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Darling's 2009 Budget 'disappointing' for charities 1

Fundraising | Tania Mason | 29 Apr 2009

Voluntary organisations that are facing heightened demand for their services and yet suffering from cashflow shortfalls due to the recession will be able to apply to a new £20m grants fund announced by the government in today’s Budget.

But the Hardship Fund is a rare snippet of good news for charities, as the voluntary sector did not even rate a mention in Chancellor Alistair Darling’s speech earlier this afternoon.

Hoped-for alterations to the gift aid system, the VAT regime arising from collaborative working and the repeal of legislation on substantial donors failed to materialise.

“It’s a storm in a teacup as far as VAT is concerned,” said PKF’s Debbie Jennings. “We had hoped there might be something to compensate charities for the withdrawal of the staff hire concession on 1 April, but there doesn’t appear to be anything. I think it’s a disappointing Budget for charities generally.”

Substantial donors legislation

Charities had also hoped that the proposed substantial donors legislation, which aims to catch out wealthy people who try to avoid paying tax by making substantial donations to charity, would be repealed.

Sector experts had complained that the proposals penalised charities rather than tax evaders by virtue of their complexity, and last year the government seemed to be listening and had published draft changes which many felt improved the proposals slightly.

But now it appears the government wants more time to consider the amendments. It has tweaked the donation thresholds again (these now stand at £150,000 over six years and £25,000 over 12 months) but said it needs more time to informally consult with the sector to develop new rules on an effective anti-avoidance purpose test.

Baker Tilly’s charity tax partner John Conlan said it appeared the government had put this particular issue into the “too-hard basket” for now.

Common Investment Funds

The government also said it and the Charity Commission would soon consult on ways of bringing charity Common Investment Funds “more fully under the FSA’s regulation whilst preserving their existing tax reliefs”.

Gift aid

The Budget report contained just one brief reference to gift aid: “The government continues to explore ideas to improve gift aid and has commissioned research into the effect of redirecting higher-rate relief from donors to charities.”

Social investment bank

However, there was renewed support for the concept of a social investment bank, as the government said it would consult on the “design and functions” of such a vehicle to “increase the supply of investment in the third sector”.

And the announcement of a new 50 per cent income tax rate from next April for those earning over £150,000 might also prove positive for the sector, as those higher earners currently receive around half of their gift aid back and may be persuaded to give more to charity rather than lose more in tax.

Conlan said: “The timing of this could be good because in 2011 charities lose the transitional boost they received last year and there’s been no suggestion in this Budget that that should be extended.”

But overall, he said, the Budget could be described as “a bit of a missed opportunity”.

Etherington: ‘extremely disappointing’

The NCVO agreed. Its chief executive, Stuart Etherington, said: “It is extremely disappointing that the Chancellor has not looked beyond the conventional solutions offered by the market and the state and has not enabled the voluntary and community sector to play its part in helping to take the country out of recession.

“A £50m government cash injection to kick-start the proposed Social Investment Bank could have given the sector a much-needed shot in the arm.

"It is deeply disappointing the Chancellor has failed to announce this, especially when the Government announced a range of substantial measures to support the private sector.”

Bubb: ‘best budget for years’

But chief executives body Acevo saw it differently: its chief executive Stephen Bubb said: “This is the best third sector budget for a long time.”

Although he was “surprised and disappointed” at the lack of support for charities with funds in Icelandic banks, an extra £1.7bn for various training and welfare-to-work programmes was good news for charities that work in that area.

In fact, Acevo claimed responsibility for much of that extra funding: “We are delighted that an Acevo report to James Purnell, the secretary of state for work and pensions has inspired a job creation scheme, extra training, and more money for existing welfare-to-work programmes – with the third sector expected to play a major role, particularly through the job creation scheme, whose design we will continue to discuss with DWP over the coming weeks.”

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Directory: Association of Chief Executives of Voluntary Organisations (ACEVO) | National Council of Voluntary Organisations (NCVO)
Who's Who: Tania Mason | Debbie Jennings | Sir Stuart Etherington | Sir Stephen Bubb