Children England has joined other infrastructure bodies in writing to the Chancellor with proposals for the Spring Budget. These policies would help to address the unequal treatment of charities compared to businesses and make charity tax and funding fairer and more transparent. (The full policy paper is here.)

Dear Chancellor,

Working together for a strong economy and shared society

We are writing to you ahead of the Spring Budget to present a number of proposals that will support the government’s goal of strengthening the economy and building a shared society.

We were encouraged by the Prime Minister’s speech to the Charity Commission in which she set out her vision of a Britain that works for everyone and not just the privileged few. The charities, social enterprises and community groups that make up the voluntary sector will be central to the successful delivery of this vision. Whether through improving the life chances of vulnerable people, providing a voice for the disenfranchised or enabling people to shape their communities, the voluntary sector is a force for social change.

As a vehicle for economic growth and innovation, civil society contributes £12.2 billion annually as Gross Value Added to the British economy. That is equal to the contribution of the country’s whole agricultural sector, while social enterprises have increased the number of new products available by 59%, compared to the 38% developed by SMEs. The sector is also a major employer with 827,000 employees across the country, in addition to mobilising 14.2 million volunteers whose contributions are worth £24 billion per year to the UK. It is clear that the sector plays a vital role, the benefits of which extend far beyond the services delivered.  

The latest data shows that through their fundraising activities, charities raise £11 billion in voluntary income through donations and legacies. This is spent on delivering services and supporting communities across the country, in many cases underpinning the work of other public services. They are often supporting people who have been left behind and individuals that statutory agencies have been unable to reach, as well as delivering preventative interventions which save public money in the long term.

However, voluntary organisations are facing the triple challenge of increasing pressure on funding, increasing and more complex demand, and growing uncertainty for the future. Brexit only adds to these pressures as European funding is thrown into question. 

Charities, particularly small charities with an income under £1 million, are under threat. Yet they are key to building a shared society and delivering services that achieve the long term value our economy demands. At this time of considerable financial pressure, it is essential that any tax and spending decisions work for this sector which delivers so much – at the very least, charities should have access to the support directed at businesses. The upcoming Budget presents an opportunity to bring the tax system up-to-date. The proposals presented in the enclosed document will support charities by reducing the tax burden, allowing charitable income to be used as intended - to address the challenges our society currently faces.

These proposals are:

  • Reduce Irrecoverable VAT for charities. The current VAT system costs the charity sector £1.5 billion. Resources meant for public benefit should not be wasted due to complexities within a system that was designed without the unique position of charities in mind.
  • Increase mandatory charitable non-domestic business rate relief to 100% - With the proposed £6.7 billion cuts to rate relief for businesses we could be in a situation where charities are paying more in business rates than businesses, thereby resulting in charitable funds subsidising private profit. The move to increase charitable rate relief to 100% would put civil society on an equal footing.
  • Increase pay back of National Insurance Contributions for charities – This is to specifically address the additional cost of the National Living Wage incurred by charities. This would provide support relative to that currently enjoyed by private businesses (through measures such as corporation tax cuts) to the voluntary sector.
  • Lower the Insurance Premium Tax for charities to 6% – IPT has increased by 100% in the last 18 months to 12%. This is estimated to cost the sector £87 million per year. By introducing a lower rate charities could save millions of pounds every year that could be spent on delivering public benefit.

We have also outlined two spending proposals that we believe should be considered ahead of the budget.

  • Adopt a strategic approach to voluntary sector funding – Since 2013 the government has committed some £550 million of Libor fines to good causes. Our proposal calls for the government to ensure future funding for voluntary organisations outside of normal departmental spending (such as Libor fines) is distributed on an impartial basis according to the sector’s strategic needs. This is as opposed to individual charity giveaways.
  • Increase funding for the Charity Commission – We propose the government increase funding to the charity sector to fully cover the cost of delivering the Commission’s support and regulatory functions.

We hope that you take our proposals on board in the upcoming budget and will work with the voluntary sector to strengthen the economy and build a truly shared society. 

Yours Sincerely

Caron Bradshaw
Chief Executive, Charity Finance Group

Neil Cleeveley
Chief Executive, NAVCA

Kathy Evans

Chief Executive, Children England

Tony Armstrong

CEO, Locality

Carol Mack

Chief Executive, Association of Charitable Foundations

Kunle Olulode,

Director, Voice4Change England

John Barrett

Acting CEO, Small Charities Coalition

Peter Hollbrook

CEO, Social Enterprise UK

Peter Lewis

CEO, Institute of Fundraising