In the first of her regular policy reports, Ida Karlsson, CFG's Policy Officer, wraps up what's been going on in Parliament and further afield, including debates on ERNICs and why charities in Scotland are bracing themselves.
With Parliament in recess last week, there was little action on charity-related issues in Westminster. Instead, the focus has been on international security, with dramatic twists related to the Ukraine-Russia war – chief among them Trump’s involvement on multiple fronts and Europe (and, shockingly, even Ukraine) scrambling to secure a position in peace talks.
With growing pressure on peace negotiations – including the possibility of the UK deploying troops in Ukraine to protect peace – it’s no surprise that the government is looking to increase defence spending. Worryingly, the Prime Minister seems to be taking a page from Trump’s playbook, deciding to fund this by cutting the foreign aid budget.
It is a significant cut from the already diminished 0.5% of GDP to 0.3 %. Might this be a bid to charm the US president ahead of the PM's meeting in Washington this week? Regardless, it’s a devastating decision for the many UK development organisations.
But let’s not dwell too long on foreign affairs – in the charity world on the domestic front, discussion and concern around ERNICs is far from fading.
In the Scottish Parliament, a debate on the Employer National Insurance Contributions motion was held last Tuesday, 18 February, put forward by the Minister for Employment and Investment Tom Arthur. I have far from read it in full, but I can tell you that the word ‘charity’ or ‘charities’ was mentioned 17 times during the debate.
The debate covered the issues we’ve heard many times: charities at risk of closing their doors, the impact on communities, worries about the future, and my personal favourite “it is… confusing and fundamentally unfair that the NHS and general public service is exempt from the Employer National Insurance rise yet [charities] are expected to absorb that cost”.
Debra Allcock Tyler from DCS seems to be taking a very pragmatic approach to the increase in ERNICs in this article: Charities urged to insist on funding uplifts to cover NICs rise. Noting that charities often hesitate to ask for more funding while still trying to deliver the same services despite rising costs, she concludes that they need to turn on their private sector mindset and simply ask and negotiate. Is this a skill charities need to work on?
Simply asking for more might not be enough for Scottish charities as inflation is hitting them hard: Scottish charities draw from reserves as inflation bites, research shows – bad news is that inflation has increased to 3% in the 12 months to January. That’s up from 2.5% in the 12 months to December, and puts the rate of inflation at its highest in 10 months…
In yesterday’s debate in the House of Lords (25 February) on National Insurance Contributions, we were hoping to see as many Peers as possible support the amendments which offer some mitigation against the financial impact the rise in ERNICs will have on the sector, and we were not disappointed!
Charities were very much at the centre of the debate and we can see that there is a lot of support in the House of Lords. In particular, we were thrilled to see that small charities (revenue below £1m) could be exempt from the ERNICs rise.
Although our research showed that medium to large charities will be hit hardest, and we would have loved to see a full exemption, this is still a huge win for the sector. We were also pleased to see not only one, but two, mentions of CFG during debates held in the House of Lords on ERNICs, showing that the work we do has a direct impact on the discussions in Parliament.
In the , Baroness Bennett referred to our research findings showing that 87% of charities are concerned about being able to afford the ERNICs increase. Yesterday, Baroness Sater quoted us saying that “the knock-on impact it will have on individuals, communities and local economies who rely on us will be devastating”.
Please have a look at our detailed summary of the debate.
In other news, the OSCR is asking charities to get ready for new regulations around trustee details and the publicity of charity accounts. Read more details on the scope of the changes.
And, finally, even more discussion on Wes Streeting’s comment on charities being stakeholders, not partners. Bet he's regretting his choice of words now!
Until next time!
Ida