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Sam Mercadante

Sam Mercadante

Sam Mercadante

Policy and Insight Manager

Sam focuses on funding and finance policy

Sam Mercadante
Policy and Insight Manager

New financial measures and tax cuts don't address causes of rising costs and rising inequality

Sam Mercadante

Sam Mercadante

Sam Mercadante

Policy and Insight Manager

Sam focuses on funding and finance policy

Sam Mercadante
Policy and Insight Manager

The cost of living has been rising all year. And we’ve been hearing more and more from our members about an enormous rise in demand for their support and the impact on their ability to deliver services.

People are turning to charities for help at a time when charities’ own costs are also spiralling. Charities expect their energy bills to rise by anywhere from 200% to 1,700% over the next six months. They're having to make difficult financial decisions to ensure their sustainability, which in turn is affecting staff and volunteer wellbeing.

Last Friday, the chancellor, Kwasi Kwarteng MP, set out a package of new economic and fiscal measures. We and many others were expecting this fiscal event, rather than a full budget, to address the cost of living crisis. However, it looked much more like a regular budget and included very little to help those struggling with rising costs.

Most support will be delivered through:

These measures will provide temporary relief to many. But they won't address the root causes of rising prices or persistent income inequalities. They’ll also be enormously costly and likely to require future cuts to public services.

Support with energy bills

Following the introduction of the new energy price guarantee on 1 October, household energy prices will be capped until 2024. This will be a 27% increase and means the average household will pay around £2,500 per year for energy. Energy bills are set to be twice as high as they were in winter 2021/22, and other costs, including food, transport and childcare, also continue to rise.

It remains to be seen whether the energy price guarantee helps to reduce these high levels of need within communities.

The government has also introduced a new energy bill support scheme for non-domestic users, including charities. The scheme is set to run for only six months, from 1 October 2022 to 31 March 2023. Organisations should read the full government guidance to make sure they understand if and how they will benefit from the scheme. You can read more about how the scheme will affect your organisation in this blog written by Utility Aid, an NCVO Trusted Supplier and specialist energy broker.

This new commercial energy price cap will provide some immediate relief to charities, but six months will pass very quickly, and charities are likely to be facing a cliff edge in March 2023, unless the government decides to extend support when it reviews the scheme. Where possible, organisations should gather evidence over the next six months of how the scheme is supporting their work and their service users, to help inform the government’s review.

Not enough help for people or charities

While the energy price guarantee is a vital intervention for households and charities alike, the new measures are poorly targeted and won't provide enough help those struggling the most or the charities supporting them. Joseph Rowntree Foundation and Turn2Us have highlighted how people will be impacted by the lack of further financial help combined with an increasingly severe benefits system.

The basic rate of income tax will be reduced to 19% from April 2023, one year earlier than expected, and the additional rate will be removed. The chancellor didn't comment on funding for public services, which will have been significantly eroded by inflation and further impacted by reduced tax receipts. Many charities provide support to people who've been failed by inadequate public services and cutting taxes will increase this challenge.

The cancellation of the health and social care levy from 6 November will lower staff costs for employers but raises questions about how the government plans to sustainability fund health and social care. The voluntary sector is committed to a health and social care system that is sustainably funded and that achieves good long-term outcomes for communities.

We may see an increased push to engage volunteers to deliver vital public services to communities, for example through the new ‘plan for patients’. However, we’re hearing from members that it’s increasingly difficult to recruit volunteers. Organisations were already struggling with recruitment due to the covid-19 pandemic, and many fear new financial pressures will prevent people giving their time. Organisations with volunteer drivers, including the NHS, are finding this particularly challenging. Skyrocketing fuel costs mean that many volunteers no longer feel that the 45p/mile expenses rate, which was set by HMRC in 2012, adequately covers their costs.

Charities should plan for this when budgeting and be aware of the impact of reimbursement delays on volunteers' finances.

Investing in communities

Any serious plan for growth needs to invest in our communities and address economic and social inequality. The Chancellor’s announcement of further investment in hard infrastructure, such as transport, will no doubt be welcome for many of the people charities support. But to achieve inclusive economic growth we also need investment in social infrastructure – the spaces, places and activities that bring us together.

Charities contribute both directly and indirectly to the economy. By growing local economies and supply chains, creating jobs, and improving long-term wellbeing and life outcomes that allow people to participate in paid work. They also strengthen community resilience by offering opportunities for people to shape and feel proud of where they live and ways for people to connect and build relationships. We've previously set out a lot of ideas for how government can support charities and volunteers to reduce inequality.

We’ve worked with others across the sector to call for increased support to communities, targeted support for charities that are helping people with cost of living challenges and ensuring that charities are included in any support for business. Where people need help, charities need funding to remain a lifeline for those who have nowhere else to turn. We also want to see the government make policy choices that prevent poverty and inequality.

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