What does the 2015 Budget mean for your organisation?
- George Osborne’s last Budget before the General Election was a mixed bag for the public and voluntary sectors
- Charities will benefit from new Gift Aid rules, while changes to National Insurance contributions will help all employers
- However, the announcement of further cuts to come means organisations should get ready to further tighten their belts
Chancellor George Osborne’s last Budget before the 2015 General Election presented a mixed picture for the public and voluntary sectors.
We take a closer look at some of the most important announcements, and examine what they could mean for your organisation.
Tax and pay
Employer National Insurance contributions for 1.5 million people aged under 21 will be abolished, saving employers £1,000 p.a. on the cost of a young worker earning £16,000.
However, set against this NI saving, organisations may find themselves paying more in wages. From October, the adult National Minimum Wage will rise from £6.50 to £6.70. Around 1.4 million workers are estimated to be affected.
Within the public sector, this change is most likely to affect local councils. According to UNISON, local government pay is the lowest in the public sector, from the top to the bottom of the pay scale.
In a Budget short on eye-catching giveaways, there were a few spending announcements that could benefit local councils and NHS trusts.
- £1.25 billion to expand mental health services for children and those suffering from maternal mental illness
- £7.4 million to support libraries in England to provide internet access and WiFi
- £1 million to buy defibrillators for public places, including schools
There were also a number of proposals to devolve more power to the regions, including pilot schemes in different areas of the country, allowing councils to retain any extra business rates collected beyond expected forecasts.
Help for first-time buyers
The Budget announcement with the clearest direct impact on the social housing sector was the introduction of Help To Buy ISAs. Expected to be introduced in the autumn, the move will see the Government contribute an extra 25% (up to a total of £3,000) on top of what a first-time buyer can save for a deposit.
However, the move received a lukewarm reception from the National Housing Federation, which represents non-profit housing associations. David Orr, its chief executive, said: “This is another short-term initiative for first-time buyers, not a budget to end the housing crisis. The Help to Buy ISA will help some people scrape together deposits but it fails to address the root cause of unaffordability – the chronic undersupply of homes, which has driven up prices.”
The Federation also observed that while the Government’s tax and welfare changes would result in a net benefit for middle-income earners, the bottom 30% of households (which would include most social tenants) would be worse off.
Impact on education
One of the few announcements directly affecting education was the introduction of income-contingent loans of up to £25,000 to support PhDs and research-based masters degrees. There is no timescale yet for their implementation, but the Government says it will “work with research councils, universities and industry to examine how best to design them so that they complement existing funding streams and continue to support the most excellent research.”
For the further education sector, a key concern for the year ahead is likely to be a 24% reduction in the adult skills budget for 2015/16. The Association of Colleges published research in March suggesting 190,000 course places could be lost this year alone.
Mixed picture for charities
The Budget included a number of announcements that will be welcomed by the charitable sector.
- £75 million of grants for military charities, taken from fines levied against banks for Libor manipulation
- Additional funding for a number of air ambulance charities and a trebling of the Church Roof Fund to £40 million
- Subsidised fundraising training for small charities
- VAT refunds for hospices and blood bike charities
In another important development, charities will be allowed to claim Gift Aid on donations totalling £8,000, up from the current figure of £5,000. An estimated 6,500 small charities are expected to benefit.
These changes, however, may seem less significant when set against the bigger picture. The National Council for Voluntary Organisations has warned that public funding for charities could be 12% lower – approximately £1.7 billion – in 2017/18 than it was in 2010/11, the latest year for which data is available.
This reduction in funding is compounded by the fact that cuts to public services are increasing the number of people reliant on charities.
Announcing £30 billion of spending cuts in the next Parliament, including £13 billion from Government departments and £12 billion from the welfare budget, George Osborne said there would not be an increase in public spending until 2019/20 – one year earlier than the Government had previously planned.
According to the Chartered Institute of Public Finance and Accountancy (CIPFA), government support for local councils will fall by 23% in 2015/16 alone.
Unveiling his Budget, Mr Osborne said that after five years of austerity, Britain was growing faster than any other major advanced economy, and was “walking tall again”.
For the public and voluntary sectors, however, it is clear that challenging times lie ahead, and that careful managing of budgets will be needed to ensure the continuing protection of their core services.