The Charity Finance Group has warned that a number of councils are considering cutting discretionary business rate relief for charities, after a Kent-based local authority decided to cut the relief for some good causes as part of its efforts to save money.
The Conservative-led cabinet at Medway Council this week voted to end the council’s policy of offering all charities in the area 100 per cent relief on their business rates, although the decision is being challenged by the council’s Labour group.
Charities currently receive a mandatory 80 per cent relief on their business rates – which, according to the Charity Tax Group, was worth £1.56bn to charities in 2015/16 – with councils left to decide whether to offer local charities a further discretionary relief of up to 20 per cent.
Medway council’s new policy means that only those charities that work with children, the elderly, the disabled and vulnerable members of society will receive 100 per cent relief from business rates.
The discretionary relief available for animal charities will fall by 30 per cent and charities that cover the arts, entertainment, leisure and private education will see their discretionary relief fall by 50 per cent.
The council confirmed that charity shops and cafés and heritage and regeneration charities would receive no discretionary business rate relief.
The council estimates that the move would save about £200,000 of the £300,000 it currently spends on discretionary rate relief for charities. The new rates policy will be implemented from 1 April.
Andrew O’Brien, head of policy and engagement at the CFG, said a number of councils across the country were contemplating similar cuts to discretionary rate reliefs.
He said: "At a time when funding is tight, discretionary rate relief is of critical importance to many charities and can make the difference between operating a service and closing it down.
"Although councils are having their budgets cut, it is a false economy to cut back on support for the charity sector, whose services and interventions help to save councils far more money in the long term than they cost."
A spokeswoman for Medway Council said its Labour group, which is the main opposition on the council, was due to call in for reconsideration the decision on business rates.
Rupert Turpin, a Conservative councillor and the Medway Council cabinet portfolio holder for business management, said: "We are at a time where any authority is having to make increasingly tough decisions. It should also be considered in the context that there is provision for any charity to appeal the change based on hardship."
He said total business rate relief in Medway would still account for more than £8m a year, with many charities still paying no business rates at all.