This week the Chancellor announced the Spring Budget, setting out spending plans before the next general election. Some of the announcements, such as funding for community cultural projects, will be welcome news for 3rd Sector groups, however the consensus is that this has been a missed opportunity for the government to recognise the vital role of the voluntary sector. One key piece of good news is the extension of the household support fund for six months to September 2024 – a further £500M. See headlines below courtesy of NAVCA*.
Headlines
• Extension of the Household Support Fund for a further six months to September 2024.
• 2% reduction on employee national insurance contributions.
• Public spending will increase by 1% higher than inflation over the next parliament.
• The Long Term Plan for Towns is extended to 20 new places.
Political Overview
There is welcome news on the extension of the Household Support Fund for a further six
months, and for those in employment a further reduction of 2% on employee national
insurance. However, the budget was limited in scope and whilst there was much political
rhetoric there were few real new announcements. Currently, there is no additional funding
for adult social care, local authorities or education, and only very limited investment in
housing in a couple of areas. There was no announcement on the timing of the
Comprehensive Spending Review which is due during the calendar year.
The 1% increase in government spending over inflation is insufficient to meet increasing
demand and rising costs, and sticking to this will require significant cuts to unprotected
departments of around £20Bn per year by 2028. This will put further pressure on all aspects
of public service delivery and limit the discretionary funding available even further.
However, various commentators including the credit rating agency Moody’s think that it is
unlikely that these spending cuts for unprotected departments are realistic or even
achievable in the next parliament, due to the existing spending commitments in place.
Announcements such as the abolition of the non-dom tax status and its use to fund the cut
in national insurance, will tie the hands of any future government.
General Economic Situation
Inflation, currently 4% is expected to fall to below 2% within a few months. The Office for
Budget Responsibility [OBR] expects growth to be 0.8% this year, and 1.9% next year –
higher than previously expected. Underlying debt will fall as a share of the economy to
92.9% in 2028/29, with borrowing falling over next five years to 1.2% of GDP. Paul Johnson
of the Institute of Fiscal Studies [IFS] says that this will depend on implementing extremely
tight spending plans which will imply cuts for many public services.
The OBR reports that tax as a share of GDP will fall slightly this financial year (due to the cut
in national insurance in January). It then rises gradually in every year of its forecast, rising
to 37.1% of GDP in 2028-29. This is the highest level since 1948 and 4 percentage points
above pre-pandemic levels of 33.1%. More people will pay tax in each of the tax bands as
tax allowances remain frozen.
Public Services
Public spending will increase by 1% higher than inflation over the next parliament. Paul
Johnson of the IFS has commented that keeping planned growth in day to day spending at
1% per year in real terms over next parliament, with bigger increases for health, defence,
and childcare, means that other public services will need to be cut by an estimated £20Bn
per year by 2028.
An extra £2.5Bn for the NHS in 2024-25 to improve performance and reduce waiting times.
A public sector productivity plan costing £4.2Bn, for public services to invest in IT systems,
new technologies such as AI and reduce the amount of administration carried out by
frontline workers. Of this £3.4Bn will go to the NHS for digital transformation, including
making the NHS app a single front door for patients and rolling out universal electronic
patient records. This is predicted to generate £35Bn in savings by 2030. The remaining
£800M is expected to generate £1.8Bn in productivity improvements from other public
services over the next five years. There will be £230m for drones and new technology
including facial recognition to free up police officer time. £75M for extension of the Violence
Reduction Unit model across England and Wales.
Household Finance
The Household Support Fund will continue for the next six months from April to September
2024 with £500M to be distributed via local authorities.
For people in receipt of DWP advance loans the time for the repayment programme will
increase from 12 months to 24 months, from December 2024 onwards. The £90 fee for debt
relief orders is abolished.
The High Income Child Benefit Charge will move to assessment by household in April 2026
and the threshold for it to apply will increase to £60,000 from April 2024.
Charities
The Digital Markets, Competition, and Consumers Bill currently in the Lords, is introducing
new protections for consumers who take out subscription contracts. The government will
amend existing Gift Aid legislation by Statutory Instrument so that charities can continue to
claim Gift Aid while complying with these new protections. The government’s intention is
that these amendments to the Gift Aid regime will be in place by the time the relevant
provisions of the Bill come into force.
Tax
From April 2024 employee national insurance will be cut from 10% to 8%, and self-employed
NICS from 8% to 6%.
This has been funded in part by the abolition of the non-dom tax status from April 2025,
which will raise £2.7Bn per year by 2028/29.
The sunset clause on the Energy Profits Levy will be extended by a year to March 2029,
raising £1.5 billion
Alcohol duty remains frozen until February 2025 and the freeze in fuel duty will continue.
The VAT registration threshold is increased from £85,000 to £90,000 which will take around
28,000 small businesses out of paying VAT altogether.
Full expensing [a capital allowance] will be extended to leased assets. Draft legislation will
be published shortly.
A duty on vapes will be introduced from October 2026, alongside a one-off increase in
tobacco duty. This will raise a combined £1.3 billion by 2028/29.
Other Measures
Nurseries and preschools future funding will rise with a combination of inflation, earnings
and the National Living Wage. The hourly rate providers are paid to deliver the free hours
offers for children aged 9 months to 4 years, will increase for the next two years in line with
the figures used in the Spring Budget in 2023, an estimated additional £500M.
The Long-Term Plan for Towns is extended to 20 new places across the UK, providing £20M
of endowment style funding over a 10 year period. The full list of towns is: Royal Sutton
Coldfield, Darlington, Runcorn, Canvey Island, Thetford, King’s Lynn, Ramsgate, Eastbourne,
Harlow, Newton-le-Willows, Rawtenstall, Wisbech, Carlton (Gedling), Bedworth, Arbroath,
Peterhead, Kirkwall, Rhyl, Derry/Londonderry, and Coleraine.
The government is providing an additional £5M for the Platinum Jubilee Village Halls Fund.
Devolution
There will be a new North-East trailblazer devolution deal which comes with a funding
package potentially worth over £100M.
The government has finalised the first of the Level 2 Devolution powers agreements with
Surrey County Council, Buckinghamshire Council and Warwickshire County Council.
£6M from community regeneration projects with the King’s Foundation to pilot how
community led regeneration projects anchored around heritage assets and sustainability
considerations can complement government’s wider place-based initiatives for levelling up,
subject to business case approval.
£100M has been allocated to levelling up culture projects (subject to business case),
recognising the important role that culture and pride in place have to play in levelling up.
DLUHC will publish a full list and explanation on gov.uk.
For more information see: https://www.gov.uk/government/publications/spring-budget-
2024
Headlines courtesy of NAVCA (The National Association for Voluntary and Community Action)*
Further reading:
Pro Bono Economics have compiled a detailed analysis of the Spring Budget: read Inching forwards, weighed down here
Civil Society consider how the budget has failed to deliver for the charity sector - click here to read
The Business Exchange Bath & Somerset collects local reactions to the budget here
UK Fundraising reports on charity sector reactions to the budget here
Key points from the budget and an analysis of what it means for charities can be found at NCVO - click here to read
Statements from national charities: