SCVO Brief on UK Budget 2018: The unknown – Brexit and Spending Review
30 October 2018
The Chancellor of the Exchequer has announced the UK Government’s Autumn Budget only months before the UK exits the European Union and amidst the uncertainties of what a UK economy will look like in a post-Brexit world. The following items will be of interest to Scotland’s third sector:
Funding to prepare the UK government for a no-deal scenario as it exits the European Union next year has been given an additional £500 million, taking the total allocated to aid departments with the planning to over £4 billion.
A full spending review due in 2019 and it is forecast for there to be a 1.2% increase in government spending over five years. This is mostly based on the increase in NHS funding but will include more significant decisions on areas such as education and policing. This forecast is based on an ‘orderly’ Brexit – which isn’t guaranteed and the Spring Statement could become an Emergency Budget.
Over £950 million of new funding will be made available for the Scottish Government in Barnett consequentials for the devolved administrations to deliver their devolved responsibilities.
£150 million was announced for the Tay Cities Deal, as well as progressing Borderlands and Ayrshire Growth Deals and opening negotiations for the Moray Growth Deal. The Third sector should have the opportunity to play their parts to deliver the deals.
Wages and Income Tax
The living wage will increase to £8.23 per hour, despite the recommended level set by the Living Wage Foundation, which is set at £8.76 at the time of the Budget.
The personal allowance for income tax will be raised to £12,500 in 2019/27. This will have an impact on Gift Aid, as the number of people paying the income tax that can be gifted to charities will be reduced.
Universal Credit will not be halted. In response to feedback on Universal Credit, the implementation schedule has been updated: it will begin in July 2019, as planned, but will end in December 2023
The Work Allowance will be increased by £1,000 from April 2019. This means that 2.4 million households will keep an extra £630 of income each year at a cost of £1.7bn annually.
However, cuts to welfare in real terms will continue with no announcement made on ending the freeze on working age and child benefits.
The VAT threshold will be maintained at the current level of £85,000 for a further 2 years until April 2022. The government will look again at the possibility of introducing a smoothing mechanism once the terms of EU exit are clear. Any reduction would add bureaucracy and compliance costs to our sector as well as increasing the burden of irrecoverable VAT for service providers (6.4% more charities if lowered to £46k, 3.4% more charities if lowered to £65k).
Tax liability Increase
There will be an increase to the upper limit for trading that charities can carry out without incurring a tax liability 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. There will also be an increase in small donation limit from £20 to £30 under the Gift Aid Small Donations Scheme
The Employment Allowance subsidy that provides businesses and charities with up to £3,000 off their employer National Insurance Contributions (NICs) bill will be restricted to employers with a NICs bill below £100,000. Larger charities may be able to absorb this increase that will impact on some organisations in the third sector.
Small business rates
Small business rates to be lowered in England with one third off for retail premises up to a rateable value of £51,000 in 2019-20 and 2020-21, something that the Scottish Government could look to match.
Other charity developments
The government will provide £15 million to charities and others to distribute surplus food.
The government will introduce exemption for the purpose-built vehicles operated by Blood Bikes from April 2020. This will align the tax treatment of the transportation of blood and medical supplies with other emergency vehicles.
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.
The government will commit £10 million to support veterans with mental health needs through a donation of £10m to the Armed Forces Covenant Fund Trust.
Health and Social Care
A new multi-year budget for the NHS until 2023-24 has been announced with the budget increasing by £20.5 billion a year in real terms by 2023-34, including an increase in mental health funding by more than £2b a year.
An immediate £650m of grant funding for councils will also boost the budget for social care, but this is well short of what is needed. Devolved administrations will benefit from Barnett consequentials.
Food and drink companies will be taxed on plastic packaging that does not include at least 30% recycled content, in a drive to reduce dependence on plastics which are difficult or impossible to recycle. The new tax is due to come into force in 2022. The government has said revenues raised from the tax will be used to enable investment to address waste and litter, but details on how it will be spent have not yet been revealed.The gaps
UK Shared Prosperity Fund
There was no mention of how the UK will transition from European Structural Funds to spending money on a UK Shared Prosperity Fund. The 2017 Conservative Manifesto promised that the Government would “use the structural fund money that comes back to the UK following Brexit to create a United Kingdom Shared Prosperity Fund (UKSPF). The creation of the UKSPF creates several risks and concerns and SCVO will continue to work with the third sector to get on the front foot and demand what we want from the UKSPF.
Dormant Assets Fund
There was no mention of a Dormant Asset Fund, something the sector has been calling for to use dormant asset money to create endowment funds and to support smaller charities to buy local community assets. SCVO will continue to monitor this issue, with approximately £1–2bn of potentially dormant financial and non-financial assets across the UK.
Clinging to the hope of a Brexit deal and dividend, the Chancellor’s autumn statement offered little hope to the poorest people in communities across the country, let alone a strategy behind the spending decisions made. Some of the giveaways to certain groups and the measures aimed at reducing administrative burdens on charities and boosting charitable giving are welcome, but the absence of a strategy for the sector and its long term viability is glaring. An injection of cash into the flailing Universal Credit is also good news, but the end of austerity is further away for working families and those on benefits. Families and communities across Scotland and the rest of the UK continuing to feel the impacts of a Universal Credit system that simply is not working. Read Craig Wilson’s blog for more analysis.
The Scottish Council for Voluntary Organisations (SCVO) is the national body representing the third sector. There are over 45,000 voluntary organisations in Scotland involving around 138,000 paid staff and approximately 1.3 million volunteers. The sector manages an income of £5.3 billion.
SCVO works in partnership with the third sector in Scotland to advance our shared values and interests. We have over 1,900 members who range from individuals and grassroots groups, to Scotland-wide organisations and intermediary bodies.
As the only inclusive representative umbrella organisation for the sector SCVO:
- has the largest Scotland-wide membership from the sector – our 1,900 members include charities, community groups, social enterprises and voluntary organisations of all shapes and sizes
- our governance and membership structures are democratic and accountable – with an elected board and policy committee from the sector, we are managed by the sector, for the sector
- brings together organisations and networks connecting across the whole of Scotland
- SCVO works to support people to take voluntary action to help themselves and others, and to bring about social change.
Policy and Campaigns Officer
Scottish Council for Voluntary Organisations,
Mansfield Traquair Centre,
15 Mansfield Place, Edinburgh EH3 6BB