The Budget and social businesses – what does it mean?

• Those working in struggling neighbourhoods will continue to see the fall out from the squeeze on the welfare budget.  The tightening of the benefit cap and the current and future restriction of tax credits will impact directly on the poorest families, both in and out of work.  Local charities and community organisations tell us they are already picking up the “fall out”, and this is likely to put a greater strain on organisations working with these communities.
• Many community organisations and social enterprises work closely with social housing providers.  The latter got some nasty shocks in the budget, and are reeling from the potential impact of the “pay to stay” proposals for higher earners in social housing, combined with the plans to reduce rents in the social sector by 1% in each of the next 4 years.  This, combined with the introduction of Universal Credit, will see housing associations going through a major review of their finances.  The concern is that this will see housing providers reduce their support for social enterprise and the community sector significantly, further undermining an already stretched resource.
• Tenant Management Organisations and other community based housing providers will feel the impact of the rent reductions directly and will need to review their financial projections urgently.  We understand that the “pay to stay” provisions will also apply to those in local authority housing, so TMOs will have to digest the implications – both financial and practical – here too.
• Social enterprises and co-ops will have many staff in lower paid roles, and will therefore need to review the financial impact of the national living wage.  Whilst supporting people on low wages is laudable in principle, the burden is being passed from the state to the employer.  In the public sector and in community organisations, of course, there is little or no scope to take account of this through pricing.
• Charities should note that on Budget Day, the government also announced plans to further review business rates and the associated reliefs.  We have already seen social enterprises being refused discretionary rate relief and the scrutiny here is only likely to increase.

So in conclusion, some major implications to digest, especially for those close to the social housing sector or working in deprived communities.  Like you, we will be watching the detail of how these proposals unfold carefully.

Contact David Alcock.

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