In his Spring Budget speech, the Chancellor praised the brilliant work that third sector organisations are doing to help people in need. Will the additional funding for charities be enough to fill the financial gaps of struggling charities?
Extra funding for charities and not-for-profits
Jeremy Hunt’s speech highlighted charities’ role in helping people navigate the cost-of-living pressures. He announced over £100 million of support for local charities and community organisations. In addition, £10 million will be made available for a grant fund for suicide prevention VCSE organisations in England across 2023-24 to 2024-25. This will support people experiencing suicidal thoughts or approaching a mental health crisis.
Funding to charities will be targeted towards those organisations most at risk, due to increased demand from vulnerable groups and higher delivery costs, as well as providing investment in energy efficiency measures to reduce future operating costs.
The Chancellor also committed £63 million over two years for public swimming pool providers to help with immediate cost pressures and make facilities more energy efficient.
Charitable tax reliefs: soon restricted to UK charities and CASCs
The Government will change the tax definition of a charity and of Community Amateur Sports Clubs (CASCs), restricting charitable tax reliefs to UK charities and CASCs. For charities, this will mean that only those which come within the jurisdiction of the High Court in England, Wales or Northern Ireland, or the Court of Session in Scotland, will qualify for tax reliefs. For CASCs, it will change the location condition so that the CASC must be based in the UK and provide facilities for eligible sports in the UK.
This took effect immediately for organisations that have not previously qualified for charitable tax reliefs. For those that have qualified for tax reliefs before 15 March 2023, there will be a transitional period until April 2024, during which they will still qualify for reliefs. From April 2024, all non-UK charities and CASCs will no longer be eligible for UK charitable tax reliefs. This measure is expected to raise tax revenues by £5m in 2024-25 and by £10m in subsequent years.
Impact of the Spring Budget announcements on the charity sector
The additional funding has primarily been targeted at supporting local frontline charities in meeting the increased demand on their services. This is urgently needed and welcomed by the sector. However, many other charities are also navigating financial challenges and will not receive extra cash.
The OBR forecast predicts that the economy will grow faster than previously anticipated and falling inflation will help charities manage their costs and their forecasts better. However, with standards of living still expected to be worse than before the pandemic, charities are unlikely to see the demand on their services decline and will need to continue investing in their fundraising efforts to mitigate funding shortfalls.
Despite enthusiastic support for the additional funding provided to charities, the charity sector’s reaction to the Spring Budget was mixed. While the extension of the fuel price guarantee will help the most vulnerable people get through the next months, the measures fail to address the causes of poverty and more funding is needed to help charities support those in need where public services are lacking.