Charity finance policy Environmental, social, governance (ESG) Tax and VAT

Tackling some myths on the Spending Review

If you listen very carefully when you walk down Whitehall you’ll hear the grumblings and table thumping of officials as they prepare for the Spending Review due to be announced on the 25th November 2015. The Spending Review is very much akin to a ‘super’ Autumn Statement, it is a review of all public spending to ensure that it meets the government’s priorities in an efficient and cost-effective way over this Parliament. Despite government spending cuts, the voluntary sector received £13.3bn in income from government grants and contracts (local, national and international). So this is going to be an incredibly important event in the sector’s calendar. As you expect, CFG will be working with other bodies to push for the government to do more to help charities achieve their objectives. However, there are three myths that I think we need to tackle first; otherwise there is a danger that we are going to lose out in the midst of conflicting messages from the sector.

Myth 1: There is no money left

This is probably the biggest and most worrying myth. Like any myth, it has a grain of truth in it. Yes, the government has been elected on a mandate to reduce government spending over this Parliament. Yes, this will necessitate cuts in public expenditure. However, this doesn’t mean that there is no money left. Total Management Expenditure (that includes social security) is £742bn for 2015/16. If you take out social security, then the total budget is still £481bn. Of course, this isn’t ‘unrestricted’ – there are lots of commitments upon it, but ultimately, government has the ability to make policy changes about how it uses that money. Moreover, the government has already made some pretty big spending commitments. It has promised to find £8bn for the NHS, it has committed £4.5bn on increases in the personal allowance, £1bn on cutting inheritance tax etc. The fact is that where there is political will, there will also be the will to find the money. So if you’re fearful of asking because you have bought into this myth that ‘there is no money left’ do just stand back and consider whether you really mean “I don’t think we can convince government to spend x on y”. If the case is well made and we put more effort into explaining why x is a good idea and why it is worth supporting the money might be found. As a sector, we need to be confident that we can make the case for why supporting charities and voluntary organisations, and why measures that we put forward are a good use of public money.

Myth 2: We need to defend what we’ve got

Another myth you’ll often hear is that charities need to ‘defend what they’ve got’ from government in terms of tax reliefs or other spending. The best we can hope for is that they don’t take it away from us. This isn’t the approach that other sectors would take. Business, for example, never takes the attitude of defending what it has and not asking for anymore. Despite the fact that the government has spent over £7bn on corporation tax cuts over the last parliament, they are still asking for more. This insatiability is built on the idea that supporting business is at the core of Britain’s success and that politicians will find it hard to ignore their requests. We need to be confident as charities that our work as valuable and important. We know that the government needs a strong charity sector if it is going to improve our society, so we shouldn’t be shy about making our views known and asking for more, if we think we need it. Just taking tax for a moment, we know that there are long standing issues with irrecoverable VAT, business rates and Gift Aid Small Donations Scheme. On spending, more needs to be done on promoting social value, encouraging partnerships between the sector and government on preventative spending, encouraging use of grants and building up the skills of the sector, particularly small organisations. These are good ideas that would help the government to achieve its objectives, improve the sector and lead to a better society. It isn’t wrong to put these ideas forward and to push for their adoption, despite the overall spending restraint the government is exercising. After all (see Myth 1) there is money there if they want to use it, and it will make a good return on its investment.

Myth 3: They don’t have a vision for the sector, so what’s the point?

There is a school of thought, I’ve heard many times, which is that the Conservative Government doesn’t have a vision for charities, so why bother proposing anything? They aren’t in the mood for listening. This myth is pernicious because it breeds the kind of defeatism that calls for charities to write off the next five years as one long wait till the next government comes along that may be more sector-friendly. Charities are facing tough times, so waiting simply isn’t an option. Nor do we serve our beneficiaries by moaning about the current position and not pushing hard for change. Moreover, when a government lacks a vision, it is the best time to propose new ideas. Governments want to have an impact and leave a legacy; we need to show that supporting the sector is one of the best ways to leave the country in a better place.

Start in the mirror…

Of course, not everything is about government money. Sometimes it is about policy changes or changes in tone and presentation which are needed. But government spending is important and given the financial situation of the sector, documented in the recent financial sustainability review, we need to make the case for why charities should get a bigger share of an overall shrinking pot. The above myths are comforting because they tell us that losses for charities are unavoidable and we are making the most out of a bad hand. We should not accept this. November’s Spending Review is a chance to put forward a positive and optimistic agenda for how the government can work with charities. But we need to start by looking in the mirror and make sure that we agree as a sector that we are worth the time, money and effort of policy makers.

This post was last reviewed on 27 February 2019 at 15:20
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