Following the UK Government’s Autumn Statement 2022, SCVO has produced the below summary of commitments impacting the voluntary sector operating environment. The summary also includes analysis from key commentators on the impacts of these commitments.
The early reaction is that the statement failed to recognise the vital role of the voluntary sector. Our sector supports people and communities across society and is a significant economic actor.
In Scotland alone, the voluntary sector employs over 135,000 people, around 5% of Scotland’s workforce, and voluntary organisations had a combined annual turnover of over £8.56 billion in 2021.
In a budget which does not go far enough in mitigating the impacts of rising costs for individuals and families, it is short sighted not to support the voluntary sector infrastructure which will be needed to support people and communities in the coming months and years.
Voluntary organisations, like households, businesses, and public services are impacted by inflationary pressures. Inflation has created a running costs crisis in the sector while the cost-of-living crisis fuels demand for essential services and undermines funds. Without support the essential support and services our sector provides will be threatened.
OBR forecasts show household incomes falling by 7% both this year and next year, the biggest fall in living standards on record. Such a sharp decrease in living standards, combined with the impacts of recession, can be expected to have a significant impact on demand for essential voluntary services and support.
At the same time, based on new OBR figures, Prob Bono Economics estimate charity income will decline by £2.2 billion in real terms by the end of 2023/24. Similarly, to keep up with inflation, voluntary organisations would need to find an additional £3.8bn for staffing costs by 2023 and £4.8bn by 2024, compared to 2019/20 (Pro Bono Economics).
Covid 19, rising inflation and the resulting running costs and living costs crisis have seriously weakened the voluntary sector’s resilience to these pressures. Many charities have already dipped into reserves, lost many valuable volunteers, and are struggling to uplift wages which will add to existing pressures on recruitment and retention.
The Chancellor’s statement should have recognised these challenges and offered a mix of short and long term solutions to ensure a sustainable voluntary sector which can survive the running costs crisis, support people through the cost-of-living crisis, offer Fair Work, and deliver quality outcomes.
We hope that the Chancellor will take these concerns seriously and engage with the sector to ensure that the Energy Bills Relief scheme provides the sector with the support it needs and to recognise and resource the sector in the Spring Statement.
SCVO Summary: UK Government Autumn Statement November 2022
Following the UK Government Autumn Statement 2022, SCVO produced this summary of commitments impacting the voluntary sector operating environment. This paper also includes analysis from key commentators on the impacts of these commitments.
On the 17th of November 2022 the Chancellor of the Exchequer, Jeremy Hunt MP, released the UK Government’s Autumn Statement.
- On the 17th of October, ahead of the Autumn Statement, the Chancellor reversed nearly all proposals in the previous UK Government ‘mini-budget’ in September. He announced that:
- almost all tax measures that had not begun to progress through Parliament, would not go ahead, with two exceptions: cutting national insurance and, in England, cutting stamp duty.
- The energy support announced in September’s mini budget would remain unchanged until March 2023. A Treasury-led review of energy support after April 2023 was launched. This support will be targeted at those most in need and incentivise energy efficiency.
Opening remarks and key themes
The Chancellor opened by saying his priorities are stability, growth, and public services.
A stronger NHS and education system were promised and several comparisons to other countries were made.
The Chancellor said the Bank of England had his full support and there would be no changes to its remit.
He talked about compassionate British values and said unfunded tax cuts are as risky as unfunded spending. Sound money, he said, comes before low taxes as inflation eats away at the money in people’s pockets.
Key themes for the Statement were stability, growth and public services.
There were no changes to the financial settlement for the devolved nations in the current financial year (2022-23). As a result, the Scottish Government will have no additional flexibility from the Autumn Statement.
- The UK Autumn Statement is debated the week of 21/11/2022.
- The Scottish Government will consider the implications of the Statement.
- The Scottish Government 2023/24 Budget will take place on the 15th of December 2022. The Budget will be accompanied by the Scottish Fiscal Commission’s (SFC) economic and fiscal forecasts.
- The Scottish Budget Bill will progress through Parliament in early 2023.
Key points impacting the voluntary sector operating environment
The early reaction is there was no recognition in the Chancellor’s statement of the role played by charities while demand for services and support continues to rise. Not enough has been done to support charities through the cost-of-living and running costs crisis. Donors also have less disposable income and reserves are falling while cost pressures rise.
Many announcements were relevant to those on low incomes. These announcements will impact voluntary organisations that have increasingly been providing a lifeline as the cost-of-living crisis worsens.
Strategic investment is needed in the short and long term to support voluntary organisations to weather this storm and future crises.
Initial reaction included:
- Surging inflation, spiralling borrowing costs and rising unemployment mean household budgets will come under severe strain. As has been the case throughout the cost of living crisis, the demand for charity support will be substantial (Pro Bono Economics).
- Many charities were forced to spend reserves to survive the pandemic and are now on the verge of buckling under the compounding pressures of increased demand, skyrocketing operational costs, eroding income, and challenges recruiting staff and volunteers (NCVO).
- Charities should take time to digest what the combined effect of these changes will be on the people they serve. We could see big increases in the number of people needing their services, not just now but over the long term (New Philanthropy Capital (NPC).
- We face a recession next year combined with high levels of inflation over several years. New groups of people may start turning to charities, such as people who don’t receive benefits but are still on low incomes. And charities are still waiting to hear what support they’ll get for their energy bills past April. Funders should be responding to all of this on at least at the scale of the pandemic response (NPC).
- Charities Aid Foundation (CAF) agrees it’s disappointing that the chancellor did not mention any support for charities and said that charities must be at the centre of any continued energy support from April and need to know where they stand.
- OBR forecasts show household incomes falling 7% this year and next year. With Real Household Disposable income per person failing so sharply, not only is this a big concern for living standards, it is likely to cause a corresponding fall in donations to voluntary organisations (Charity Finance Group)
- With the new data from the OBR, we estimate that charity income will rise by around £1bn in cash terms during 2023-24 (1.6%), but if costs rise in line with broader inflation, then the real value of that income for the charity sector will decline by £2.2bn over that time period Based on OBR figures, Pro Bono Economics estimate charity income will decline by £2.2 billion in real terms by the end of 2023/24. The pandemic has seriously weakened the charity sector’s resilience and ability to cope with increasing pressures from inflation.
- The pension rise, as an example, will disappear into the rise in energy bills (Steve Webb LCP Consultants).
- Uprating some benefits in line with inflation next spring will be a lifeline for many people, however, it will not come soon enough to prevent people facing poverty this winter, the voluntary sector will be needed (NCVO).
- CTG will continue to argue that the tax system needs positive change to support the work of charities.
Big picture analysis
- Some commentators commented the Autumn statement is two budgets in one as it includes commitments until the end of Spending Review and commitments beyond that, ahead of the next General Election.
- Tax is now at the highest level since the second world war.
- On the 17th of November, the OBR confirmed that Britain is in recession and will shrink by 1.4% next year. Inflation was announced at 11.1%. Inflation is predicted to stay in double digits over winter before falling sharply in 6 months. OBR forecasts predict borrowing will half in 5 years.
- Change to EU regulations in five industries to be announced by the end of next year: Digital, life sciences, green industry, financial services, and advanced manufacturing.
Broader points of interest
Mentions of the voluntary sector
- Increased national Living Wage by 9.7% to 10.42 an annual pay rise of £1600 to a full-time worker. Benefiting 2 million lowest paid workers. This is in line with the target for the NLW to reach two-thirds of median earnings by 2024, and for the age threshold to be lowered to those aged 21 and over (currently 23 and over)
- The Department for Work and Pensions will thoroughly review workforce participation to get economically inactive people into work. This work will conclude in early 2023.
- Given the vital role that charities play in getting people back to work, government will benefit from close engagement with the sector in its review of economic inactivity, this is also an opportunity for charities to shape policy (Pro Bono Economics)
- One of the biggest reasons for women being unable to work or work more hours, is the crisis in the childcare sector, this has been overlooked (Women’s Budget Group)
- Were charities' spending on staffing costs to keep up with inflation, they would need to find an additional £3.8bn by 2023 and £4.8bn by 2024, compared to 2019/20 (Pro Bono Economics)
Levelling-up/UK Shared Prosperity Fund
- The government remains committed to levelling up and spreading opportunity across all areas of the UK. The Statement confirms that the second round of the Levelling Up Fund will allocate at least £1.7 billion to priority local infrastructure projects. Successful bids will be announced before the end of the year.
- Existing expressions of interest in Investment zones will not be taken forward.
- The government will refocus the investment zones programme on leveraging research strengths on universities in less developed areas. New announcements expected in the Spring Budget.
- The government will use this programme to catalyse a limited number of the highest potential knowledge-intensive growth clusters, including through leveraging local research strengths. The Department for Levelling Up, Housing and Communities will work closely with mayors, devolved administrations, local authorities, businesses, and other local partners to consider how best to identify and support these clusters, driving growth while maintaining high environmental standards. The existing expressions of interest will therefore not be taken forward. The government is grateful to local authorities for their work to develop proposals. (Note: Investment zones in Scotland are still to be agreed).
- There is no UKSPF expenditure allocated for this year. Funds are allocated for 2023/24 and 2024/25.
- £1 in every £13 of the Levelling Up and Shared Prosperity Funds will be lost to inflation (IPPR North). This is equivalent to £223 million from the Shared Prosperity Fund over the next three years and £340 million from the Levelling Up Fund over the same period (IPPR North).
- Wasted resources on investment zones as existing expressions of interest wont be taken forward as government refocuses.
Research and Development
- Chancellor confirmed his commitment to the UK as a Science Superpower by protecting R&D funding.
- Entire research budget protected and will increase budget by 20 billion by 2025.
BHF welcomed this.
- Councils in England can now raise council tax by 5% without a referendum.
- 95% of councils expected to raise council tax (Council tax is devolved).
- As a result of the government’s tax and spending decisions, devolved administration funding is increasing by around £3.4 billion over 2023-24 and 2024-25 through the Barnett formula and agreed tax and welfare Block Grant Adjustments. This comprises around £1.5 billion for the Scottish Government, £1.2 billion for the Welsh Government and £650 million for the Northern Ireland Executive.
- SNP MP Alison Thewlis has highlighted that soaring inflation means this year’s Scottish Government budget has already been squeezed by 1.7 billion.
- Even with £1.5 billion additional funding the Scottish Budget, like all budgets, is facing a real terms reduction over the next two years (IPPR Scotland).
- Not mentioned. Charity Tax Group is urging HMRC to continue to invest time and resources into the Future of Gift Aid project.
Tax / business rates/ VAT
- Business rates: Government will proceed with the revaluation of business properties in 2023. However, a 14 billion tax cut over the next 5 years will benefit thousands of small businesses. Rates bills in England will fall immediately for companies whose property values have dropped.
- £1.6bn transitional relief scheme and £2.1bn in reliefs for hospitality businesses, extending emergency Covid-19 support.
- Freeze employer NICS threshold until April 2028 at £9,100 and the VAT registration threshold at £85,000 for two years from April 2024. 70% of actively trading companies will not see an increase in the rate of Corporation Tax they pay due to the Small Profits Rate, and 40% of employers will not be affected by decisions on the threshold for employer NICs due to the Employment Allowance. The largest employers pay the most.
- The additional tax rate threshold has been reduced from £150,000 to £125,140, increasing taxes for those on high incomes.
- Income tax, National Insurance and Inheritance Tax thresholds will be frozen at their current levels for a further two years, to April 2028.
- The Energy Profits Levy will be increased by 10% to 35% and extended to the end of March 2028, and a new, temporary 45% Electricity Generator Levy will be applied on the extraordinary returns being made by electricity generators.
- The Stamp Duty Land Tax (SDLT) cuts will remain in place until March 2025 (this is devolved and won’t apply in Scotland).
- SME scheme deduction changes due to fraud. OBR says the new measures won’t have an impact.
- In a separate document, the government said that following consultation, it had decided to not introduce an online sales tax.
- More charities are expected to be required to register for VAT after the Chancellor froze thresholds. Organisations must register for VAT if their total turnover is more than £85,000. It is welcome that there was no increase in VAT, but freezing the registration threshold until March 2026 will result in more charities being subject to VAT. Charity Tax Group calls on the Government to provide important support to the sector by introducing a special reduced VAT rate on their purchases, allowing them to do more with their hard-earned resources.
- Charity Tax Group continues to be concerned about the Research and Development tax credit system and urges the Government to reintroduce the relief for charity-funded research through the tax system.
- Frozen tax levels will result in around 3 million new taxpayers and will push around 2.5 million people into higher rate tax (BBC news)
- The freezing of the personal allowance affects Scottish taxpayers, but other changes to income tax do not directly affect taxpayers in Scotland. With non-savings non-dividend income tax being devolved to the Scottish Parliament, it will be up to the Scottish Government to come forward with its proposals for Scottish income taxpayers when it sets out its Budget next month. (SPICE)
- The retail sector is projected to pay 20% less, while large distribution warehouses are expected to pay 27% more. That is viewed as the alternative to an online sales tax (The Guardian)
- Volunteer recruitment may not be a reliable way to meet rising demand in a recession. The charity sector can experience a ‘social recession’ when a financial one occurs, where volunteering rates fall. This creates an additional difficulty in meeting demand (Pro Bono Economics).
- Many charities have not yet had the chance to recover from Covid's blow to their volunteering pool (Pro Bono Economics).
- UK have cut emissions more than any other country. Despite economic pressures, government are committed to COP 2026 commitments.
- Growth priorities: Energy, infrastructure, and innovation.
- The Chancellor said we need to react radically to change our approach to energy to save our economy and planet. As a result, the Government will proceed with new nuclear plant.
- New national ambition to reduce energy demand from building and businesses by 15%. They will double their annual investment of 6.6 billion pounds from 2025 by a further 6.6 billion.
- Energy is the single biggest driver of inflation, and they will target this.
- From April, will continue the energy price guarantee for a further 12 months at a higher level of £3000 per year. An average of £500 support for every household. Additional cost-of-living payments of £900 for households on means tested benefits, £300 to pensioner households, and £150 for those on disability benefits. An additional £1 billion of funding to enable a further extension to the household support fund, helping local authorities to assist those in need. Doubling the amount of support from £100 to £200 for those using alternative fuels, such as heating oil, liquefied petroleum gas (LPG), coal or biomass, to heat their homes.
- Before the end of the year will bring forward a new targeted support for Business from April.
- It is important the sector is engaged with the Energy Efficiency Taskforce, especially considering the challenges faced by smaller community groups in investing in energy efficiency (Pro Bono Economics)
- There are also opportunities to shape what the government is doing, through the Energy Efficiency Taskforce (Pro Bono Economics)
- There's potential of further support for the sector. December will bring the review into the energy bills relief provided to businesses, charities & public services (Pro Bono Economics)
- Voluntary organisations are struggling to plan for coming years without any certainty about future energy costs. Further government support will be needed for those most in need and the organisations that are supporting them (NCVO)
- For those not receiving benefits, energy bills are rising again from April, without any additional funding for insulation schemes to bring down bills until 2025. This may impact demand on voluntary organisations (New Philanthropy Capital (NPC).
- 7 million households will be in fuel poverty this winter. The rise in the energy price cap from April next year could see this figure increase to 8.6 million households (End Fuel Poverty Coalition).
- Loopholes mean that oil and gas companies could avoid more than half of the government’s updated windfall tax (New Economics Foundation)
- Strong NHS and world class education are at the heart of the PMs vision. The remaining two years of the Spending Review will protect these budgets. Public spending will rise in real terms for the next 5 years. NHS Budget will increase in the next two years by £3.3 billion.
- An independently verified plan will be published on NHS staff shortages and the staff numbers needed in 5 and 10 years.
- Will increase the schools budget by £2.3 billion. Won’t tax independent schools as estimate that this would result in 90,000 pupils leaving independent schools.
- Work and pensions secretary to review the issues holding people back from employment (economic inactivity) and report back early 2023.
- £2.8 billion funding increase for social care next year and £2.6 billion the following year. (£4.7 billion for social care).
- Previously scheduled public spending will be maintained until 2024-25, before being squeezed in subsequent years. As a result, public spending will continue to grow over the next couple of years, albeit at a time when high inflation will squeeze how far that money goes (SPICE).
- The budget announced real terms cuts to public services over the next two years. Of the small increases included in the Chancellor’s statement, most are delayed until 2025 and even then the projected net increases in education, health and social care are below what is needed to address the scale of the challenge in these sectors (Women’s Budget Group)
- Expectations of efficiency savings and no real terms inflationary increase in funding for local authorities and other public spending will inevitably mean continued pressure on civic services Association of Chief Executives of Voluntary Organisations (ACEVO).
- Boosts to the NHS, social care and education spending next year should go some way towards protecting the incomes of charities which deliver commissioned health and care services and school support. Despite this, charities which currently receive a substantial amount of their funding from government should still regard this as a risk, as pressures on public spending will not be lifting any time soon (Pro Bono Economics).
- BHF welcomed treasury spending for the NHS and the comprehensive, independent workforce plan which they had called for.
Other headlines and analysis
- Uprated benefits by 10.1% costing £11 billion. To increase the numbers of households who can benefit, the benefit cap will also increase next year. (Note: Some benefits are devolved in Scotland, so it is for the Scottish Government to decide uprating).
- Increased pension credit by 10.1% and will protect the pensions triple lock. In April the state pension will increase in line with inflation.
- Pension age to be reviewed early 2023.
- The Chancellor ruled out increasing UK Aid to 0.7%
- To support people most exposed to high inflation, will cap the increase on social rents for 23/24 at 7%.
- A surcharge on banks next year was cut from 8% to 3%.
- Reforms to UK insurance rules – known as Solvency II – will reduce the amount of capital they need to set aside as safety buffers, and allow them to invest money from life insurance and pension policies in a broader, and potentially riskier, range of assets.
- Half of all new vehicles will be electric by 2025, so no longer exempt from vehicle tax duty.
- All benefits rising by 10.1% is not new, it is the default policy but is a big deal for poorer households (Resolution Foundation)
- NCVO are calling for the government to urgently undertake and publish an equality impact assessment into these measures before implementation.
- The Joseph Rowntree Foundation (JRF) looked at how the Chancellor’s decisions will impact some example households and found one-off payments and uprating benefits do not make up for rising rents, energy bills and other costs.
- Association of Chief Executives of Voluntary Organisations (ACEVO) found that there was little in the statement that will make a real difference to hundreds and thousands of households who are already turning to foodbanks and other charities to survive day to day.
- This is only the fourth time benefits have risen by inflation in the last 10 years (Child Poverty Action Group)
- Benefit upratings don't begin until April and the cost-of-living payments are TBC as far as timing and eligibility is concerned. Demand for charity services are spiralling now (Pro Bono Economics)
- Even once support kicks in, many households will still need charitable support next year, as: Prices rises will continue with inflation at 7.4%; Real wages fall 2.2%; Unemployment rises by 500k; By the start of 2024, incomes will be lower than they were 10 years before (Pro Bono Economics)
- Without the Energy Price Guarantee and cost of living payments, the record drop in household disposable income projected to land this year would have been 2x as bad (Pro Bono Economics)
Office for Budget Responsibility (OBR) forecasts
The Chancellor introduced two new fiscal rules to be assessed by the Office for Budget Responsibility (OBR): that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period and that public sector borrowing, over the same period, must be below 3% of GDP.
The Office for Budget Responsibility (OBR) published its Economic and Fiscal Outlook alongside the Autumn Statement.
- The OBR predicts that the Autumn Statement will help inflation fall sharply by the middle of next year.
- OBR forecasts suggests borrowing will half in 5 years.
- OBR forecasts show household incomes falling 7% this year and next year.
- Plans to increase fuel duty by 23% in late march 2023 will raise petrol and diesel prices by around 12p per litre.
Policy and Public Affairs Officer, SCVO
Last modified on 23 November 2022