The mini-budget – what does it mean for foundations?

17 October - update.  Please note that some of the policies from the mini-budget have now been reversed.


5 October 2022

Chancellor Kwasi Kwarteng recently unveiled a raft of new economic policies. In this blog, we consider what the fiscal statement signifies for the foundation sector.

Energy bills

In his statement, the Chancellor reiterated earlier commitments made in the UK Government’s Energy Bill Relief Scheme, which aims to reduce energy prices for businesses, charities and public sector organisations. The scheme will initially run for a six-month period and discounts will be applied to energy usage between 1 October 2022 and 31 March 2023. This comes on top of plans to freeze household energy bills at an average of £2,500 this winter. 
The inclusion of charities in plans to support non-domestic energy customers is welcome and a result of robust campaigning by the sector. In addition, we are aware of many of our members speaking to current and potential grant holders about the impact of rising energy costs to understand how they can best provide support. 

Income tax and Gift Aid 
The mini-budget has brought forward several key tax reforms in a bid to boost economic growth, including the basic rate of income tax being cut to 19% from April 2023. 

A four-year transition period for Gift Aid relief will apply to maintain the income tax basic rate relief at 20% until April 2027. Many sector bodies and charities have welcomed these new measures on Gift Aid.

The Charity Tax Group (CTG) responded by saying “Positive engagement by the sector has ensured that the interests of charities are being considered as policies like this are developed.” The CTG is also calling for plans for a modern and digital Gift Aid system to be progressed in the meantime. 

Universal Credit 
As part of the Chancellor’s statement, rules around Universal Credit are to be tightened by reducing benefits if people don’t fulfil their job search commitments. Around 120,000 more people on Universal Credit will be asked to take steps to seek more work. Jobseekers over the age of 50 will be given additional time with work coaches to help them return to the job market. 

This is a move which has been criticised by some sector bodies. The Charity Finance Group (CFG) commented that “this announcement will not provide any reassurance to those on low incomes, and it will almost inevitably lead to an increase in the number of people turning to charities and other community support.” 

As noted by the CFG, the sector is facing a grave set of challenges this winter. Many civil society organisations are preparing for an increased demand in services - fuelled by the rising cost-of-living and changes to benefits - alongside charities’ own rising costs and a predicted fall in donations. Additional requests for support from foundations and funders are therefore likely in the coming months. 

Investment zones
The government has pledged to establish 38 new investment zones in England and work closely with the devolved administrations to drive local growth in Scotland, Wales and Northern Ireland. These zones are intended to have lower taxes, accelerated development and wider support for local growth. The government will also relax planning rules in these areas, including environmental assessments, in an effort to speed up development. This has raised concerns among some environmental charities and trusts who view the policy as a threat to environmental and nature protection and are calling for urgent discussions with government.

We will continue to monitor government announcements, including the forthcoming Medium Term Fiscal Plan, and provide updates on key issues for the foundation sector. 

For more information on how the current cost of living is affecting foundations, please visit our dedicated resources page. This includes information, blogs and upcoming events to help trusts and foundations navigate the crisis and consider their response.