Liam Kay: A clean Brexit would be a murky affair for charities

The Charity Finance Group was brave to argue for leaving the single market and the customs union, but it's not clear that this is the best option for the charity sector, says Third Sector's senior reporter

Liam Kay
Liam Kay

Given the current uncertainty around Brexit and the perceived political leanings of the charity sector, it takes a brave organisation to stick its head above the parapet and set out a case for a "clean" Brexit, otherwise known as a hard Brexit.

Yet this is what the Charity Finance Group has done this week. Its report A Brexit that Works for Everyone has set out the charity sector case for leaving both the single market and the customs union, citing benefits such as freedoms on tax policy, state aid and procurement. For many remainers, it will have been a shock to see a charity membership body take such a position.

But the CFG has probably taken a realistic approach to how negotiations with the EU are likely to pan out. It is highly unlikely that any deal that sees the UK stay in the single market will come with enough caveats and opt-outs to benefit the charity sector on issues such as VAT. And given that the leaders of both the Conservatives and Labour have said they favour leaving the single market, a clean Brexit still looks the most likely option.

But is it really the best option for charities, especially when, as the CFG states in the report, poor economic performance after Brexit "would outweigh many of the potential benefits of a clean Brexit"?

There has been a lot of debate on the eventual economic impact of Brexit, and the majority view among economists has leant towards a weaker UK economy and currency.

The CFG report fails properly to factor in the economic consequences of actually achieving a clean Brexit. The bold assertion that more funds would be available to support charities after a clean Brexit is hard to justify given that a weaker UK economy would inevitably lead to a fall in donations and further cuts in public spending.

The CFG also hopes that leaving the EU would give the UK government the freedom to address the charity sector’s long-standing gripe of irrecoverable VAT, which currently costs the sector £1.5bn a year. But a government in charge of a faltering economy is hardly likely to start handing back such large sums.

Charities have benefited from the EU. For example, health charities and scientific research benefit from EU research funding. The British Heart Foundation says that from 2007 to 2013, the UK contributed €5.4bn towards European research and development, and UK research and development received €8.8bn.

The National Council for Voluntary Organisations also remains unconvinced of the merits of a clean Brexit. It says that the "biggest threat to charities would be a diminished economy", and it is hard to see how charities can consider the benefits of Brexit without considering the substantial risks posed by the knock-on effects from short and long-term national economic malaise.

It is important to have this debate: a clean Brexit is an option and is something the charity sector will have to examine in detail, but it is far from clear at this stage whether it is the best option.

Liam Kay is senior reporter at Third Sector

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