MHA | Report to the Chancellor ahead of Spring Budget
Not for Profit eNews February 2024 4

Report to the Chancellor ahead of Spring Budget

· Posted on: February 15th 2024 · read

As part of the Civil Society Group, a group of almost 90 organisations that support the UK charity and voluntary sector, the Charity Finance Group (CFG) has recently written to the Chancellor of the Exchequer setting out is four main policy ‘asks’ ahead of the Spring Budget on 6 March 2024.

It argues that the asks would support and protect the immediate and longer-term financial health of the charity sector by providing greater financial and operational certainty.

  1. Essentials Guarantee
    In light of recent research which found that half of those on Universal Credit ran out of food in the last month and couldn’t afford to buy more, the first ask is that an ‘Essential Guarantee’ be introduced. The Guarantee involves the level of Universal Credit being regularly appraised and set to cover the costs of essentials (such as food, utilities and household goods).
  2. Delivery of public services
    Noting that the voluntary sector is a critical partner in delivering public services (from 2016 to 2020, charities delivered 69% of commissioned homelessness services, for example), but that grants and contracts for these services do not have inflationary uplifts built in, the second ask focuses around ensuring that such grants and contracts are not underfunded and thus posing a threat to charities’ ability to deliver public services.
  3. Extend funding terms
    Comparing the term-length of the UK Shared Prosperity Fund (three years) to that of the EU’s Multiannual Financial Framework (seven years), the third ask stresses that long-term funding provides financial certainty for commissioners and providers, it also enables continuity of support for individuals.
  4. Streamlining and reviewing the charity tax system
    The final ask includes four points concerning the charity tax system. Firstly, it argues that the Government should place a transitional relief mechanism of at least three years for Gift Aid if the basic rate of income tax is reduced so that charitable income is not lost.

Secondly, the letter argues that the removal of inheritance tax incentives, which are under review and result in a significant contribution to the sector’s legacy income, would have a detrimental effect on the number of charitable bequests made and the value of legacy gifts to charities.

Thirdly, arguing that charities only make purchases for public benefit, the letter asks for the Government to bring in a new special charity VAT rate, to be applied when charities make purchases, and thus reduce the irrecoverable VAT costs the sector incurs.

Finally, there is the call to extend the charitable rate relief to include wholly-owned trading subsidiaries. This is so that when charities do use these subsidiaries to carry out their activities such, they are not penalised for doing so.

The CFG comment on the submission on their website.

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This insight was previously published in our Not for Profit February 2024 eNews

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