Budget 2020: this Government needs to wake up and smell the charity sector

The new Chancellor Rishi Sunak MP faced a tough combination of massive expectations and a volatile economic environment in his first Budget announcement on 11 March. But really, what else is new?

Sunak has only been in post for about a month, following the shock resignation of his predecessor Sajid Javid MP during the February reshuffle. Then the growing coronavirus crisis threatened to derail a flagship Budget intended to lead Britain into a post-Brexit future and consolidate the Conservatives’ recent General Election victory.

The new Chancellor opens the spending taps

Sunak did announce a substantial package of funding and measures to deal with potential effects of the pandemic in the form of a £30bn package including £12bn this year. The main features are £5bn for the NHS to support treatment for patients, a £500m Hardship Fund for local authorities to help economically vulnerable households, and changes to Statutory Sick Pay for organisations to support individuals with the virus or those who are quarantined and can’t work.

Apart from that, the big top-line story from the Budget is that the Government has opened the public spending taps big time, with a £600bn splash out for public infrastructure to support the so-called ‘levelling up agenda’ – essentially boosting areas of the country that have not equally shared in economic and social prosperity. In terms of our political-economy, we’re dumping the Coalition Government’s fiscal policy (rather than pretending to broadly keep to it without really doing so) and borrowing much more rather than trying to gradually reduce our debt. New rules to formalise this will be announced later in the year.

Combined with an interest rate cut by the Bank of England earlier in the day, the Budget was a massive statement of intent intended to calm markets and instil public confidence in the economy. Although for the moment this borrowing is at very low rates, the Chancellor is cutting plenty of taxes too. Many, including plenty in his own party, will rightly wonder: where’s all this money coming from? More quantitative easing? And what if the economy tanks and we enter a recession?

Colleagues at CFG, NCVO and CTG have done excellent analyses of the detailed measures that affect the charity sector (links below), so I won’t reiterate them in full here, but some big themes deserve mentioning.

The lack of consciousness about the importance (and potential) of our sector is stark

Sadly this Budget provided yet more evidence that the Government – at least at its highest levels – has little to no consciousness of the charity, social enterprise and wider social sectors. It just doesn’t even seem to understand the basic data, or perhaps it does but it doesn’t recognise the relevance or importance.

Yet again, the word ‘charity’ wasn’t mentioned. There were actually substantial funding pots and initiatives that will be welcomed by many in our sector (some re-announced) like £500m for youth centres, £250m to support cultural projects like libraries and museums (£90m for outside London), £237m to support 6000 rough sleepers, and another tranche of £10m for the Armed Forces Covenant Trust.

Building on the election manifestos and the prominence of green issues in the campaign, funding and policy to fight climate change also feature prominently, in advance of the COP26 summit in Glasgow. These are very important initiatives even if they don’t solve all the fundamental problems.

But overall, it is so frustrating that there is just no sense of the sector’s strategic role. We’re facing a pandemic. The Chancellor has announced billions in support to cope with it. Who in government is communicating with the thousands of health charities, to integrate them into scenario planning? Who is communicating with the food banks, in case there are food shortages or people cannot pay for food because they’ve lost wages? Who is talking to the charitable care homes? Or the charities helping people with immune system difficulties?

Infuriatingly, the financial support on offer was almost exclusively framed as support for ‘businesses’. It’s now down to us to a) figure out whether charities are eligible and b) if not, start making the case. DSC and others have called for a fund and tax relief to support charities with cash flow problems so they don’t go under. The Budget did announce a new Business Interruption Loan Scheme to support access to bank lending and overdrafts, but are charities eligible? It’s not clear.

In the year 2020, any politician or policy-maker, whether in the Treasury a local council, should understand that there are diverse types of organisations in the economy apart from ‘business’ which employ people, pay taxes, have potential supply chain and cash flow problems, can’t easily get bank overdrafts, need bridging loans or financing, and will lose critical sources of revenue from fundraising and trading during a pandemic or economic downturn. Is this really too much to ask?

Massive issues were kicked into long grass…again

This is an extraordinary situation, and the new Chancellor had to move swiftly to counter a potential economic and social crisis. Nevertheless, long-standing policy matters that affect not just charities but millions of people were punted yet again. For example:

Local government finance – amidst all this spending, there’s no sense of how local government will fare past this year. Much depends on the Spending Review discussions currently underway which will start to be sewn up by the summer. The ongoing lack of certainty inhibits councils’ forward planning, and has a negative impact on thousands of local charities and their millions of beneficiaries.
UK Shared Prosperity Fund – yet again there was little news on the promised successor fund to replace EU funding, apart from that further ‘plans’ will be announced at the Spending Review statement in the Autumn. By that point, we will have been discussing how to discuss what we theoretically might maybe want to achieve with this Fund for four years!
Social Care – despite the emphasis in the major party election manifestos, and its inclusion in the coronavirus response funding, the long-term future of social care didn’t really feature. The Budget document simply noted that the Health Secretary had ‘written to Parliamentarians to begin building cross-party consensus’ about it. Which is kind of just one step up from ‘the dog ate my homework’, guv.