Charities react to the budget

Reaction to today's budget from the charity sector's main umbrella groups has been mixed.

The £80m investment in grassroots community organisations was widely welcomed. Changes to community investment tax relief and empty building tax relief were also applauded.

However, the Chancellor's announcement that he was going to work with the sector to increase the take-up of Gift Aid was not universally welcomed.

Charities were also concerned about the income tax cut, which is likely to reduce the amount of Gift Aid that some charities are able to claim on donations.



Navca chief executive Kevin Curley welcomed the £80m investment in community organisations. "In recent months local voluntary groups have lost their Community Chests, their Single Regeneration Budget pots and had most of their applications to the Big Lottery Fund's Reaching Communities fund rejected because the £100m it set aside was far too little to meet the needs," he said. "At last there is some good news.

"It is of course a very small fund: just £20m each year. But Navca members will be able to use it to lever more grant aid out of Local Strategic Partnerships and Local Area Agreements in those areas where the local council understands what the sector needs."

Institute of Fundraising

Megan Pacey, director of policy and campaigns at the Institute, also welcomed the £80m investment. "The Chancellor's ongoing commitment to tax-effective giving – particularly in its championing of Gift Aid – is also heartening," she added.


Policy officer Mubeen Bhutta said the NCVO had made the case for more funding for small community organisations. "In our responses to the Third Sector Review we pressed for a small grants programme to support local groups' voice and advocacy work, and we look forward to further details on how this fund can make this a reality," he said.

Charity Finance Directors' Group

The Charity Finance Directors' Group said it was "slightly disappointed" that many of the key demands it made in a pre-budget document with Acevo had not been met. Those demands included the abolition of irrecoverable VAT, a relaxation of the rules governing charity trading and the introduction of an assumption that charitable donations should be Gift-Aided unless expressly stated otherwise.

"Overall, the budget doesn't look particularly strong," said a spokeswoman. "It is good that the Government is going to be working with charities on Gift Aid, but charities are going to be hit by the cut in the basic rate of income tax from 22p to 20p. That amounts to an 11 per cent drop in Gift Aid income."

Charities Aid Foundation

Concern about the income tax cut was echoed by CAF, which said in a statement: "Charities currently reclaim around £625m each year at the current basic rate of income tax: a reduction to 20 per cent could see this fall to £554m. And while this will create additional income for the public, charities will have to call on their donors to help make up the shortfall."

However, the statement also acknowledged that the UK already enjoys one of the most favourable environments in the world for charitable giving.

"Charities consistently fail to reclaim the tax that's currently available to them because they believe it's either too costly, too complicated, or they simply don't understand the rules," it said. "As a consequence, about £700 million goes unclaimed by charities every year on donations that could so easily be converted to Gift Aid. So we very much applaud the commitment from Gordon Brown to help charities to make the most of Gift Aid."

Charities Tax Reform Group

The Charities Tax Reform Group welcomed the changes to benefits for charity donors and on empty building tax relief. But it agreed that the loss of Gift Aid income was likely to result in the budget still being "met with a groan" by charities.

"The Government has long said that it prefers giving tax concessions to encourage giving to charities rather than the VAT relief the sector needs to enable it to play a full part in public service delivery," said director Helen Donoghue. "The impact of the 2 pence cut in income tax shows the real flaw in the Chancellor's arguments: yet again, charities will be the losers."

Community Development Finance Association

On the changes to community investment tax relief, Sarah McGeehan, deputy chief executive of the Community Development Finance Association, said: "Community investment tax relief is yet in its infancy and the use of it to date has merely grazed the tip of the iceberg regarding prospective sector investment. We look forward to working with the Treasury and HMRC to develop this instrument."

Social Enterprise Coalition

Meanwhile Social Enterprise Coalition chief executive Jonathan Bland welcomed the commitment to investigate the reasons for low levels of equity investment in social enterprise. "We will be working with government on taking this forward and hope that progress on enhancing the community investment tax relief model is made as soon as possible," he said.

"Money is the motor of all business and a lack of suitable investment is currently stopping social enterprises from realising their full potential as dynamic and sustainable businesses."

Bland also welcomed the increased flexibility given to community development finance initiatives. "This will hopefully boost the role of community development finance initiatives in being able to provide finance to social enterprises," he said.

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