George Osborne with the red box

The 2015 budget: surprises and questions for the voluntary sector

8 July 2015

George Osborne has delivered the first Conservative budget in nearly two decades. What did it hold for charities, social enterprises and philanthropists?

Firstly, some welcome investment was announced, not least for domestic violence victims.  The Sun puts the figure at £3m, some of which will likely go to charities in the field. Meanwhile, the Chancellor’s gifts to military charities are to continue: new bank fines will be split between, among others, the Veterans Specialist Mobility Fund and the Royal Commonwealth ex-Services League. This move (one of George Osborne’s favoured budget tricks) is more smart politics than smart philanthropy—these organisations may or may not be effective, but Whitehall mandarins are probably the last people to judge, and NPC has previously called for much more targeted use of such fines.

Many charities will have been focused intently on upcoming welfare cuts and their consequences. And the news will have given them plenty to think and worry about. Adults under 21 will no longer qualify automatically for Housing Benefit (with some exemptions for the most vulnerable), and Housing Benefit will be cut across the board by 1% for the next four years. Our researcher Andrew Weston blogged last month on the dim view many charities take towards government policy on housing, and there are certainly plausible concerns that restricting Housing Benefit further will make potential landlords even more likely to turn away its recipients. Those ‘No DSS’ signs may become more prevalent.

And all of this may have an effect on the social investment market too. The housing benefit cut will make it harder for social landlords to recover their costs, including investments in new-build projects. Increased risk for lenders in an area that should be attractive to social investment is bad news. So whilst the cut may seem small, the cumulative effect could be large over time.

Charities campaigning on poverty and social justice will have noted that the benefit cap, set at £24,000 a year in the last parliament, will be lowered to £23,000 in London and £20,000 everywhere else. Similarly, from April 2017, Child Tax Credit and extra Universal Credit will be limited to the first two children of any family (although again there are exemptions, including for multiple births). The Chancellor quoted ‘independent statistics’ that child poverty had dropped in recent years, but some charities will be quick to disagree.

But like all memorable budgets, the Chancellor had a rabbit to pull of the hat. He concluded with the announcement that the minimum wage will be raised to £7.20 per hour (a rise of 70p, to within 65p of the amount lobbied for by the Living Wage Foundation), with the aim of reaching £9 an hour by the end of this parliament. Osborne cited the work of the charity and think tank the Resolution Foundation, one of many organisations that has been pushing for this sort of increase.

It’s a welcome move, yet one that begs some tricky questions. Businesses have been offered cuts in National Insurance and Corporation Tax to help them meet the extra costs, but how will this affect local authorities, where pay is often low and  where no cushion exists for greater wage expenditure? And what will it do for people whose wages are low because of the way their contracts are structured, rather than because of hourly rates—care workers, for example?

The Living Wage move also has interesting implications for the charity sector. You would think charities would be the first to pay Living Wages, but it doesn’t seem that this is the case. Only 200 out of the UK’s 160,000 charities have officially committed to paying Living Wage according to the Living Wage Commission—although of course this may be more a result of charities not telling the Commission than charities under-paying staff. Meanwhile a third of voluntary sector organisations use zero hours contracts.

As usual, there are more questions hanging in the air. The summer budget may be over but its full effects will play out far beyond and the Autumn spending review may reveal more bad news for charities and their beneficiaries.