AUTUMN BUDGET 2018 – BETWEEN A ROCK AND A (POTENTIALLY) HARD BREXIT
The last time a Budget was held on a Monday was 1962, the same year that saw John Glenn launch from Cape Canaveral to become the first American to orbit the Earth.
Glenn’s mission impossible could have been a source of inspiration for the Chancellor Philip Hammond when preparing for yesterday’s budget, given the significant political and economic uncertainties currently facing the UK.
This is clearly a challenging time to be setting budgets. There remains a great deal of uncertainty around whether a withdrawal deal with the EU can be reached, let alone what a future relationship might look like. But it’s fair to say that most economists predict that Brexit, whatever its shape, will have a negative impact on the economy, at least over the short term. Caution was the Budget’s watchword.
And there’s mounting pressure from multiple fronts to loosen the budgetary purse strings after years of public sector cuts. The Institute of Fiscal Studies predicts that delivering the Prime Minister’s conference speech pledge to end austerity and boost NHS spending will cost the taxpayer £19bn a year by 2022/23 – a conservative estimate that would still leave £7bn worth of benefit freezes on the cards.
Balancing all this with the Conservative’s manifesto commitment to eliminate the deficit entirely by the mid-2020s was always going to be tricky without significantly higher growth than forecast, or substantial tax rises. The fragile parliamentary majority facing the Chancellor makes the latter a difficult sell to his party.
There is a glimmer of sunshine in the form reduced public borrowing which has returned to pre-crisis levels (although still growing) and tax receipts which have been better than expected. This provided the Chancellor with some headroom to boost spending on infrastructure, technological innovation, social care and welfare changes. There were also a number of measures that will have implications for charities and their work.
Specific measures to support charities and promote giving
There was a suite of small measures aimed at reducing administrative burdens on charities and encouraging charitable giving.
- The amount that charities can trade before incurring a tax liability has increased The limit shifts from £5,000 to £8,000 where turnover is under £20,000, and from £50,000 to £80,000 where turnover exceeds £200,000. Charity shops using the Retail Gift Aid Scheme will be allowed to send letters to donors every three years when their goods raise less than £20 a year, rather than every tax year (which is known to irritate some donors, so although a small change we think this is a good thing).
Not relevant to AVOW but will benefit some of the larger charity shops in Wrexham who have large turnover – the implication is that they have a larger turnover before falling into tax brackets on profits.
- And in line with current contactless payment limits, the individual donation limit under the Gift Aid Small Donations Scheme has been increased to £30. This applies to small collections where it is impractical to obtain a Gift Aid declaration. The limits on benefits that charities give their donors to acknowledge donations have also been simplified. Again this is a small change but will ease the administrative burden on charities a little.
AVOW can benefit from donations that are given to the MAD Grant scheme from individuals as the totals can be rolled up together and Gift Aid claimed without paperwork back up – best practice is however all people sign. An example of when this would be useful would be if we held a sponsored walk and took bucket along to collect from the general public.
Other announcements of interest to charities
No changes to the VAT threshold (yet)
The government has decided to keep the VAT threshold at the current level of £85,000 for a further two years. In our response to the Office for Tax Simplification’s review of VAT, we raised concerns that lowering the VAT threshold would begin to encompass an increasing number of small and medium sized charities within the registration requirement, many of whom have seen significant falls in income in recent years. We will look to ensure the potential impact on charities is fully understood when the government revisits the issue, which is likely to happen once we have left the EU.
Not applicable as AVOW is not VAT registered
NICs Employment Allowance axed for larger organisations
One area where the Chancellor has been able to save some money is through limiting the Employment Allowance, introduced in 2013, to employers with a total National Insurance Contributions bill below £100,000. From 2020, smaller charities will still be able to claim the allowance, but it does mean that a number of larger charities will face an extra £3,000 on their bill. Hopefully most of the largest charities can absorb this increase, but we’d be interested to hear from our members whether this could have an impact on them.
Will need checking but I’m sure we fall below the £100k threshold – will check with KP
A review of the Apprenticeship Levy
The government will work with a range of employers and providers to consider how they are dealing with the Apprenticeship Levy across different sectors and regions in England and the future role of apprenticeships in the post-2020 skills landscape. We will be looking to make sure the difficulties charities have encountered in using their Apprenticeship Levy allowance are fed into this conversation.
This is England only Wales has a different scheme
A winter boost for social care
The Chancellor reiterated the government’s plan to publish its long-awaited social care green paper this Autumn and an immediate £650m of grant funding for councils. (This is England only) Any boost for social care, however small is welcome, but many have already pointed out that it is a short-term measure, focused on alleviating winter pressures and bed blocking this year alone – it falls well short of the £2bn+ a year that is widely regarded to be needed.
Qualification requirements for this grant funding are also unclear. It will be important to see if this is done on the basis of an area’s deprivation, social care needs or other criteria.
Support for air ambulances and blood bikes
The Chancellor recognised the services that donation-funded air ambulances provide to England, and to support their work, £10 million of capital funding will be made available to air ambulances in England. No such funding available on Wales.
From April 2020, government will also introduce an exemption to the Vehicle Excise Duty (VED) for charity Blood Bikes, so their tax treatment will be aligned to with other emergency vehicles responsible for the transportation of blood and medical supplies. (This will be UK wide but does not seem sense that it will take till 2020 to implement) It still does not apply to Mountain Rescue Teams despite them often being the lead ‘blue light’ rescuers in many instances.
Village halls, Miners’ Welfare facilities and Armed Forces organisations’ facilities
The government will provide up to £8 million to help with the cost of repairs and alterations to village halls, Miners’ Welfare facilities and Armed Forces organisations’ facilities. England Only
Extra cash for Universal credit
As widely trailed, there was a cash boost for the Universal Credit system. The main headline was an increase of Work Allowances for households with children, and people with disabilities by £1,000 from April 2019. This will translate to £1.7 billion annually benefitting 2.4 million working families and has been called an ‘important step in tackling in-work poverty’ by some in the voluntary sector.
Affordable Credit Challenge
The government will provide £2 million to launch an Affordable Credit Challenge Fund to promote innovative technological solutions that will harness the power of the UK’s Fintech industry to support social and community lenders. England only
No-interest loans scheme pilot
The government, working with leading debt charities and the banking industry, will launch a feasibility study to help to design a pilot for a no-interest loans scheme early next year. England Only
Protecting the environment
Addressing food waste
The Chancellor dedicated money to simultaneously address food poverty and avoid food waste, by allocating £15 million to charities and other organisations to distribute surplus food. It is hoped that this will reduce the 250 million meals worth of edible food currently wasted annually in the UK. England only – Wales may benefit indirectly if an England based food charity operates in Wales.
Tackling plastics and waste
The government is providing £20 million to support measures to tackle plastics and boost recycling – £10 million more for plastics R&D and £10 million to pioneer innovative approaches to boosting recycling and reducing litter, such as smart bins. England only
A piecemeal budget lacking long-term vision
Today’s budget was widely tipped to be an uneventful affair amid nerves over the impact of Brexit on the economy. It largely lived up to these expectations. Aside from the predicted injections of funding to relieve pressure on social care and welfare changes, it felt more like a Budget to tide us over until Brexit is sorted and to keep voters on side, rather than a strategic vision for tackling some of the big issues facing the country.
It’s good that the Chancellor is investing in physical infrastructure and tech innovation, but he now needs to kickstart investment in our social infrastructure. We recently called for the forthcoming UK Shared Prosperity Fund (UKSPF) to be ring-fenced for a successor programme to the European Social Fund (ESF) and £2 billion from dormant assets to be designated for strategic, long-term investment in civil society organisations. Unfortunately, clarity on neither of these issues materialised.
Nor was there much in today’s budget about alleviating the cuts to public spending, despite mounting pressure from across the political spectrum to ease austerity. The spending boosts announced will mainly go to protected departments like the NHS, while cuts remain in the pipeline for unprotected departments and local government.
All eyes are now squarely on next year’s Spending Review. This will be the true litmus test for whether austerity really is over.
Organisations based and operating in Wales should note that many of the announcements are “England” only- due to the devolved nature of funding the Welsh Government have the choice of which areas they decide to spend the allocation.