Not the sector’s Darling on 22 April

May 2009

The chancellor's second Budget on 22 April 2009 held few surprises given the current economic climate.

And despite the lobbying that has come from the sector on issues such as the substantial donor rules, extending the staff hire VAT concession and Gift Aid reform, there was nothing in Alistair Darling's red box this time around that brought overhwelming cheer, apart from, possibly the new hardship fund of £20m for charities delivering front line services. However, various undertakings to conduct further research and consultations on key issues were encouraging, and indicated that the messages have been listened to.

Around 700,000 high earners (more than £150,000 per year) will be affected by a new 50 per cent income tax rate, a cut in personal allowances (£1 for every £2 of income above £100,000, falling to zero for those earning £112,950 or more) and a reduction of the top rate of pension tax relief. It remains to be seen how this will affect donations to the sector from high net worth individuals – there are predictions that the changes will generate more tax exiles.

These changes will be effective from April 2010, just before the next General Election (George Osborne, the shadow chancellor, would not confirm that these changes would be reversed if they got in…). Other ‘highlights’ included:

VAT will return to 17.5 per cent by December of this year from the current rate of 15 per cent.
The government pledged 1.7 billion to support Jobcentre Plus and the New Deal to protect 500,000 jobs.
A £500m package is aimed at restarting work on housing developments that were halted by the adverse economy, with more money being made available for social housing.
All those aged 25 or younger will be given a job or training if they have been unemployed for 12 months or more from January 2010.
Statutory redundancy pay will increase from £350 a week to £380 a week.

Richard Weaver, charities partner at audit firm Haysmacintyre told Caritas:

‘In last weeks’ budget the chancellor yet again made no specific reference to the charity sector. There were however a number of areas that will be of interest to charities in particular the introduction of a hardship fund of £20m, the introduction, following consultation, of a social investment wholesale bank and other specific measures for the funding of those needing assistance to regain employment which may impact on service delivery charities with objectives in this area.

In terms of taxation, the rules regarding the transition back to the 17.5 per cent rate of VAT were not as tight as they were first feared although the disappointment for the sector was that they did not grab the bull by horns and introduce significant reforms to gift aid or substantial donor rules. Further consultation will now be sought.’

A downloadable fact sheet providing more detail is available from the Haysmacintyre website, and the Office of the Third Sector has an information section on their site which provides more detail of support initiatives arising from the Budget.

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Not the sector’s Darling on 22 April