplifting grants and contracts to cover the true cost of delivering them means some charities will be forced to step away from delivering public services or reduce the services they offer, leaving people without the support they need and deserve.
The chancellor’s stated goal was to focus the Autumn Statement on policies that promote economic growth. We are disappointed that none of today’s announcements will deliver improved growth and stability for the voluntary sector.
Read on for our wider reflections.
NCVO contributed to and supported the Civil Society Group’s submission to the Autumn Statement.
We’re pleased that the government took the right decision to reinstate VAT relief for the installation of energy-saving materials in buildings that are used solely for a relevant charitable purpose. However, we are very disappointed to see that none of our other asks were addressed in today’s Autumn Statement. We will continue to advocate for these changes.
The chancellor announced that benefits will be uplifted in April 2024 in line with September inflation, as they should be. Uplifting the local housing allowance rate, which has been frozen since April 2020, will also provide very welcome support for many renters.
However, we and others across the sector are still very concerned that benefits are not high enough to meet people’s basic needs. Insights from the Office for National Statistics reveal that food prices have risen by about 30% since 2021 and data from Citizen’s Advice shows that far too many people don’t have adequate income to pay for essentials.
The government has also doubled down on increasing punitive measures in the welfare system for people who are out of work, and recommitted to changing the Work Capability Assessment so that fewer people are deemed as not fit for work. The government claims that these changes will encourage more people into work, but Disability Rights UK points out that they will in fact push more disabled people into poverty.
It remains to be seen what impact these changes have on demand for charities’ support and services.
The Institute for Fiscal Studies expects very tight public spending plans to persist until at least 2028/29. The chief secretary to the Treasury has previously said he does not see a need for increased public spending, and that government is reviewing public sector productivity and considering where artificial intelligence can help reduce spend.
This is despite the Institute for Government’s Performance Tracker 2023 revealing that most public services, including hospitals, police, and adult social care, are performing worse than in 2010. It also predicts that all public services except children’s social care will be worse in 2027/28 than before the pandemic.
We were therefore very disappointed by today’s announcements, which included no mention of support for charities delivering public services. We will continue to call on the chancellor to properly fund public services, so charities can continue providing vital support and services that people and communities rely on.
The government has announced that the national living wage, which is the minimum wage paid to workers over age 23, will rise to £11.44 from April 2024. The living wage will also be extended to all workers over age 21. This will be helpful for many workers, but may be difficult for many voluntary sector employers.
Our recent survey of charities delivering public services found that 45% of organisations are finding it difficult to pay the living wage within the financial limitations of underfunded grants and contracts.
Some of the tax changes announced today are likely to have implications for voluntary organisations and the people and communities they work with.
The chancellor announced a 2% reduction in employee national insurance contributions. While this will increase take-home pay for many people, it raises questions about how the government plans to sustainably fund the services that national insurance pays for. Furthermore, the Institute for Fiscal studies has pointed out that frozen tax thresholds until 2028 will mostly or entirely cancel out reductions in national insurance payments.
Our call for the government to introduce a special charity VAT rate, set at 0%, went unanswered. According to research by London Economics, this could have saved the voluntary sector an estimated minimum of £1.8bn per year in irrecoverable VAT. In a tax-cutting Autumn Statement, this was a missed opportunity to increase funding for charities and voluntary organisations.
While the chancellor provided a number of tax incentives for the private sector, it’s disheartening to see the government continue to overlook the potential of similar measures for the voluntary sector.
Data from NCVO’s Almanac reveals charities and voluntary organisations employ just under 1m people and contribute £18bn to the economy each year (about 0.8% of GDP). They’re keen to invest in productivity-improving measures, such as technology and training, but financial constraints, particularly over the last few years, make this difficult to prioritise.
Charities and the social infrastructure they provide are critical to growth, and we will continue to call on the government to recognise and support the sector’s economic role.
A small number of other new measures are likely to be of interest to some voluntary organisations, namely:
Why the government must act to cover the true cost of charities delivering public services
Read our open letter calling on the chancellor to ensure charities can continue providing essential services for communities
NCVO's CEO Sarah Vibert launches our campaign to support charities and voluntary organisations this winter