After a whirlwind of social media rumours and red ‘Budget box’ photo calls, Chancellor Rishi Sunak has now revealed the latest Budget. So, now that the word is out, what can we expect to see for the social economy? Our Policy Lead Will Thomson shares a breakdown.
Today, the Chancellor delivered his Budget with a three-part plan to protect jobs and strengthen public finances as the country begins its tentative journey along the roadmap out of lockdown. He set out a variety of proposals to stabilise the economy and promised to spread investment and opportunity across the UK – but what does this Budget with its ‘investment-led recovery’ really mean for our sector and the social economy?
- Ongoing Covid-19 support to protect jobs and support businesses
The Chancellor opened by giving clarity over the future of Covid-19 support schemes – including the furlough scheme and government backed loans – which will come as welcome news to businesses, charities and social enterprises who are concerned about the future.
The Coronavirus Job Retention Scheme has been one of the most valuable and effective Government interventions to project jobs and support businesses throughout the pandemic. Initially intended to last for a few months, the scheme has been extended in different guises now for the best part of a year. Our own Covid-19 data collection on 1163 organisations across our emergency grant rounds and internal loan book shows that 43% had utilised the furlough scheme. We are therefore pleased that the Chancellor has decided to extend the scheme to September – well beyond the end of the current lockdown. The scheme will taper so that businesses will be required to pay 10% from July, and 20% from August, before closing at the end of September. This extension and clarity over the tapering will give organisations some confidence as they plan for the long Covid-19 recovery.
The Chancellor also confirmed that he will be extending the Government-guaranteed loans, replacing CBILS with the new Recovery Loan Scheme. This new scheme will continue the 80% guarantee on eligible loans between £25k and £10m. From our experience managing the Resilience and Recovery Loan Fund, we know there is still widespread demand for guaranteed loans that are accessible to charities and social enterprises, and we expect this demand to continue as we enter the recovery phase.
- Boosting the high street recovery
It's no secret that high streets have been hit hard by this pandemic, accelerating a trend of decline that was already well underway. Online retail giants like Amazon have seen profits soar to new heights, while major bricks and mortar retailers have fallen like dominoes. The hospitality sector has been particularly badly hit – with an alarming rent debt of £1.6bn and no prospect of fully reopening until May.
The Chancellor set out a range of measures to support businesses on the high street. A new, one-off Restart Grant Scheme of up to £18,000 will give businesses some certainty in order to plan ahead for reopening. The 100% business rate relief for retail, hospitality and leisure properties will be extended until 30 June, followed by 66% relief until 31 March 2022. The hospitality and tourism sector will continue to benefit from the VAT reduced rate of 5% until September. Meanwhile, cultural venues and museums will receive an additional £90m funding, and the Cultural Recovery Fund will be extended by a further £300m.
This should all come as positive news for high street businesses as they look to reopen over the coming months. However, while these measures might provide some much-needed relief on costs through the tax system, they do little to address the issue of mounting SME debt that we wrote about last week. As loan and rent repayments kick in, this debt burden will add further pressures on businesses and could hinder the economic recovery – especially in local economies that were already struggling before the pandemic.
The future of high streets remains uncertain but, with the right funding and ambition, they can be rebuilt as dynamic community hubs with a wide range of uses and activities beyond retail. We will soon be launching a set of high street trackers focusing on 10 coastal towns to monitor their performance over the coming year. We hope these will develop our understanding of how high streets are recovering from the pandemic, what role social infrastructure plays in this recovery, and where our funding and support can be best targeted to bolster local economies.
- An investment-led recovery
When it came to the section on ‘building the economy of the future’, the Chancellor had some big announcements: a new National Infrastructure Bank in Leeds, a Treasury economic campus in Darlington, eight new Free Ports, and significant investment into green infrastructure and R&D. But where does the social economy come into this?
First, the sector can breathe a sigh of relief with confirmation that Social Investment Tax Relief (SITR) is being extended until 2023. This comes following a determined lobbying effort from Big Society Capital, Social Enterprise UK, Resonance, Social Investment Scotland, Coops UK and others. It is a big win for the sector after concerns that SITR would be axed and will help to unlock further capital for investing in the social economy. The Government has said it will publish its response to the 2019 consolation at the end of this month – we hope they will use this as an opportunity to improve and expand SITR to unlock its potential.
Secondly, the Chancellor gave more detail on funding to ‘level up and empower all UK communities’ – including the £4.8bn Levelling Up Fund and the £220m UK Community Renewal Fund (the interim UK Shared Prosperity Fund). Most notable among these was confirmation of the long-promised £150m Community Ownership Fund (originally set out in the 2019 Manifesto). Details on the fund are relatively light at the moment – community groups will be able to bid for up to £250,000 matched funding to help them buy or take over local assets at risk of being lost. There isn’t a definitive list of eligible assets, but projects mentioned include sports clubs, leisure facilities, cinemas, theatres, music venues, galleries, pubs and shops.
This, too, is a positive development – hopefully the fund will have broad eligibility criteria that enables communities to innovate with a range of different ownership models and uses for local buildings, spaces and facilities. We also know from experience that there can be issues around sustainability for community organisations that attempt to take over an asset; the fund should therefore also include specialist support to build the skills, resources and capacity to help develop resilient business models. There is significant expertise within the sector for the Government can draw on – from the likes of Power to Change, Locality, Cooperatives UK, the Plunket Foundation, and others.
Is this really levelling up?
Since the beginning of this pandemic, we’ve said that there will be a stark need for investment to help places recover and bounce back. However, we’ve also been clear that we need to rethink how we invest in places, and who benefits from that investment. The concern is that the ‘investment-led recovery’ set out by the Chancellor today is overly focused on ‘high growth’ and ‘innovative’ SMEs, large national infrastructure projects, and investment in R&D.
While there is no doubt that these are important, the Government needs to recognise that truly levelling up will also require long-term, patient and flexible investment in people and the places where they live. The kind of investment that builds social infrastructure and develops the local economic capacity of a place, ensuring everyone has access to good jobs with fair wages – not high growth, but inclusive growth. This is what is desperately needed in the places that have been hardest hit by Covid-19, many of which were economically vulnerable before the pandemic – and it is in these places that the social economy must be part of the solution.