Following the UK Government Spending Review 2021 SCVO produced this summary of commitments impacting the voluntary sector and key analysis of these commitments.
Background
This was the Chancellor’s third Budget and first multi-annual Spending Review. The 2021 Spending Review is also the first review since 2015 due to Brexit and COVID delays.
The Spending Review differs from the Budget as a Spending Review takes place every 2-4 years. It is expected to provide planning certainty for departments and allows the Government to prioritise the spending that most effectively delivers their priorities for the rest of the Parliament.
What’s next?
The Scottish Government is due to publish its Budget for 2022-23 on 9 December. Alongside this, there will also be publication of the Medium-Term Financial Strategy (MTFS) and a consultative Framework document on the upcoming Scottish Resource Spending Review.
On the same day as the Scottish Budget, the Scottish Fiscal Commission (SFC) will release their forecasts for the Scottish economy, and their estimates for how much revenue will be raised from Scottish tax policies.
The Scottish Budget will also incorporate the Block Grant Adjustments from the latest Office of Budget Responsibility (OBR) forecasts.
Key points of interest for SCVO priorities
- The 2021 spending review states that: Resource and capital DEL budgets and the devolved administrations’ block grants from 2022-23 to 2024-25 have been set through multi-year budgets.
- UKSPF very delayed. Total amount until 24/25 looks unlikely to meet the 2019 commitment to be at least as much as from EU.
- Scotland will receive an additional £4.6 billion per year on average through the Barnett formula. A 2.4% real terms increase over the Spending Review period. However, this is front loaded with big real terms increases next year (+7.7%), followed by two years of the Scottish Budget standing still in real terms (SPICE).
- Voluntary organisations are barley mentioned, what does that mean for our sectors ability to influence? Charities received just one mention in the budget for every 40 mentions for the public sector and 70 mentions for the private sector (Pro Bono Economics)
- Pro Bono Economics analysis of the OBR’s new figures indicates that charities will be left with a permanent income scar as a result of the pandemic. If public giving moves in line with projected consumption PBE predict the sector will see out this spending review period with a hole of around £6.6bn.
- Charity Commission budget set to rise to £29.3m by 2024-25. (Their budget fell from £31m in 2010 to £21m in 2017).
- A tax cut worth £265m for theatres, museums and galleries, and £850m of new funding for culture and heritage organisations (follows the £2bn Culture Recovery Fund which operated throughout the pandemic) means the culture and heritage sector has now received more than four times as much support from government to survive the pandemic than the charity sector has (Pro Bono Economics).
- Publishing a response to the fundamental review of business rates the Government has confirmed that it will not change any existing business rates reliefs, including the mandatory and discretionary charity reliefs, at this time. This is worth over £2bn a year to charities and is very important to the sector (Charity Tax Group).
Broader points of interest
New Charter for Budget Responsibility
- Two new fiscal rules that put a “ceiling” on his future spending. The chancellor will also commit to running a surplus by the end of this parliament, bringing in more in tax than he is spending day to day.
Lack of mentions of the voluntary sector
- Voluntary organisations are barely mentioned, what does that means for our sectors ability to influence? Charities received just one mention in the budget for every 40 mentions for the public sector and 70 mentions for the private sector (Pro Bono Economics)
- PBE analysis of the OBR’s new figures indicates that charities will be left with a permanent income scar as a result of the pandemic. If public giving moves in line with projected consumption – as it often does – the sector will see out this spending review period with a hole of around £6.6bn. https://www.probonoeconomics.com/News/budget-2021-what-did-it-mean-for-charities
- That the voluntary/third/social sector is missing from the budget isn’t so much about missing out on money, but in missing out on the recognition of our role as a key actor in improving society. That is recognised by some parts of government but not Treasury (Matt Whitaker, PBE).
- In the past concerns have been WHICH (types of) charities got direct funding through the budget, this year there’s little for charities (youth, museums, veterans (not just charities)) (Matt Whitaker, PBE).
Levelling-up fund
Content
- First round of bids allocated £1.7 billion to invest in infrastructure in everyday life in more than 100 local areas. £170 million of which will be in Scotland, more than the Barnett share says Sunak. Some successful projects named. Of which 10.1% has been allocated in Scotland, 7.2% in Wales and 2.9% in Northern Ireland.
- 8 places including Aberdeen and Inverness benefit from almost £172 million in local infrastructure improvements through the Levelling Up Fund.
- Over £1 million for five projects in Whithorn, Inverie, New Galloway, Kinloch Rannoch and Callander from the first round of the Community Ownership Fund to protect valued community assets.
- British Business Bank’s (BBB) regional funds will set up new regional funds in Scotland (£150 million) and Wales (£130 million), and to build on its existing programmes in Northern Ireland (£70 million), working closely with the devolved administrations.
Analysis
- First allocations of the Levelling-up Fund announced in the Spring suggest Government prefer grey infrastructure over social infrastructure, with railways and other transport infrastructure the big winners (PBE).
- The government’s narrative on Levelling-up has shifted to recognise the importance of social infrastructure, with the main Budget document claiming “good quality civic infrastructure strengthens local communities and local economies, contributing to higher civic engagement” (PBE)
- Levelling-up White Paper expected a few months from now (PBE)
- “If the Government is truly committed to levelling up it must recognise that charities are the lifeblood of their communities. They cannot continue to pay more tax without there being adverse impacts on the people and causes they support and thereby on the communities that the Government says it wants to support” (Charity Tax Group).
UKSPF
Content
- The UK Shared Prosperity Fund (UKSPF) is the centrepiece of this ambition, worth over £2.6 billion over the next three years. It is the successor to the EU Structural Fund programme and will tailor funding to local needs across the UK. The UKSPF will rise to £1.5 billion a year by 2024-25. As a result, the fund will be increased to match EU receipts, averaging about £1.5bn each year.
- Through UK-wide funds like the UK Shared Prosperity Fund (UKSPF) and the Levelling up Fund (LUF), the government is investing in local priorities across the UK targeted at places in need. As part of this, the Budget and SR reaffirms that total funding through the UKSPF will at a minimum match the size of EU Funds in each nation and in Cornwall, each year.
- Over £2.6 billion of investment through the UKSPF will enable local areas to invest in people, community and local business, including Multiply, a new adult numeracy programme which will provide hundreds of thousands of people across England, Scotland, Wales and Northern Ireland with essential numeracy skills needed for life and work.
Analysis
- UKSPF very delayed. Total amount until 24/25 looks unlikely to meet the 2019 commitment to be at least as much as from EU (Pro Bono Economics).
UK Infrastructure Bank (UKIB)
To support infrastructure investment and create new job opportunities, the UK Infrastructure Bank (UKIB), is now operational and is expected to support more than £40 billion of investment. The work of UKIB will complement the work of development banks in Scotland and Wales to support regional and local economic growth across the UK.
Culture
Content
- £800 million to protect museums, galleries and local culture.
- Tax relief for museums and galleries to be extended for two years to March 2024.
- To support theatre, orchestras, and museums the tax relief for all those sectors from today to April 2023 will be doubled. A tax relief for culture worth almost ¼ of a billion pounds.
Analysis
- Extension of the Museums and Galleries Exhibition Tax Relief (MGETR) for a further two years until 31 March 2024. While this is welcome it is disappointing that there are no plans to extend the relief beyond then or a commitment for a review of the value of the relief. In addition the headline rates of relief for the Theatre Tax Relief Orchestra Tax Relief and the MGETR will temporarily increase to support cultural organisations’ recovery from the pandemic (Charity Tax Group).
- A tax cut worth £265m for theatres, museums and galleries, and £850m of new funding for culture and heritage organisations (follows the £2bn Culture Recovery Fund which operated throughout the pandemic) means the culture and heritage sector has now received more than four times as much support from government to survive the pandemic than the charity sector has (Pro Bono Economics).
Glasgow’s cultural offer
- Announced up to £3 million over three years to boost Glasgow’s cultural offer (subject to a business case). This funding will be directed to the Burrell Collection, recognising its important cultural and economic contribution to Scotland and the UK. It will enable the museum – which has undergone a major transformation – to bring its collections to life and attract new audiences as it reopens.
Barnett formula
Content
- Today’s decisions increase Scottish Government funding by an average of £4.6 billion per year
- The 2021 spending review states that: Resource and capital DEL budgets and the devolved administrations’ block grants from 2022-23 to 2024-25 have been set through multi-year budgets.
Analysis
- Delivers in real terms the largest block grants since devolution (SPICE)
- Scotland will receive an additional £4.6 billion per year on average through the Barnett formula. A 2.4% real terms increase over the Spending Review period. However, this is front loaded with big real terms increases next year (+7.7%), followed by two years of the Scottish Budget standing still in real terms (SPICE).
- The Budget documentation states that Scotland will receive “an additional £4.6 billion per year on average through the Barnett formula over the SR21 period, on top of its annual baseline funding of £36.7 billion.” (SPICE).
- What this means in practice is that the total unadjusted Scottish block grant will increase from £36.7 billion (excluding COVID funding) in the current year (2021-22) to £41.8 billion by the final year of the Spending Review period (2024-25) (SPICE).
- This equates to a 2.4% real terms increase over the Spending Review period. However, this is front loaded with big real terms increases next year (+7.7%), followed by two years of the Scottish Budget standing still in real terms (SPICE).
- Scottish block grant increases are frontloaded, with a large increase next year, to be met with a flatter outlook in real terms for the subsequent two years of the spending review period (other organisations have also flagged this as above) (Fraser of Allander Institute)
- Our Scottish Future claims increased consequentials will give the Scottish Government opportunities to raise the Scottish Child Payment (Fraser of Allander Institute).
Table 1: Scotland Block Grant from Treasury 2021-2025
| Year | Cash, £ billion | Cash % change | Real (2021-22 prices) £ billion | Real % change |
| 2021-22 | 36.7 | 36.7 | ||
| 2022-23 | 40.6 | 10.6 | 39.5 | 7.7 |
| 2023-24 | 41.2 | 1.5 | 39.3 | -0.7 |
| 2024-25 | 41.8 | 1.5 | 39.1 | -0.4 |
Business rates
- Publishing a response to the fundamental review of business rates the Government has confirmed that it will not change any existing business rates reliefs, including the mandatory and discretionary charity reliefs, at this time. This is worth over £2bn a year to charities and is very important to the sector(Charity Tax Group).
- The Government will, however,reform business rates by:
- freezing the business rates multiplier until 31 March 2023, keeping the multipliers at 49.9p and 51.2p
- introducing a new temporary business rates relief for eligible retail, hospitality and leisure properties for 2022-23. Eligible properties will receive 50% relief, up to a £110,000 per business cap
- introducing a 100% improvement relief for business rates. This will provide 12 months relief from higher bills for occupiers where eligible improvements to an existing property increase the rateable value. The government will consult on how best to implement this relief, which will take effect in 2023 and be reviewed in 2028
- increasing the frequency of business rates revaluations so that they take place every 3 years instead of every 5 years, starting in 2023 (Charity Tax Group).
Innovation
Content
- Increase R&D to 22billion but will reach the target in 26/27 so 20 billion by end of this parliament (effectively pushed back). Spending in addition to the costs of R&D tax relief.
- Expanding the scope of R&D tax relief. Will no longer fund tax relief on activities that are not domestic (from April 2023).
Analysis
- Investment in research and innovation and tweaks to R&D tax reliefs. Disappointingly the Government has not taken steps to allow charities to claim these reliefs again, despite the vital role charities play in funding and undertaking medical research(Charity Tax Group).
Employability
- Increase skills spending over parliament by £3.8 billion, an increase of 42%
- Multiply programme mentioned again here, with £560million to improve basic maths skills (Funded from Shared Prosperity Fund).
Employment
Content
The budget notes that employee numbers in Scotland had not returned to pre-pandemic levels by September 2021 (the other nations are above pre-pandemic levels). And that the furlough scheme has supported 911,000 jobs in Scotland.
On Covid related support the budget also notes that:
- Approximately £1.7 billion has been provided to support the self-employed through the SEISS.
- Through the BBLS and CBILs, approximately £2.7 billion and £1.4 billion has been lent to business respectively.
- £12.7 billion in additional funding for the Scottish Government through the Barnett formula across 2020- 21 and 2021-22.
Analysis
As previously announced a new 1.25% Health and Social Care Levy to fund investment in the NHS and social care. This will affect both charities as employers, as well as their employees, from April 2022 (Charity Tax Group).
Pay rises and UC (Universal Credit)
Content
- Return to normal independent pay rise review for public sector
- National Living wage £9.50
- Universal credit taper will go down from 63% to 55% will come into effect by December 21.
- Will also increase work allowance by £500. 2 million families to keep on average £1000 a year. (JRF mentioned by name).
Analysis
- People who are already struggling have not been helped by this budget – so demand on charities and local authorities is going to grow (Sian Williams, Toynbee Hall)
- People who work and receive UC are slightly better off, Joseph Rowntree Foundation describes them as being “thrown a lifeline”. There is, however, no lifeline for those who have lost UC and don’t or are unable to work (JRF).
Departmental Spend
Content
- Real terms rise in overall spending in every department- highest sustained level in half a century.
Analysis
- Big, unexpected, rise in spending on public services (particularly in the first year of the spending review) – “austerity is over, but its shadow remains and budgets are still very stretched in many departments” (Matt Whitaker, Pro Bono Economics (PBE))
- Setting out the implications of the Autumn Budget and Spending Review for Scotland, the Fraser of Allander Institute concludes departmental spending is set to be around £10bn higher in 2024-25 than it was pre-pandemic but it raises concerns over whether this will be sufficient to meet the long-term impacts of COVID.
- While the Budget announced that the health capital budget will be the highest since 2010 the IFS suggested that with an ever-ageing population and chronic health conditions becoming more common, that’s unlikely to be enough (IFS).
- Increase to the HMRC budget allowing increased investment in tackling avoidance and ensuring compliance. Funds have also been set aside to enable HMRC to meet the government’s ambition to build a modern, digital tax system fit for the 21st century, including through Making Tax Digital and significant investment in the online Single Customer Record and Account. Investment in the Valuation Office Agency (VOA) will also support the planned changes to business rates revaluations (Charity Tax Group).
Tax
Content
- Lowering domestic air passenger duty
- From April 2023 introduce a new ultra long-haul band of duty
- Confirm that the new regime of penalties for VAT will come into effect for VAT taxpayers from periods starting on or after 1 April 2022, as announced at Budget 2021 (Charity Tax Group).
- Introduce measures to clamp down on promoters of tax avoidance (Charity Tax Group).
- Bring forward a further set of tax administration and maintenance announcements later in the autumn(Charity Tax Group).
- Plans to publish a consultation on options to simplify the VAT treatment of fund management fees (Charity Tax Group).
- As previously announced, delay Making Tax Digital (MTD) for Income Tax Self Assessment ITSA by a year until 2025.
Analysis
- Introduction of new regulation-making powers that would allow ministers to take decisions to provide income tax and NICs reliefs on specific expenses or benefits-in-kind in the event of a disaster or emergency of national significance. This could have been particularly helpful during the pandemic in terms of Gift Aid changes or reliefs on employee benefits including taxi rides or issues relating to home working (Charity Tax Group).
Digital
Content
- The government will improve digital connectivity, continuing its landmark £5 billion investment in Project Gigabit to support the rollout of gigabit capable broadband in hard-to reach areas across the whole of the UK. The government will also provide £180 million over the next three years as part of its £500 million investment in the Shared Rural Network, to deliver 4G mobile coverage to 95% of the UK.
Local Government funding
Analysis
- An increase in local government spending was announced but IFS analysis suggests it might not be a real terms increase, as such it is unlikely the sector will get more money from local government (Richard Sagar, Charity Finance Group).
Other headlines
- Return to spending 0.7% GDP on Aid in 24-25 before the end of this parliament as the Government will have met their ‘three tests’.
- Provide new grant funding to Local Gov of £4.8 billion- largest increase to core funding in a decade.
- Largest cash investment in housing in a decade.
- Residential properties developers’ tax for (safe removal of?) cladding
- Largest prison building programme in a generation.
- New high skill VISA plans.
Contact
Sheghley Ogilvie
Policy and Public Affairs Officer, SCVO
sheghley.ogilvie@scvo.scot