29 October 2026
Following yesterday's Autumn Budget, CAF Bank and its research partner PBE have looked at what the key announcements could mean for charities and social purpose organisations.
Charities will feel the squeeze of further cost-of-living pressures in the months following Chancellor John Healey’s first Budget. Energy prices will surge to almost a third higher than in 2022 and inflation will continue to rise at rates in excess of 3% per year. This will erode charities’ spending power as they pay more to deliver services, at a time when stagnant real household incomes will put pressure on demand for charity services.
The social sector suffers from a ‘sticky income’ problem that affects the real-terms value of the money it raises. Most grants, contracts and regular donations are ‘fixed’ in cash terms, leaving charities with a widening gap between their income and the cost of delivering services. In 2025 charities received £2.8 billion in regular gifts, rising inflation will reduce their real value by £125m over the next three years.
Public services also face this squeeze, which can be a double blow for the charities they commission — contracts are worth less while the need for services increases. And Charity staff pay is a casualty too: despite rises in the National Living Wage, median non-profit pay fell 0.4% in real terms between 2016 and 2025, compared with rises of 10% in the private sector and 2.9% in the public sector.
But Healey’s policy announcements do offer some opportunities for charities. The commitment to end rough sleeping is being upped to £874 million and support for youth employment includes £100 million over two years, devolved to mayoral authorities.
And a new ring-fenced spending category, to be introduced at the 2027 Spending Review, will help protect prevention programmes that reduce long-term costs across government. For charities delivering early intervention services, this could open the door to more sustained funding.
Jon Franklin, Interim Co-CEO, PBE said:
“Charities are being dragged under by the weight of costs they can’t pass on. All at a time when many are struggling to plug the gaps left by strained public services. If the government and funders don’t step-up to support them then it’s the people who need help most that will ultimately pay the price.”
Alison Taylor, CEO, CAF Bank said:
"It's a critical time for charities heading into the winter as they face challenges from rising demand, increased costs, and falling incomes. Cost-of-living measures announced in the Budget may help alleviate some pressure on their services from squeezed households, with additional funding potentially available for some causes, such as rough sleeping.
"However, charities are also experiencing rising energy costs and organisations will need to consider whether minimum wage rises will affect their staff costs. During this tough time for charities, we hope this analysis provides insight for them to navigate what the Budget means for them."
