The Spending Review and Autumn Statement 2015 – A few thoughts

Autumn statementWell, the Spending Review and Autumn Statement have now come and gone, and the more dire predictions many were making seem not to have come true. Once again, one suspects, George Osborne deliberately allowed (or even stoked) speculation about how bad things were going to be so that he could treat the announcement of cuts he wasn’t actually going to have to make as unexpected good news. He certainly seems to have learned the lessons from 2012’s “Omnishambles” Budget when it comes to managing expectations.

 

So where did charities and the voluntary sector figure in all this? If you want an overview of all the announcements that affect charities, I recommend this blog by my colleague Steve Clapperton. What I want to do here, however, is just pick up on a couple of points in more detail.

 

  1. Fines, VAT and the tombola largesse of government

I’m beginning to get really exasperated by the growing trend for every Budget announcement and Autumn Statement to include a roll call of individual charities earmarked to receive money from government imposed levies and taxes (such as LIBOR fines and the plastic bag charge). The newest example of this is the announcement that the VAT currently raised on sales of women’s sanitary products (the so-called “tampon tax”) is to be used to fund charities addressing women’s causes.

 

Whilst one the one hand any money going towards charitable causes (particularly ones as woefully underfunded as domestic violence and other women’s issues) is welcome, I still have a number of problems with this kind of approach.

 

  • It is intellectually dishonest:

The language used when talking about these giveaways is always carefully tailored to suggest that the government is somehow going to be taking the tax or fines collected in a particular way and then allocating them to specific charities. But this really is not how taxation works, as the detail of the announcement on the tampon tax makes clear: “The government will also set up a new fund equivalent to the total amount of VAT paid on sanitary products to provide additional support to women’s charities over the course of this Parliament, or until the UK can apply a zero rate of VAT for sanitary products.” I.e. this is actually just public spending, rather than hypothecation of tax.

 

Robin_shoots_with_sir_Guy_by_Louis_Rhead_1912If the government feels that levying a tax or fine is justifiable in the first place, then surely it should be willing to accept responsibility for spending it? It always seems a bit of a cop-out to me to claim that they are giving the money away to charity, rather than simply backing the decision to impose the charge and then spending the resulting income in the same way as any other bit of Exchequer revenue, as it suggests that charities are being used as a shield to deflect any potential criticism.

 

Now by all means spend public money on supporting charities, on the basis that there is a public interest in maintaining a vibrant and healthy civil society (after all, to my mind that is the justification for tax reliefs such as Gift Aid), but make it clear that is what you are doing. Don’t instead try to craft a narrative designed to make the government look like some sort of Robin Hood in order to obscure the fact that you are raising money through taxation or fines.

 

 

  • It picks winners (but how?)

Apart from the distinctly shaky theoretical basis for handing over fines and taxes to individually named charities, there is the more pressing question of who decides which charities actually get the money. If there was any suggestion of some kind of strategic grantmaking approach, or a fair and open application process, that would be one thing. But the reality instead appears to be a totally opaque mishmash of personal preference and happenstance based on (as far as I can see) factors including:

How much popular support the cause has (hence the massive prevalence of military charities and causes commemorating famous historical events)Boycott2

Whether the cause is supported by a backbench MP or other potential critic (this may also explain the support for the Evening Standard’s charity campaign…)

Physical proximity to The Chancellor/Involvement of a celebrity (e.g. the recent intervention by ex-cricketer Geoff Boycott which resulted in £1m for the Yorkshire Air Ambulance)

 

As an illustration, the list of charities included in today’s announcement includes: Guide Dogs for Military Veterans, Direct Skeletal Fixation, SkillForce, Care After Combat, The Jon Egging Trust, Invictus Games, Alabare Christian Charity, NOW, The Commonwealth War Graves Commission, The Victoria Cross Trust, The Mary Seacole Memorial Statue Appeal, The Tavistock Square Memorial Trust, The Royal Marines Museum, The National Army Museum, The D-Day Museum Portsmouth, The Bentley Priory Battle of Britain Trust, The Winston Churchill Memorial Trust and The Hooton Park Trust.

 

It is certainly hard to discern any obvious strategic approach in there.

 

 

  • It politicises charity

I’m sure the charities that receive the money from these fines and taxes are grateful for the additional funding (LIBOR fines, after all, are going to produce £25m for charities over the next 3 years, according to Treasury estimates, which is not to be sniffed at), but it does place them in a potentially awkward situation. In much the same way as charities accepting money from donors who are morally questionable in some way (a problem I have covered here), these charities need to be careful that their good reputation and the public trust they have worked for is not compromised by their involvement in issues which carry some degree of political risk.

 

 

  • It replaces actual voluntary sector policy

The other worry is that giving money away to a named list of worthy organisations allows the government to sidestep criticism that is failing to address the wider policy issues facing charities because its spokespeople can always turn around and say “it’s not true that we are doing nothing for charities – in fact, here is a long list of the specific charities that we are helping…” It should not be seen as sour grapes on the part of the vast majority of charities who are not going to benefit from LIBOR fines etc. to point out that dishing out this money is not a substitute for a coherent policy approach to the voluntary sector.

 

 

2) Social Impact Bonds: sprinting before we walk?

 

I also noticed that in the course of skirting round the exact size of the budget cut to the Office for Civil Society, it was announced that they would also be “expanding support for Social Impact Bonds, providing £80 million of the £105 million total across government over the Parliament.” Now some of that is money that we already knew about, but at least £20m appears to be new money as well. This suggests that the government’s enthusiasm for SIBs has not noticeably diminished.

 

Toddler_running_and_fallingThis is potentially a cause for concern for two reasons. Firstly, despite the fact that SIBs remain an interesting and innovative approach to funding innovation in certain types of public services, there are reasons to be cautious about their long-term viability. For instance, they are only viable in quite a narrow set of circumstances and they are also expensive to set up and maintain. Furthermore, the results coming in from the few SIBs that have been going long enough to report any are mixed at best: the flagship Peterborough SIB here in the UK failed to hit its first round of targets, while the Goldman Sachs-backed Rikers Island SIB in the US has been ended early due to its failure to deliver the required outcomes.

 

The other reason one might be concerned is that SIBs often get referenced as one of the elements of the government’s policy approach to supporting charities and the voluntary sector. Yet SIBs are not relevant for the vast majority of organisations, and in all likelihood never will be. Even within the social investment market, SIBs are at the complex and esoteric end of the spectrum, when what most organisations actually want is fairly straightforward repayable finance (I have written more about this here). The worry is that the enthusiasm of Ministers and officials for SIBs results in increased spending on them, despite the known concerns, at the expense of more traditional funding for charities.

 

There are obviously a whole host of other questions that need to be answered in terms of what the changes in the Autumn Statement mean for charities – not least when it comes to the new powers for Local Authorities and what this will mean for the voluntary sector. However, the growing trend of using charity giveaways to dispose of public money and the increasing pace at which Social Impact Bonds are being touted as a mainstream policy solution are threads that have run through the Chancellor’s last few Budget and Autumn Statement announcements, so we should be aware of the problems they pose.

 

 

Rhodri Davies

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