Blog

Charity finance policy

19 June 2017, 15:01

Charities must not let Brexit negotiations get away from them

The government has formally begun its Brexit negotiations with the EU – so expect lots of awkward looking photographs of UK and European politicians sitting across from each other. It’s ...

Post byAndrew O'Brien

The government has formally begun its Brexit negotiations with the EU – so expect lots of awkward looking photographs of UK and European politicians sitting across from each other. It’s very early on, and already the government’s position is starting to adapt due to the election result, but the early moves in the negotiation could have big long term consequences both for the UK and for the charity sector.

What do we want to see?

It goes without saying that the UK charity sector wants to see a strong UK economy. Whatever deal the UK gets need to be one that is good for economic growth, which will boost the financial environment for charities and also help beneficiaries. However, beyond that the UK government has a number of hard choices to make. For the UK charity sector, the ideal negotiating outcome would be one which delivered a strong economic growth for the UK, but with flexibility on tax policy (particularly VAT), State Aid, public procurement and the ability to access pan-EU funds in areas such as international development and research. A quick settlement on the right of EU nationals is also important – although it looks like the EU and UK are on the same page with this point. Is that something that the EU is prepared to agree? And what are the costs?

What are the risks?

As I have referenced in a previous blog post, the EU negotiating strategy wants to see a “level playing field on competition and state aid”. What does that mean? We would not argue that allowing new zero rates or rebates for charities on VAT would be anti-competitive. But the EU could view any changes or flexibility to VAT rules as a way for the UK to try and artificially reduce costs. In a similar way, reforming State Aid so that it is less about red tape and more focus on competition in real functioning markets (like energy or retail) rather than in broken or non-functioning markets (such as the areas that charities work in) doesn’t sound anti-competitive to charities. But the EU may want to the comfort of a blanket approach to prevent any unforeseen changes in UK policy which undermine the EU’s competition. On a spectrum – the freer the trade, the more restrictions likely. The more restrictions, the less flexibility there will be to deal with the issues of tax, state aid and procurement that have been highlighted above. This is a crude analysis, but appears to be borne out by the literature around Brexit so far. Similarly, a transitional arrangement may significantly impact on the ability of the UK to act on the issues above. This could see the charity sector “locked in” to the current sub-optimal status quo for several years, without the UK government having the ability to enact meaningful changes.

Charities and business interests are not necessarily the same

As we heard at CFG’s Annual Conference, UK politicians do not feel that they are hearing enough from charities about what they need. It is important that we raise the needs of our beneficiaries, but it is also critical that we raise the operational issues that impact charities. Already today we have seen the CBI push its demands for a soft Brexit so that trade access is maintained. For charities, we need to remember that our interests are not the same as business, or other stakeholder groups. On some issues, such as right to remain for EU nationals, we may be united. On others such as tax policy, we are significantly more impacted in terms of costs (such as VAT) than we gain through trade access. Our trade-offs would be different. The UK will be focused on economic outcomes, but the public also wants to see a Brexit which doesn’t disadvantage the most vulnerable in society. The outcome of the election is that there are significant concerns about austerity and the need for better social outcomes. We need to push this point repeatedly with stakeholders. Charity finance teams should make sure that their policy teams are aware of these issues when they are meeting with stakeholders in government and Parliament.

Concerned about Brexit?

If you have any concerns about Brexit, please do let the CFG Policy Team know (policy@cfg.org.uk). We regularly engage with government on these issues and we will be pushing forward the charity sector’s interests to the government and Parliament over the coming two years. Â« Back to all blog posts

Blog

Charities must not let Brexit negotiations get away from them

What do we want to see?

What are the risks?

Charities and business interests are not necessarily the same

Concerned about Brexit?

Related Content

Finance Focus February 2021

Finance Focus January 2021

And then the world turned upside down…

Finance Focus November/December 2020

Finance Focus October 2020

Bespoke interventions for the sector are never more needed

Finance Focus September

Collapse in charity provision looms at moment of greatest need

Finance Focus August

Finance Focus July

Summer Economic Update

"Whack-a-mole" economic update

Coronavirus Job Retention Scheme update

From red to green, but what does it mean for us?

Restarting the economy amidst coronavirus

Natwest support to the charity sector

What does the chancellor’s announcement mean for charities?

COVID-19: General guidance and short-term action planning

COVID-19 – what planning should charities be undertaking?

What should charities expect from the budget?

Caron Bradshaw appointed as a member of new SORP Committee

Sector bodies issue joint proposal for Chancellor ahead of March's Budget

Key messages from the Bank of England’s January Monetary Policy Report

Learn, earn and change the world: Social Change Degree Apprenticeship opens for second round of employer partners

Takeaways from the Migration Advisory Committee report

Economic Outlook Briefing December 2019

Finance Focus Nov/Dec 2019

A Charity Finance Manifesto To Enable Civil Society To Thrive

Has the Charity Commission has taken the wrong tone in its election guidance

Why does the narrative around public 'trust' makes me feel so uncomfortable?

What does Labour’s independent schools proposal mean for charities?

A living wage needs to lead to a sensible discussion about charity funding

Time to get on an election footing

Spending Review Briefing 2019

We must prepare for a no-deal Brexit

Five takeaways from August’s Inflation Report

The lessons for Oxfam and the wider sector

Our new PM is neither a buffoon nor a jester. It's time to take him seriously.

What does the new prime minster mean for the charity sector?

The Charity Tax Commission report - does it go far enough?

BEIS Review of the Financial Reporting Council

CFG Annual Handbook 2019

Economic Outlook Briefing 2019/20

Brexit crystal ball

Spring Statement 2019

If it comes down to a vote on no-deal, vote against it, says CFG

Charity Property Matters Survey 2018

CFG responds to the Charity Commission’s consultation on the SORP-making process

Charities are ill-prepared for a no-deal Brexit and fear the worst: CFG survey

Are you prepared for a WTO Brexit?

What the recent SCOTUS judge controversy can teach us about the Charities’ SORP

The Brexit deal is bad for charities says CFG, as it urges MPs to vote against it on Tuesday

London Charity Property Survey Findings

London Charity Property Survey Results in Summary

London Property Survey Statistical Analysis

Increasing number of charities fear property poses risks to their charitable mission

Charity Finance Group's briefing on the Autumn Budget 2018

Live Blog: Budget 2018

Labour Conference September 2018 update - Brexit and Beyond

Brexit will be bad for both charities and beneficiaries, says new report from CFG

Cost Benefit Analysis Of Brexit For Charities

Does the Civil Society Strategy deliver for charities?

Post-Brexit immigration rules could cause skills shortage in charities

The charity work force in post-Brexit Britain

Economic Outlook Briefing 2018

Charities need to find nearly £4bn additional income by 2020 finds CFG

CFG Annual Handbook 2018

Apprenticeship Levy Guide

Spring Statement 2018: What should charities be looking out for?

Review: Wolves in Sheep’s Clothing Report - Extremism in Charities

A stairway to heaven on business rates for the charity sector?

Live Blog: Autumn Budget 2017

What should charities expect from the Autumn Budget 2017?