Find out about key points for the not-for-profit sector following its publication.

General backdrop

This is a Budget that puts security first and lays great emphasis in particular on economic security, but for who exactly? What the Chancellor gives, the Chancellor takes away; although a headline grabber is the move to a ‘national living wage’, there is still great concern that the lowest paid will not be better off because of changes to child tax credit, and a slew of other welfare reforms. Analysis of their cumulative effect will emerge, but many commentators say low income families will be very badly affected. A new Welfare Bill is being published which will give all the detail.

The new national living wage will undoubtedly have an impact on what are seen as low pay sectors, social care being one of them. It will give much cause for thought and discussion among commissioners and providers alike, and will surely have implications for the Shaping Hampshire budget planning that has been out for consultation. Charities are not going to benefit from the ‘softener’ of a reduction in corporation tax to make the new rate easier to deal with.

George Osborne is still planning a budget surplus, but this will be a year later than previously forecast. £12 bn will come off the welfare bill by 2019-20 and £5 bn by 2019-20 is to be saved from tackling tax avoidance and tax planning, evasion and compliance, and imbalances in the tax system.

In the autumn Spending Review, the government will set out plans to deliver an additional £20 bn of consolidation measures required to achieve the surplus, which is when we’re likely to hear more about reductions and savings required from local authorities which exposes social care to more reductions. However, we do know that government will provide funding to stick with 1% public sector pay rises for the next four years; it expects pay awards to be applied in a targeted manner within workforces to support the delivery of public services. But even here in Hampshire we have heard of councils saying they have to offer more because they are unable to recruit.

Key points

Employment

  • New mandatory national Living Wage: “Britain deserves a pay rise,” says the chancellor, announcing a new national living wage. This is a clever bit of rebadging, moving away from the National Minimum Wage with all its connotations of a rock bottom wage. Instead we progress to what is now called the National Living Wage. It is supposed to be £9.00 per hour by 2020 for people 25 and older, and will kick off next April at £7.20 an hour, falling short of the current living wage rate set by the Living Wage Foundation which is already at £7.85. The government will ask the Low Pay Commission (LPC) to set out how the new NLW will reach 60% of median earnings by 2020. (Based on the OBR’s earnings forecasts, it is anticipated that the NLW will reach the government’s target of over £9 by 2020 – but the OBR also warns of possible job losses.)
  • Alongside the Budget, the government has published a new remit for the LPC. To ensure that the rate of the NLW is set at a sustainable level and continues to take account of broader economic conditions, the LPC’s remit will require it to set the NLW in a way that reflects the growth in median earnings. The LPC’s remit in relation to the National Minimum Wage (NMW) will remain unchanged, and the wages of younger workers will continue to be underpinned by the core NMW.
  • Income tax allowance goes up to £11,000 from next year. The government has an ambition to increase the Personal Allowance to £12,500 by 2020, and a law will be introduced so that once it reaches this level, it will always be set at least at the equivalent of 30 hours a week on the NMW. This will ensure that those working up to 30 hours on the NMW will not pay income tax in the future.
  • From April 2016, the government will increase the National Insurance contributions (NICs) Employment Allowance from £2,000 to £3,000 a year. The Employment Allowance gives businesses and charities a cut in the employer National Insurance they pay.

Welfare

  • The £26,000 cap on benefits will be reduced to £23,000 in London and £20,000 elsewhere
  • Working-age benefits, including tax credits and Local Housing Allowance, will be frozen for 4 years from 2016-17 (this doesn’t include Maternity Allowance, maternity pay, paternity pay and sick pay)
  • Support through Child Tax Credit will be limited to 2 children for children born from April 2017. Any subsequent children born after April 2017 will not be eligible for further support. This will also apply in Universal Credit to families who make a new claim from April 2017.
  • In addition, those starting a family after April 2017 will no longer be eligible for the Family Element in tax credits. The equivalent in Universal Credit, known as the first child premium, will also not be available for new claims after April 2017. In Housing Benefit, the family premium will be withdrawn for new claims from April 2016.
  • From April 2016, the government will speed up the rate at which benefits are withdrawn as earnings increase. Currently income has to reach £6,420 before tax credits start to be withdrawn, but a reduction in tax credits will start at a new threshold of £3,850. The equivalents in Universal Credit (work allowances which determine the amount of income ignored when people are in work) will be reduced to £4,764 for those without housing costs, £2,304 for those with housing costs, and removed altogether for non-disabled claimants without children.
  • The disabled child premia in tax credits and UC will continue to be paid to all children with a disability.
  • Removal of automatic entitlement to housing benefit for 18-21 yr-olds, with a new earn to learn focus, the Youth Obligation. Those aged 18-21 who are on Universal Credit will have to apply for an apprenticeship or traineeship, gain work-based skills, or go on a work placement 6 months after the start of their claim. There will be exemptions, including for vulnerable young people, those who may not be able to return home to live with their parents, and those who have been in work for 6 months prior to making a claim, who will continue to be able to receive housing support for up to 6 months while they look for work.
  • From April 2017, new claimants of Employment and Support Allowance (ESA) who are placed in the Work-Related Activity Group will only get the same rate as those claiming Jobseeker’s Allowance, alongside additional support to help them take steps back to work.
  • State pension triple lock is protected; other benefits for pensioners including the Winter Fuel Allowance and free TV licences for over 75s will be protected in this parliament.
  • Statutory payments, including Maternity Allowance, Maternity Pay, Paternity Pay and Statutory Sick Pay will continue to be indexed by CPI.
  • Disability benefits will also continue to be indexed by CPI, including Personal Independence Payment, Attendance Allowance, Disability Living Allowance and Employment and Support Allowance (Support Group).
  • Currently, those who receive benefits to help to pay their mortgage interest are able to do so indefinitely with no need to pay anything back. Now the Support for Mortgage Interest scheme is to be converted into a loan, so that homeowners repay the financial support they receive.

Housing

  • Rents in social housing sector will be reduced by 1% a year for the next four years, requiring housing associations and local authorities to deliver efficiency savings.
  • Pay to Stay: local authority and housing association tenants in England who earn more than £30,000 – or £40,000 in London – will have to pay up to the market rent – sounds like a good incentive to take advantage of right to buy. Local authorities will repay the rent subsidy that they recover from high income tenants to the Exchequer, contributing to deficit reduction. Housing associations will be able to use the rent subsidy that they recover to reinvest in new housing. The government will consult and set out the detail of this reform in due course.
  • The government will review the use of lifetime tenancies in social housing to limit their use and ensure that households are offered tenancies that match their needs, and ensure the best use is made of the social housing stock.
  • Reduced tax relief for landlords: currently, individual landlords can deduct their costs – including mortgage interest – from their profits before they pay tax, giving them an advantage over other home buyers. Wealthier landlords receive tax relief at 40% and 45%. This tax relief will be restricted to 20% for all individuals by April 2020.
  • In addition, from April 2016, the ‘wear and tear allowance’, which allows landlords to reduce the tax they pay (regardless of whether they replace furnishings in their property) will also be replaced by a new system that only allows them to get tax relief when they replace furnishings.
  • To help councils protect the most vulnerable housing benefit claimants, the government will provide £800m of funding for Discretionary Housing Payments over the next 5 years.
  • The government will increase the Rent-a-Room relief from £4,250 to £7,500 a year from April 2016, allowing individuals who rent a room in their main residence to do so tax free on income up to £7,500 to reflect increases in rent.

NHS and care

  • The government commits to fully fund the NHS plan which called for £8 bn more by 2020-21. This additional funding comes on top of the £2 bn announced at Autumn Statement 2014.
  • The government will set up a £3m fund to encourage innovative approaches including refuge provision to help those suffering from domestic abuse. Ahead of the Spending Review, the government will draw together evidence from frontline professionals to review how services for victims of violence against women and girls are funded and delivered and feed into a refreshed Violence Against Women and Girls strategy in the autumn.

Other

  • The usual pay out from Libor fines to military charities and other good causes. The largest portion of the money – £50m – will be spent on a Cadet Expansion Programme to increase the number of cadet units in state schools to 500 by 2020. The Children’s Air Ambulance service will get £2m.
  • A levy on large employers to fund 3 million new, high quality apprenticeships during the course of this parliament
  • The government is exploring options to move the Green Investment Bank into private ownership.
  • Devolution: the government is working towards further devolution deals with the Sheffield City Region, Liverpool City Region, and Leeds, West Yorkshire and partner authorities, to be agreed in parallel with the Spending Review. It also intends to support towns and counties to play their part in growing the economy, offering them the opportunity to agree devolution deals. It is already making good progress towards a deal with Cornwall.

To read all the detail and accompanying documents, go to the Treasury website