Last week the Chancellor, George Osborne, published the government’s Comprehensive Spending Review and Autumn Statement 2015. Our Head of Policy and Development, Mike Perry, has reviewed it and presents here a summary of the key elements of most interest to community co-operatives. We’d also like to hear from our members about their views on how these changes could have an impact on them – please let us know by emailing [email protected]

No immediate changes to in work benefits

Ahead of the announcement, the big debate was about whether or not there would be changes to work benefits, specifically tax credits. The Chancellor decided against making changes to these until other changes – such as the National Living Wage coming in, and the increase to personal tax allowances happening – has taken effect.

Big Lottery Fund reprieve

Many community co-operatives, and Plunkett ourselves, have benefitted from support from Big Lottery Fund, so rumours in advance of the Spending Review that the Big Lottery Fund’s proportion of National Lottery income could be significantly reduced to help provide additional support for sports, arts and heritage initiatives were potentially an area for concern. However, Prime Minister, David Cameron confirmed there would be no changes.

Departmental spending cuts

Significant cuts were confirmed for departments most relevant to our members including the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs. There will also be changes to the Office for Civil Society, which will have a greater focus of their budget on expansions of Social Impact Bonds and the National Citizen Service. We will not know the full impact of these changes until it becomes clear the impact across the work of each department.

Business rates

The business rate review, expected before Christmas, has been delayed until March 2016, at which point we expect to receive greater clarity on the continuation, or not, of various exemptions many Plunkett members benefit from. We do know that the Chancellor has confirmed an extension to the small business rate relief (up to April 2017) which means that businesses below a rateable value of £6,000 will receive 100% relief. Some businesses may be eligible, however, under the terms of the rural rate relief scheme, which has different rules. The retail rate relief will not continue beyond April 2016, and the current 2% inflation cap on annual increases will also be removed.
The implementation of business rates will be part of a number of changes to the local government financing system. This is likely to lead to very similar community co-ops being treated differently by different local authorities.

Pension auto-enrolment

Two mandatory increases for minimum contributions into workplace pensions had been planned to take place in October 2017 and 2018, but have now been delayed by six months. According to the Chancellor, delaying the rate rises will help businesses by enabling them to save six months’ worth of higher rate contributions, and will align the changes with the financial year.

Community energy changes

A topic that has generated a lot of interest recently in our sector, the Spending Review confirmed that community energy organisations will no longer be activities that qualify for the Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCT) and the Seed Enterprise Investment Scheme (SEIS).In addition, these activities will also not be eligible for Social Investment Tax Relief (SITR) when SITR is enlarged. The government will exclude all remaining energy generation activities from the schemes from 6 April 2016, as well as from the enlarged SITR, and introduce increased flexibility for replacement capital within EIS and VCT, subject to state aid approval.

A ‘devolution revolution’

The report set out a range of changes with the aim of ‘returning power to the UK’s nations, cities and councils’. This has meant some changes in responsibilities (for example the nations of the UK being responsible for major infrastructure work), planned investment in specific areas like ‘the Northern Powerhouse’ and changes to council responsibilities. It has also meant budget reductions for Scotland, Wales and Northern Ireland.

Use of ISAs for share issues

There are potentially new options being considered for community shares, as the spending review saw the list of qualifying investments for the new Innovative Finance ISA being extended (with effect Autumn 2016) to include debt securities offered via crowdfunding platforms. The government will continue to explore the case for extending the list to include equity crowdfunding.