Written by Madison Kerr, Economist and Tia Manavis, Communications and Marketing Officer at Pro Bono Economics 

At yesterday’s Budget, the Chancellor set himself three challenges. First, how to help the country continue to weather the storm. Second, how to begin the work of restoration once we’re allowed to emerge from the proverbial storm shelter. And third, how to pay for it all.

In doing so, the Chancellor made some big choices, some hard choices and some choices of variable popularity.

Eggs in the Private Sector Basket

The incredible work being undertaken by the NHS, the military and the volunteer ‘jab army’ has offered the prospect of a more rapid recovery for the UK than previously thought. To provide what rocketboosters he can to that recovery, the Chancellor has extended and expanded many of the measures which have kept businesses afloat to date: loans, re-opening grants, VAT cuts, business rates relief, sick pay clawback, targeted support and furlough – the full private sector check list (corporation tax hike aside).

And to secure that recovery, he has pulled on the three key levers of productivity to various degrees. First and foremost, infrastructure investment will be encouraged through unprecedented plants and machinery tax cuts, and directed through a range of transportation and green initiatives. Second, innovation will be encouraged through a future fund. Third, skills got a look in through apprenticeships schemes, a review of immigration rules and business training. Again, all three of those tracks are top priorities for businesses and the Chancellor made sure to check all three boxes.

Gambles in sharp relief

This comprehensive support for businesses makes the contrast in the Chancellor’s approach to other sectors more stark: the private sector was mentioned at a rate of 10:1 compared to charities, education and health services combined. Having cut public sector spending by £10billion in the Autumn Statement, the Chancellor has doubled down and trimmed another £4billion from departmental expenditure. With the NHS, schools, defence and aid (at its reduced level) protected from this, greater savings will be needed from unprotected areas like the courts services, prisons and local government. And, of course, while the hard-hit hospitality, leisure, retail, sports and culture sectors have received multi-billion-pound promises of targeted support, charities cannot expect the same.

There are a number of gambles implicit in this approach. The main one of those is that the Chancellor is betting on getting people back to work being enough to sufficiently reduce demand on public and charitable services, with the option to change tack further down the line once he’s given the private sector a chance. But that means also rolling the dice on the public and charitable sectors being able to continue stumbling along as they are now, until that demand diminishes.

Civil Society Shout Outs

The budget did provide additional funding to a few causes that are very much welcomed by the charity sector and broader civil society. The Chancellor allocated £10 million towards organisations increasing veteran's mental health, to be delivered through the same charity which distributed a range of Covid grants. This is welcome investment, with PBE’s work with Veteran's Aid and Walking with the Wounded showing that there were significant economic benefits associated with helping veterans attain employment, housing and improved mental health. In addition, the budget gives £19 million towards addressing domestic violence, much of which will likely be distributed through VCSE organisations.

But these are just two of the causes that the government decided it was important to provide additional funding to in April 2020. Charities supporting loneliness and mental health, homelessness, vulnerable children, survivors of modern slavery, and those providing legal and citizens advice and meals were assigned ring-fenced funds in the £750million charity fund but were left out of the Budget – and those which did not get assigned ring-fenced funding even last Spring, such as those supporting the disabled and refugees continue to get no specific look in. This speaks to a fundamental question about how government makes decisions about the charity sector and the causes charities support, and specifically the data (or lack thereof) they are using to make those choices.

Levelling Up Begins

Overall, of the £65 billion announced, £370 million focused on community assets, £319 million focused on cultural assets, £328 million focused on grassroots sports, and £29 million is likely to be spent directly by frontline charities. But the £4.2 billion Levelling Up Fund creates the potential for much more, with community infrastructure and cultural investment two of the three key themes for first-round investment.

The government takes welcome pains to make a nod towards both economic and social development and towards the health and wellbeing of local people as important priorities for cultural investment in particular, and states that social value is an acceptable measure of value for money. With the Levelling Up Fund driven by local communities, this creates significant opportunities for local civil society to take the reins and bid for projects that make the most impact to their areas. It only remains to be seen whether allocations will meet those intentions, and whether small charities can make enough of an impact on local bids.

Will a jobs-based recovery be enough?

The Chancellor’s laser focus on jobs and investment has been nuanced to take account of regional inequalities, and by providing additional funding for apprenticeship programmes the Chancellor has also partially acknowledged the disproportionate impact of Covid on young people’s job prospects. However, the rest of the approach set out yesterday is relatively broad-brush. Gender equality, for example, has not significantly featured, despite the disproportionate risk jobs held by women may not come back. 

Additionally, while jobs have been one victim of the economic crisis, they are not the only metric for a successful recovery. Household incomes, having fallen by £300 on average so far, are expected to flatline through 2021 and only recover to pre-pandemic levels in 2023. Living standards will be similarly sluggish. And little the Chancellor said yesterday recognises the social scarring the pandemic has created. The OBR has highlighted its concerns that the government hasn’t accounted for new funding required to tackle backlogs in the NHS or intensive catch up support for pupils falling behind. And the widening gaps in social mobility, the mental health crisis and rising debt cannot be solved by jobs alone. That means the moment that the Chancellor has to reconsider his approach to public services and social sector funding may come more quickly than he expects.