The Chancellors -Winter Economy Plan

CAF Policy Team

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Charities Aid Foundation

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The Chancellor’s ‘Winter Economy Plan’

What’s in it for charities?

25 September 2020

The centrepiece of Chancellor Rishi Sunak’s “Winter Economy Plan” - announced this week as part of a radical shake up to the normal Budget cycle in recognition of the major challenges ahead over the winter - was a new jobs support scheme.

This replaces the existing furlough scheme, and was broadly seen as welcome news by many, yet offers a decidedly mixed picture for charities.

Many charities, large and small, are struggling with unprecedented collapses in income at the same time as seeing greater demand for their services than ever before, and this is already leading to major job losses across the sector. The latest big name organisation to announce cuts is Macmillan Cancer Support, which this week announced it is to consult on 310 redundancies as it anticipates losing out on £175m of fundraising income by the end of 2022.

Given this, the announcement of further support beyond the existing furlough scheme would seem like welcome news for charities.

However, unlike that previous scheme - which cost employers nothing - at the heart of the new scheme is a requirement for employer contributions towards salaries. It appears that employers will need to pay 55% of an employees pay for 33% of the work, and this will present a major challenge for many cash-strapped charities.

The need for new infrastructure to harness informal volunteering & mutual aid

A further important point is that unlike the Job Retention Scheme, the new Job Support Scheme focuses on jobs that do and can continue to exist, instead of those that are unable to be executed due to Covid-19. Whilst some charities may be able to meet these requirements of the new scheme in order to keep staff in jobs, many others will not and may be faced with further job cuts as their only option.

The Chancellor also announced that all of the government’s state-backed business loan schemes will be extended until the end of 2020. A “pay as you grow” loan scheme will allow businesses to pay back government loans over 10 years, effectively halving the total payments over the life of a loan. Whilst existing business loan schemes have proved useful for some charities that have trading activities, it is important to recognise that the vast majority are not in the position to take on more debt in such times of great economic uncertainty. Therefore, amendments to loan finance arrangements – whilst not unwelcome – are unlikely to be of great help to civil society.

official portrait of rishi sunak free images 275

Rishi Sunak
Chancellor of the Exchequer

Positive measure but continued challenges for fundraising

The chancellor is also cancelling a planned increase in VAT, keeping a lower rate for hospitality and leisure firms that was initially due to end in November until 31 March 2021. This will be welcomed by charities that work in that space, but is a small consolation in the face of the challenge of the stricter social distancing regulations that impact their fundraising. A positive measure is the VAT deferral ‘new payment scheme’ that will give those businesses,including charities where applicable,which deferred VAT due to be paid in March to June 2020 the further option to spread their payments over the financial year 2021-2022.

The wider economic environment and measures such as the new “rule of six” social distancing measure will have an impact on the already strained wider fundraising environment. While the £750 million charity sector-specific stimulus announced earlier in the year was a welcome step, there is still a consensus across civil society that additional measures are crucial to avoid job losses and the decline of vital charity services that keep our communities safe and resilient. CAF has outlined other ways the Government can stimulate philanthropy and charitable giving to support civil society at this time, and we need to continue to push forward on these and other ideas in the coming months.

Campaign for a Gift Aid Emergency Relief package

We are, for instance, continuing to campaign as part of a coalition of charities for a two year Gift Aid Emergency Relief package, proposing Gift Aid be raised from 20% to 25% and that the Small Donation scheme that makes claiming gift aid easier for small charities be extended to many more.

The change would mean that a £100 donation from a UK taxpayer would increase from £125 to £133.33 for the charity once Gift Aid had been claimed and could result in an additional £450m to help the sector survive this crisis and recover.

Essential collaboration across the sector

The lack of a normal Budget process has altered the shape of the policy landscape and removed some of the traditional avenues we would use for influencing. So, like many others, we will need to look for other opportunities to raise proposals with government and push our recommendations forward. This will take creative thinking and hard work - and collaboration with others across the sector will be vital - but it is clear that we owe it to the many charities we know are doing such vital work across the country to make that effort.