When the Chancellor stood up to present his Budget today, he made clear his appetite for “reforms that strengthen our society, as well as strengthening our economy”. Having been Culture Secretary, Health Secretary and Shadow Minister for Disabled People over a 14-year frontbench career, he has certainly had far greater exposure than many of our previous chancellors to the more ‘social’ side of government – and how society and our economy are intrinsically interlinked. That seemed to run as a theme throughout his speech, far more strongly than in any speech by his predecessors - as did the role of charities and the wider social sector.

Indeed, for the first time since George Osborne wielded the iconic red box, the social sector’s role in supporting families through difficult times was clearly acknowledged in a Budget speech. Jeremy Hunt explicitly recognised that charities “can often reach people in need that central or local government cannot”, and he put money in place to back that sentiment up.

Cash for charities

In the most significant step for the sector since the government’s emergency Covid package in 2020, the Chancellor announced that £100 million of funding will be made available to charities and community organisations which help vulnerable people, to support them to meet demand. Details are still to emerge about how that money will be distributed, but DCMS has stated that around three-quarters of the funding will be used to deliver grants “targeted at those frontline charities and community organisations most impacted by increased demand for their services from vulnerable people and increased delivery costs”, while the remaining quarter will go to fund “measures over the next two years to increase the energy efficiency and sustainability of voluntary, community and social enterprise (VCSE) organisations”. DCMS added that “this could include new boilers, heat pumps and insulation allowing them to deliver more efficient services for vulnerable individuals.”

This follows the allocation of Dormant Assets Scheme funding to help charities to achieve the latter goal – which was originally announced as £31mn but has been downgraded to £20mn after an additional apportionment was given to Big Society Capital to distribute more generally as blended finance.

Helping charities to improve their energy efficiency is critical, as our research undertaken in partnership with Nottingham Trent University sets out. In December, energy costs were the third highest concern for charities, and over four in ten charities which pay for their energy bills directly reported having experienced a rise in energy costs in 2022. Of those, over half reported that their energy bills had increased by 50% or more. As DCMS helped to shape this research, PBE is delighted to see the findings influencing not only the Dormant Assets funding and today’s £100mn announcement, but an additional £63mn for community leisure centres with swimming pools and some smaller measures, such as a planned consultation on whether to reform VAT relief on the installation of energy saving materials on buildings used for charitable purposes. This reflects the research’s crucial finding that a third of charities which pay for their energy do so through their rent.

There were also small pots of additional funding made available for veterans, suicide prevention charities, and the extension of enhanced tax relief for theatres, orchestras, museums and galleries.

A more challenging context

However, this additional public spending and tax relief will not in itself make up for the significant real-terms funding shortfall that the charity sector is experiencing. With a net balance of a quarter (26%) of charities reporting that they expect their financial position to deteriorate this quarter, and 55% of charities using their reserves to meet costs, there is still a serious financial situation within the charity sector. Based on today's OBR figures, PBE projects that the charity sector will experience a real-terms income drop of £800mn between 2022/23 and 2023/24.

This real-terms income fall is set against a worrying backdrop for charity sector demand. Before Christmas, 71% of charities PBE surveyed with Nottingham Trent University reported that demand for their services had increased and half (49%) were concerned that they would not meet demand over winter.

There were signs today that things may be improving, but not at any great pace. Driven largely by a sharp reduction in global gas prices, the OBR presented a brighter economic outlook for the coming years than the one set out in November. The previously anticipated sharp recession is now transformed into a shorter and shallower downturn, with more rapidly falling inflation, a lower spike in unemployment and a better fiscal position for the government.

Yet in truth the overall picture is less one of renewed optimism and more one of reduced pessimism. Most crucially for households, the OBR made it clear that the squeeze on living standards – while nearing its turning point – remains in place for the moment. Disposable household income is set to continue falling in the first part of 2023, reaching a low that is almost £1,700 per person (or 7.6%) down on the pre-pandemic peak. While the OBR expects things to improve in the second half of the year, it’s notable that average incomes are projected to still fall short of the pre-pandemic level by the end of the forecast horizon in 2027-28. Despite the better news today, it remains the case that the UK has not yet reached the end of a two-year decline in incomes which is the sharpest since records began in the 1950s.

A Budget for jobs

One of the core parts of the Chancellor’s plan to turn the economy around in the long-term is a multi-pronged approach to get inactive and otherwise unemployed people into work. This includes older workers through ‘returnerships’, midlife MOTs, and pensions changes; parents through a significant expansion of childcare provision; the long-term sick and disabled people through changes to welfare and a range of additional support programmes; and young people through an extended Youth Offer.

The charity sector has a major role to play in this jobs plan. As PBE set out earlier this week, charities are notably better at employing women, older people and people with disabilities than the rest of the economy. A range of charities provide employment and training schemes which are proven to be impactful for these groups, and volunteering can also make a difference to the chances of inactive individuals moving into work.

Some elements of the Chancellor’s job plan attempt to make use of the expertise the charity sector has to offer. A number of the schemes – including a pilot ‘WorkWell’ programme on integrated work and health support for job seekers and benefits claimants, a Musculoskeletal Hub programme and the Youth Offer – try to bring together local authorities, community services and health services to solve problems collaboratively. The promise of an additional £239mn in funding for wrap-around childcare could also be a major boost for relevant charities, as the Department for Education suggests that 54% of after school care is provided in partnership with the voluntary, community and private sector. And the expansion of the Staying Close programme which supports care leavers to remain in their local authorities, the expansion of the employment support programme for Ukrainians, and the chance to receive subsidies to improve organisational occupational health all also provide small opportunities for specific charities.

All this, of course, stands in the context that some of the changes to welfare and disability will be extremely concerning to charities that support certain groups, and disabled people’s organisations in particular.

Is this a sign of things to come?

As the Law Family Commission on Civil Society set out, charities have been undervalued and overlooked for a very long time. Today’s Budget might have marked a change in that status, with the welcome recognition of the charity sector’s role in supporting people, and the many ways the Budget presented for charities to contribute to getting people into work providing opportunities for the sector to demonstrate how vital it is to economic, as well as social, progress. However, there is much more to do before the sector is seen as an equal partner to the private and public sectors, with the valuable part it plays in growth understood alongside appreciation for its role in campaigning for change.

In their press release on today’s developments, DCMS stated that “charity and community organisations are often the closest to vulnerable communities and individuals. With government support, they played a vital role in supporting people during the pandemic, and will again be crucial in helping communities and households during this difficult period.” The lessons of the pandemic provide many lessons for the sector - with good data, collaboration across the sector and a strong voice undoubtedly key to achieving that equal footing.