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Spending Review 2010: implications for charities
Practical Law UK Legal Update 5-503-6746 (Approx. 7 pages)
Spending Review 2010: implications for charities
by PLC Private Client
| Published on 21 Oct 2010 • England, Wales |
On 20 October 2010, the Chancellor of the Exchequer, George Osborne, set out the government's four-year public spending plans in its Comprehensive Spending Review 2010 (SR 2010). This legal update highlights the main implications for charities and other third sector organisations. (Free access.)
Speedread
On 20 October 2010, the Chancellor of the Exchequer, George Osborne, set out the government's four-year public spending plans in its Comprehensive Spending Review 2010 (SR 2010). He said the government had chosen to spend on health, education and infrastructure and to cut waste and reform the welfare system. In addition, he said the government needs to invest in transport, green energy infrastructure and sciences. Its aim is to eliminate the structural deficit by 2015.
The SR 2010 makes a number of announcements which will be of interest to lawyers advising charities and third sector organisations.
The full impact of the SR 2010 on charities and the wider third sector will not be known until funding cuts have filtered through to local authorities. It seems inevitable that many third sector organisations will not survive sudden cuts in their funding streams. However, the Office for Civil Society is to receive £470 million over the next four years to build capacity within the sector to deliver the government's Big Society agenda, which will include a £100 million Transition Fund.
Charity lawyers will be concerned that cuts to the Charity Commission's budget and resultant job losses will have a negative impact on the Commission's ability to perform its functions efficiently and effectively and about how this will affect their service to clients.
For PLC's wider coverage of the SR 2010, see Legal update, Spending Review 2010: PLC coverage.
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Background to the SR 2010
On 20 October 2010, the Chancellor of the Exchequer, George Osborne, set out the government's four-year public spending plans in its Comprehensive Spending Review 2010 (SR 2010).
The June 2010 Budget set out the overall level of public spending for the four years from 2011/12 to 2014/15. The SR 2010 now sets out the allocation of these resources across all government departments, according to the government's current priorities. The budgets announced for each department are fixed but departments have the power to decide how best to manage and distribute the money within their areas of responsibility.
The June 2010 Budget announced that public spending, and not taxation, was where the most dramatic reforms to reduce the deficit lay, stating that there would be a reduction in public spending of £83 billion by the end of this spending review period (when inflation was taken into account). For more information on the June 2010 Budget, see PLC's landing page, Budget 2010.
This note looks at the areas in the SR 2010 which are likely to be of primary interest to lawyers who advise charities and third sector organisations.
For PLC's wider coverage of the SR 2010, see Legal update, Spending Review 2010: PLC coverage.
Charity Commission funding cuts
The Charity Commission's budget is to be cut by 33% in real terms by 2014/15.
In its statement in response to SR 2010 the Commission anticipates that it will have to reduce staff numbers by about 140 full time employees to meet the funding reductions. Final decisions on restructuring the Commission will follow the strategic review, due to conclude in April 2011. The Commission is to launch a public consultation on its strategic review in the next few days.
Big Society
The SR 2010 puts some more flesh on the government's Big Society strategy, which will be supported by the Cabinet Office, through the Office for Civil Society. New responsibilities and funding which include:
- Civil Society funding. Around £470 million to support the "Civic Society organisations sector", it is not clear what this means.
- Transition Fund. The civil society funding includes £100 million to help charities, voluntary groups and social enterprises make the transition to a tougher funding environment and to work with the government "to build a big society, and make the most of the opportunities it will bring".
- National Citizen Service. To support young people from a mix of backgrounds to develop skills and engage with their communities. Funding 10,000 places in 2011/12 and 30,000 in 2012/13.
- Community First Fund. To support new and existing small organisations in the most deprived areas.
For further details about the Big Society strategy, see Legal update, Government publishes Big Society strategy and consults on improving support for third sector.
Local government funding
The main points of interest for advisers of charities and third sector organisations are:
- Devolution to local authorities. While there will be cuts in funding, there will be a devolution of financial control to local authorities. Grant funding will be consolidated into fewer core grants and ringfencing will be removed from all grants except the simplified schools grant and a new public health grant.
- Working with the third sector. Central government will support local authorities that reform the way public services are delivered, particularly through personalisation of service delivery and the use of the voluntary and community sectors (see Big Society).
For a detailed summary of the implications of the SR 2010 for local government, see Legal update, Spending Review 2010: local government implications.
Public procurement
Along with substantial cuts and the potential sale of various government-owned assets, central government department budget reductions will require a widespread reform of public procurement practices, with a particular emphasis on centralising and rationalising procurement spending.
In particular, the SR 2010 states that the government will look at setting proportions of appropriate services across the public sector that should be delivered by independent providers, including the voluntary and community sectors and by employee spin-outs. Specific developments in this area are likely to follow a government White Paper on the delivery of public services, expected to be published in 2011.
For further details of the implications of the SR 2010 for the central government, see Legal update, Spending Review 2010: local government implications: General implications of the SR 2010 for central government.
Social housing
The government aims to make social housing more responsive, flexible and fair so that more people can access social housing in ways that better reflect their needs.
Announcements of particular interest to lawyers advising social landlords include:
- Funding for social housing is to be cut by 50% from £8.4 billion between 2008/11 to £4.4 billion in the SR 2010 review period.
- Housing associations will be able to charge 80% of market rent to new tenants, with the aim of funding 150,000 new social homes. Increased flexibilities are also likely to mean that fixed-term tenancies may be offered to new tenants rather than "homes for life".
- The National Register of Social Housing is to be reformed as part of work to disband the Tenant Services Authority (for more information, see Legal update, Review of social housing regulation published). This will reduce the reporting requirements on social landlords.
For further details of the implications for the social housing sector, including comment from the chief executives of National Housing Federation and Hyde Group, see Legal update, Spending Review 2010: construction industry implications: Social housing shake-up.
Development aid
The SR 2010 announces that, in order to meet the UK's international commitments to assist those living in extreme poverty, the government commits to spending 0.7% of gross national income on official development assistance (ODA) from 2013. A new Independent Commission for Aid Impact will assess all ODA spending to ensure best value for money and effectiveness.
Other announcements of interest
The following announcements may be of interest to practitioners and their clients.
Arts and culture
The Department for Culture, Media and Sport will reduce overall spending by 24% over the SR 2010 period.
The announcements include the following:
- Arts Council England. Grant in aid to be reduced to £349.4m by 2014/15; a 29.6% cut.
- "Front-line" grant-funded arts organisations and museums. Cuts limited to 15%.
- Sport England. Budget cut by around 30%.
- UK Sport. Budget cut by around 30%.
- English Heritage and Visit Britain. Budget cut by more than 30%.
- British Film Institute. Budget cut by 15%.
- The UK Film Council and Museums, Libraries and Archives. Both abolished.
- National museums and galleries. Free admission retained.
- Tate Modern, British Museum and British Library (Boston Spa). Funding provided for capital projects.
Environment
For a summary of the main environmental announcements in SR 2010, see Legal update, Spending Review 2010: environmental implications.
Education
Key announcements include:
- Capital funding for new schools. Capital spending by the Department for Education is to be reduced by 60% over the SR 2010 period. However:
- £15.8 billion will be available to refurbish and improve the maintained schools estate over four years.
- Over 600 schools from the Building Schools for the Future (BSF) and Academies programmes will be rebuilt or refurbished. It has been reported that this will cost £6 million. The fate of the school rebuilding programme and Partnerships for Schools will not be known until December 2010, when the government completes its review of the Department for Education's capital expenditure.
- Early years. The government will maintain 15 hours of free childcare a week for all 3 and 4 year olds, and extend it to all disadvantaged 2 year olds.
- Sure Start. Sure Start services will be protected in cash terms and there will be new investment in Sure Start health visitors. The intention is to refocus Sure Start on its original purpose, which was to improve the life chances of disadvantaged children through early intervention with those families needing the most support. The government's hope is that reforms to Sure Start children's centres will encourage more community providers to enter the market.
For further detail of the specific implication of SR 2010 for the Department for Education, see Legal update, Spending Review 2010: local government implications: Department for Education.
Health and social care
For a summary of the specific implications of SR 2010 for the Department of Health, see Legal update, Spending Review 2010: local government implications: Department of Health.
Welfare reform
The SR 2010 announced radical reform of the welfare system, in order to bring total welfare savings to £18 billion per annum by 2014/15.
Some of the key reforms are:
- Replacing the means-tested working-age benefits and tax credits with an integrated payment called the Universal Credit.
- A new Work Programme to provide personalised support for those with the greatest barriers to employment. Third sector and private providers are to be paid on the basis of the additional benefit savings they secure, with the aim of delivering higher performance and savings for the taxpayer.
What's next?
Later this year each government department will publish a business plan setting out the details of its reform plans.
Comment
The full impact of the SR 2010 on charities and the wider third sector will not be known until funding cuts have filtered through to local authorities. It seems inevitable that many third sector organisations will not survive sudden cuts in their funding streams.
On the other hand, the announcement of £470 million over the next four years to build capacity within the sector to deliver the government's Big Society agenda, and in particular the £100 million Transition Fund within it, has received a cautious welcome from some in the sector, including the National Council for Voluntary Organisations and the Charity Finance Directors' Group.
Nick Hurd, the Minister for Civil Society, has subsequently been reported in the press as saying that:
- Voluntary organisations with incomes between £50,000 and £10 million are likely to be eligible for grants from the Transition Fund.
- Five partners are being assessed to help deliver the fund, including the Big Lottery Fund and the Community Development Foundation (which is to cease being a quango and continue to operate as charity).
Charity lawyers will be particularly concerned that deep cuts to the Charity Commission's budget and resultant job losses will have a negative impact on the Commission's ability to perform its functions efficiently and effectively and about how this will affect their service to clients.