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Budget 2021: What does it mean for social enterprise?
Budget 2021: What does it mean for social enterprise?
Written by
Kevin Armstrong
Policy Lead
Changes to alcohol and air travel tax, and more talk of levelling up in the UK's autumn Budget, unveiled yesterday – but is it good news or bad for social entrepreneurs? Kevin Armstrong, policy lead at UnLtd, takes a closer look.
In keeping with long-held traditions, the chancellor of the exchequer Rishi Sunak has talked about how wonderful his 200-page Budget is, opposition parties have said it’s terrible, and news channels headed to pubs to describe the announcements using lots of puzzling booze-based metaphors.
But does the Budget’s small print harness social entrepreneurs’ proven ability to deliver the social value and growth that the country really needs?
How will the Budget help social entrepreneurs?
No two social enterprises are the same, but several things have been announced in the Budget that could help social entrepreneurs across the country. Amidst the reiteration of the March announcement of extending SITR until 2023, there are some highlights to note.
Pay increases for some low to middle earners
Increases in the National Living Wage, minimum wage, apprentice pay and public sector pay, as well as a reduction in the Universal Credit taper rate (the proportion of the benefit that claimants can keep as they earn more money from work) and work allowance have been announced. This will all help some people to be able to buy from social enterprises, although overall household disposable income is only projected to increase by 0.8% a year. Social enterprises will have to spend more on staff salaries too.
Spending increases in each UK government department
Many social enterprises win contracts and/or grants from UK government departments, so this after-inflation increase matters. However, work is still needed to make government procurement truly accessible to all social entrepreneurs.
Funding for Help to Grow – helping SMEs to digitise.
However, this scheme currently isn’t available to registered charities or ventures with fewer than five staff, making programmes like Selling Social (which helps social entrepreneurs to grow via online sales) vital.
Kickstart’s extension to March 2022 confirmed
Some social enterprises have been able to create employment opportunities for young people via this scheme so far, although we know that many more would like to do so before and after March 2022.
36% funding increase for Innovate UK during the next three years
According to Social Enterprise UK, 66% of social enterprises introduced a new product or service in the last year, compared to 35% of businesses as a whole, so we should expect a lot of this funding to Innovate UK (the government-funded innovation agency) to filter through to social entrepreneurs.
More investment in SMEs
Small and medium-sized enterprises to be provided by the British Business Bank in the north east, south west, and devolved administrations. However, to be impactful, we’ll need to see significant improvement in access to finance for the latest generation of social entrepreneurs, especially those who are from Black, Asian or minority ethnic backgrounds.
Launch of the UK Shared Prosperity Fund
We’ve been waiting for the UKSPF ever since Brexit. The £2.6bn fund will ‘help people access new opportunities in places of need’, hopefully via local social enterprises. The Budget also confirms the government’s commitment to the £150m Community Ownership Fund, which aims to help communities to protect and manage local assets. Danny Kruger, who was recently given a role in the government's levelling up team, has been a big supporter of this fund and others which support social enterprises.
How will the Budget hinder social entrepreneurs?
Unfortunately, many current and new social entrepreneurs are set to be hindered by the following Budget announcements in the future.
National Insurance rate increase confirmed
From April 2022 onwards, employers, employees and the self-employed will pay 1.25p more per pound, albeit to bolster the NHS budget.
Local authority grant increase of just 3% a year in real terms
Considering that central government grants were cut 38% in the last decade, we should expect to see increases in council tax and further cuts to council services. Social enterprises will experience challenges in trading with the public and local government as a result. Cases like Harissa Kitchen shows the impact that Council cuts can have on social enterprises and communities.
Continuing uncertainty over business rates and an online sales tax
The government simply says it will consult on a UK-wide online sales tax, and that tax receipts would reduce business rates for retailers in England. In the meantime, some business rates reliefs are only confirmed up to 2022-23.
No growth of the Start Up Loans Scheme
The Budget only pledges ‘continued funding’, despite the fact that access to finance is a leading barrier to social entrepreneurs wanting to start and scale-up. This would make it harder for organisations like Huddersfield-based Omnis Circumvado CIC, which did access a start up loan.
Corporation tax increase confirmed
From April 2023, companies with non-ringfenced profits of £50,000 or more will pay a higher rate, rising to 25% for profits of £250,000 and above.
Overall, the Budget paints a pretty blurry picture of the future. Social enterprises may find it easier to find grant and investment from some sources, but not others. The public’s spending power will be improved slightly by some actions, but set back by others. Trade with local authorities looks set to get even tougher, but the availability of regionally and locally-focussed grants and investment may improve in some areas.
Social enterprise needs to be a high priority for both Westminster and local councils, and UnLtd will continue to push for greater support of social entrepreneurs filling the gaps statutory bodies have created – including better access to capital, and our continued commitments to equity in grant-making.
Did the autumn Budget provide you with welcome news, or did it disappoint? Tweet UnLtd and Pioneers Post to share your thoughts.