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Summer Economic Update

Richard Sagar, Policy Manager, sets out a briefing on today's Economic Update by the Chancellor aided by commentary from our corporate partner experts. Together, they examine how the announcements might affect charities and what we might expect from the Autumn Spending Review.

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There was no surprise that jobs were the centrepiece of the Chancellor’s Summer economic update. With the furlough scheme gradually being phased out and coming to an end entirely in October, fears of unemployment not seen since the 1970s were on the horizon. So the Chancellor has announced measures to avert this, including a ‘Kickstart scheme’ for young people entering the job market, a Job Retention Bonus for employers who keep furloughed staff employed into the new year, and additional support for those who hire new apprentices (further details on these schemes can be found below).

In addition to the focus on jobs, the other key measures of interest to the voluntary sector, concern what the government has labelled “hospitality accommodations and attractions”. Covid-19 and the accompanying social distancing measures have had an enormous impact on the finances of charities in these sectors, including museums, theatres and other visitor attractions so any relief is to be welcomed, but as we shall see, some of the measures will not benefit charities in this space at all. And the additional infrastructure spending which made up a large part of today’s announcement are not of direct relevance to charities. Overall there was very little of direct relevance to our sector in the Chancellor’s speech and the accompanying documents from the Treasury. In fact, there is only one mention of charities directly and it is only a repetition of the £750m 'emergency' package and the additional money from VAT on PPE and charity singles that has previously been announced.

CFG alongside other charity infrastructure bodies has proposed a five point plan for the Chancellor to consider; including implementation of a flexible approach and appropriate extension of the Coronavirus Job Retention Scheme (CJRS), the Introduction of the Gift Aid Emergency Relief Package, re-purposing of and access to the National Fund to support charity services, ensuring effective and efficient distribution of the UK Shared Prosperity Fund and finally, creation of a Community Wealth Fund using Dormant Assets.

Taken together these measures would have gone some way to ameliorate the loss of income that charities have seen, but sadly there nothing on four of the asks, and only a partial recognition on making the CJRS more flexible. With the Chancellor announcing that the Budget and Spending Review will occur in the Autumn, the announcements today should be seen as stop gap measures rather than a systematic plan for the macro-economy ( and see Caron Bradshaw’s thoughts in advance of the statement today on lack of strategic approach). We can hope that these larger fiscal events will see greater focus on charities, and offer the voluntary sector an opportunity to continue the important work we are already undertaking in helping to build back better from Covid-19.

“While it is encouraging that the government is providing a much-needed boost to the economy, it’s disappointing that the chancellor hasn’t used this fiscal statement as an opportunity to give specific support to the charity sector. A sector that will be key in helping to rebuild society and the challenges it has faced during this Covid-19 pandemic. While some charities can benefit from the Government’s new job retention scheme, we want to see more direct support, such as a cut in insurance premium tax (IPT) or increasing the rate of Gift Aid, and we urge him to consider this in future.”

Angus Roy, charity director at Ecclesiastical

“Whilst there are a number of welcome job related measures that charities will be able to take equal advantage of, it was disappointing that there were no charity specific announcements. Perhaps the boldest, that of the VAT cut on tourism and hospitality activities, is unlikely to be of significant benefit to charities in this sector due to existing exemptions, though we await the full details of this. It was also a missed opportunity not to heed the calls for a boost to Gift Aid at a time when donations are dwindling, yet many charities will be expected to help pick up the pieces over the months and years to come. I very much hope this has not been ruled out.”

Alice Palmer, NFP Tax Manager, haysmacintyre

Unlike the Budget, Spring Statement or Spending Review, today's updates were not accompanied by a statement on the public finances and economic forecasts from the OBR. But there is a Fiscal Sustainability Report scheduled for 14 July, which will outline three alternative scenarios for the economy and the public finances with a discussion of their implications for fiscal sustainability and fiscal risks. CFG will be able to provide updates on our blog once this report is released on 14 July.

As Table 1 from the Treasury documents show, the additional support announced today equates to £30bn. In addition to the almost £160bn which has been spent thus far, this demonstrates that the government has been willing to borrow large sums of money to help mitigate the effects of Covid-19. It is a shame that they have been less willing to use this money to support charities. We would expect further announcements at the Autumn budget and Spending Review to address Covid-19, which we hope will give greater prominence to concerns of the charity sector and our five point plan.

“Charities are still facing the perfect storm. At around £30 billion, the scale of Treasury spending on measures to revive the UK economy is impressive. The reaction in the bond markets suggested that investors are not currently concerned by increases to the budget deficit. In the currency markets sterling was largely unchanged, dropping 0.1% against the US dollar in the aftermath of the announcement. Questions around a change in approach to government spending will inevitably ensue, with current forecasts indicating that the country will end the year with a significant deterioration in the budget deficit. A political party that until recently preached the importance of fiscal conservatism at all costs is now following a different path.

The Chancellor’s statement did not contain any announcements specifically aimed at the charity sector, although the Prime Minister’s announcement earlier this week of £1.6 billion of funding to support the Arts and Culture sector will have an important impact on many organisations.

The sector remains in an extremely challenging position, with many charities reporting an increase in demand for their services while also having had to furlough staff to protect their financial position. A number of reports have also highlighted a drop in funding as the economic impact of the lockdown has hit people’s incomes. The Institute of Fundraising reported a survey of members that suggested voluntary income could decline by around 48% and overall incomes by around a third.[1] The sector will be hoping that the measures announced today act to stimulate the economy as a whole and that the recovery looks more like a V than the U that many fear.

So far the British economy has been on life support – the aim has been to simply keep it alive. Today was another shot of adrenaline to get the heart beating again. At some point the patient will have to leave intensive care. It will be a few months before we see whether the plan has worked. It is likely that some areas will need more treatment still. Economic rehabilitation is likely to take time and is by no means assured. However, today’s announcement is to be welcomed and has highlighted a willingness to take decisive action and to act quickly.”

Patrick Trueman, portfolio manager at James Hambro & Partners


  • Job Retention Bonus – The government will introduce a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July.
  • Kickstart Scheme- The government will introduce a new Kickstart Scheme in Great Britain, a £2 billion fund to create hundreds of thousands of high quality 6-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
  • High quality traineeships for young people – The government will provide an additional £111 million this year for traineeships in England, to fund high quality work placements and training for 16-24 year olds. This funding is enough to triple participation in traineeships. For the first time ever, the government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee. The government will improve provision and expand eligibility for traineeships to those with Level 3 qualifications and below, to ensure that more young people have access to high quality training.
  • Payments for employers who hire new apprentices – The government will introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021. These payments will be in addition to the existing £1,000 payment the government already provides for new 16-18 year-old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies.

CFG’s five point plan called for an extension of the Job Retention Scheme for employers whose business models have been particularly susceptible to Covid-19, and it is disappointing that this didn’t feature in the announcements. But these measures, for the most part, are to be welcomed.

There are unanswered questions about the Job Retention Bonus, but on the face of it, it seems any employer that has furloughed staff at any time, and continues to employ them into January 2021 will be able to claim the additional £1000. This will provide a helpful financial boost for charities struggling with cashflow.

The kickstart scheme, traineeship for young people, and payment for new apprentices will also help charities looking to hire new less experienced staff, but leaves existing issues in place, most notably with the apprenticeship levy, where charities end up paying in without being able to benefit directly. CFG will soon commence some work on this issue and will seek to engage members shortly.

All these schemes suppose that the labour market will improve quite significantly by the start of next year, but if this is not the case, the Chancellor may have to consider further measures, to avoid high unemployment.

“This age group are already finding that lockdown job prospects are not good so the Kickstart Scheme and Traineeships for young people are welcome and hopefully some charities will be well placed either to take advantage of these or encourage and assist other organisations to find candidates and take up them up to help its success.”

Helen Elliott, Sayer Vincent


Support measures for hospitality, accommodation and attractions

  • Temporary VAT cut for accommodation and attractions – From 15 July 2020 to 12 January 2021, to support businesses and jobs, the reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days
  • Temporary VAT cut for food and non-alcoholic drinks – From 15 July 2020 to 12 January 2021, to support businesses and jobs in the hospitality sector, the reduced (5%) rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK.
  • Eat Out to Help Out – In order to support around 130,000 businesses and to help protect the jobs of their 1.8 million employees,4 the government will introduce the Eat Out to Help Out scheme to encourage people to return to eating out. This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the entire month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount. Organisations can register to participate here from 13 July.

Some of these temporary cuts will be useful for charities, as Helen Elliott from Sayer Vincent has pointed out, it will be particularly useful for those who run cafes in their charity shop or premises.

However, the cuts to VAT for attractions sadly won’t be applicable for most charities, as they will already have exemptions from VAT, for instance, museums which are charities are already exempt from VAT for admission, so will not see a benefit. Further guidance on the scope of this relief will follow shortly.


" There were some interesting and bold measures announced today. However the focus on business worries me that the government have overlooked the challenges for our sector who work with those most likely to experience harm and disadvantage across the nation.

A more flexible exit from the CJRS is vital to preserve the services to our beneficiaries. The measures to support the creation of new roles under the Kickstart scheme and modifications to the apprenticeship scheme are welcome if they can be applied to charities; but we know from our previous experience that charities need help to play their role in this regard.

A quick win would have been to relax the apprenticeship levy requirements so that charities could permanently support skills development. The significant temporary reduction in VAT could be helpful to some in the sector but more detail is needed to understand just how many this could benefit. We would like to see more permanent adjustments that will facilitate lasting change and enable charities to play their full part in supporting communities to embody what the Chancellor said today was his most prized value, endurance. "

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