Spending Review 2020

The Chancellor delivered the Spending Review 2020 (SR20), which outlined the extremely high levels of Government borrowing as a result of coronavirus that is likely to necessitate future tax rises or budget cuts.

At a glance:

  • The Charity Commission’s budget will increase to £27.3m in 2020-21 and to £28.3m in 2021-22
  • More information was provided on the UK Shared Prosperity Fund (more below)
  • The Government is undertaking a fundamental review of the business rates system and is currently considering responses to the call for evidence. To support businesses in the near-term, the Government has decided to freeze the business rates multiplier in 2021-22
  • The UK will spend the equivalent of 0.5 per cent of its national income as overseas aid in
  • The Government has established funding the Levelling Up Fund and has provided funding to get those unemployed for more than a year into work
  • The Government has decided not to proceed with a reset of business rates baselines in 2021-22 and will maintain the existing 100 per cent business rates pilots for a further year
  • The Government has also responded to its consultation on the Reform to Retail Prices Index (RPI) Methodology
  • The Spending Review provides:
    • Nearly £20bn for the Government’s long-term housing strategy
    • Funding for the Government’s environmental strategy
    • Funding for the culture and heritage sector

UK Shared Prosperity Fund

As a member of the European Union, the UK received structural funding worth about £2.1 billion per year. This funding has been used for boosting several aspects of economic development, including support for businesses, employment and agriculture, and is administered by the different nations of the UK. In order to replace the funding now that the UK has left the EU, the Government has pledged to set up a Shared Prosperity Fund to “reduce inequalities between communities”.

The UK Shared Prosperity Fund (UKSPF) will operate UK-wide, using the new financial assistance powers in the UK Internal Market Bill.  The Government will ramp up funding, so that total domestic UK-wide funding will at least match current EU receipts, on average reaching around of £1.5 billion a year. Its funding profile will be set out at the next Spending Review.

The Government will develop a UK-wide framework for investment in places receiving funding and will prioritize:

  • Investment in people and skills tailored to local needs, such as work-based training, supplementing and tailoring national programmes (e.g. the Adult Education Budget); and other local support (e.g. for early years)
  • Investment in communities and place including cultural and sporting facilities, civic, green and rural infrastructure, community-owned assets, neighbourhood and housing improvements, town centre and transport improvements and digital connectivity
  • Investment for local business including to support innovation, green and tech adoption, tailored to local needs.

Places receiving funding will be asked to agree specific outcomes to target within the UK-wide framework. They will then develop investment proposals to be approved by the Government among a representative stakeholder group. Investment should be aligned with the Government’s clean growth and net zero objectives.

A second portion of the UKSPF will be targeted differently: to people most in need through bespoke employment and skills programmes that are tailored to local need. This will support improved employment outcomes for those in and out of work in specific cohorts of people who face labour market barriers.

The Government will set out further details of the UKSPF in a UK-wide investment framework published in the spring.

To help local areas prepare over 2021-22 for the introduction of the UKSPF, the Government will provide additional funding to support our communities to pilot programmes and new approaches. This additional funding will be delivered UK-wide, using the new financial assistance powers in the UK Internal Market Bill. Further details will be published in the New Year.


Departmental settlements

Announcements from the Spending Review 20 (SR20) that may be of interest to charities include:

  • 6.4 Around £500 million to address waiting times for mental health services
  • 6.9 SR20 confirms an additional £25.8m to increase the value of Healthy Start Vouchers to
    £4.25 in line with the recommendation of the National Food Strategy. Local authority spending
    through the public health grant will also continue to be maintained and the government will
    set out further significant action that it is taking to improve the population’s health in the
    coming months
  • 6.10 The Government will enable local authorities to access over £1 billion of spending for social care through a £300 million social care grant and the ability to levy a 3 per cent adult social care precept. This funding is additional to the £1 billion social care grant announced last year which is being maintained. In the longer term, the Government is committed to sustainable improvement of the adult social care system and will bring forward proposals next year.
  • 6.11 SR20 includes an investment of £573 million in Disabled Facilities Grants and £71 million in the Care and Support Specialised Housing Fund, supporting people to live independently for longer.
  • 6.17 SR20 also supports the Government’s commitment to improve skills in the economy and
    level up productivity across England by:

    • From August 2021, employers who pay the Apprenticeship Levy will be able to transfer
      unspent levy funds in bulk to small and medium-sized enterprises (SMEs) with a new
      pledge function. Unspent levy funds will still expire after 24 months. The Government
      will also introduce, from August 2021, a new online service to match levy payers with
      SMEs that share their business priorities.
    • During 2021-22, the Government will test approaches to supporting apprenticeships in
      industries with more flexible working patterns, including consideration of how best to
      support apprenticeship training agencies
    • Incentive payments for hiring a new apprentice introduced in the Plan for Jobs will be
      extended to 31 March 2021.
  • 6.19 The DfE settlement also:
    • Provides funding towards delivering a £220 million Holiday Activities and Food programme
      to provide enriching activities and a healthy meal for disadvantaged children in the Easter,
      summer and Christmas holidays in 2021. This provides funding up to the end of 2021-22
      and supports the Government’s commitment to establish a Flexible Childcare Fund to
      increase the availability of high quality and affordable flexible childcare
    • Provides £44 million for early years education in 2021-22 to increase the hourly rate paid to
      childcare providers for the Government’s free hours offers. This is on top of the £66 million
      increase confirmed at SR19
    • Provides funding to prepare for a UK-wide domestic alternative to Erasmus+, in the
      event that the UK no longer participates in Erasmus+, to fund outward global education
      mobilities. The Government will set out further details in due course.
  • 6.47 The UK will spend the equivalent of 0.5 per cent of its national income as overseas aid in
  • 6.57 The Government is launching a new Levelling Up Fund worth £4 billion for England, to invest in local infrastructure that has a visible impact on people and their communities. Moving away from a fragmented landscape with multiple funding streams, this new cross-departmental Fund for England will invest in a broad range of high value local projects up to £20 million, or more by exception, including bypasses and other local road schemes, bus lanes, railway station upgrades, regenerating eyesores, upgrading town centres and community infrastructure, and local arts and culture. SR20 makes available up to £600 million in 2021-22. The Government will publish a prospectus for the Fund and launch the first round of competitions in the New Year.
  • 6.58 SR20 provides £254 million of additional resource funding, including £103 million announced earlier this year for accommodation and substance misuse, to support rough sleepers and those at risk of homelessness during Covid-19. This additional funding will support frontline services through the Rough Sleeping Initiative and enable local authorities to fund their statutory duties to prevent homelessness. The Government will also provide new funding to support prison leavers at risk of homelessness into private rental tenancies and will commit £87 million of capital funding in 2021-22 primarily to support the delivery of long-term accommodation for rough sleepers.
  • 6.59 SR20 also provides nearly £20 billion in multi-year capital investment to underpin the Government’s long-term housing strategy:
    • A National Home Building Fund (NHBF), with initial funding of £7.1 billion over the next four years to unlock up to 860,000 homes, including:
      • Confirming £4.8 billion of capital grant funding, including for land remediation, infrastructure investment, and land assembly
      • Delivery of the Brownfield Fund, announced at Budget 2020 for Mayoral Combined Authorities (MCAs)
      • An additional £100 million for non-Mayoral Combined Authorities in 2021-22 to support housing delivery and regeneration, including unlocking brownfield sites, regenerating estates and releasing public sector land – including serviced plots for self and custom builders
      • £2.2 billion of new loan finance to support housebuilders across the country. This includes delivering Help to Build for custom and self-builders, and funding for SMEs and modern methods of construction
      • Further funding for the NHBF will be confirmed at the next multi-year spending review, delivering on the Government’s commitment to provide £10 billion to unlock homes through provision of infrastructure
    • Reconfirming £12.2 billion for the Affordable Homes Programme (AHP). The new AHP will deliver up to 180,000 new homes for affordable homeownership and rent, with a greater proportion outside of London than the previous programme.
  • 6.61 SR20 also:
    • Provides an additional £30 million to help deliver the new building safety regime, taking resource funding to at least £70 million in 2021-22.
    • Provides an additional £12 million to take forward the Government’s planning reform agenda
    • Provides £98 million of additional resource funding, bringing total funding to £125 million,
      to enable local authorities to deliver the new duty to support victims of domestic abuse and
      their children in safe accommodation in England
    • Confirms of £165 million of resource funding for local authorities through the Troubled
      Families programme
  • 6.69 The Government is undertaking a fundamental review of the business rates system and is currently considering responses to the call for evidence. A final report setting out the full conclusions of the review will be published in spring 2021. To support businesses in the near-term, the Government has decided to freeze the business rates multiplier in 2021-22, saving businesses in England an estimated £575 million over the next five years. Local authorities will be fully compensated for this decision.
  • 6.70 Earlier this year, the Government announced that it would delay the move to 75 per cent Business Rates Retention and the implementation of the fair funding review. This decision allowed local authorities to focus on meeting the public health challenge posed by the pandemic. In order to provide further stability to the sector, the Government has decided not to proceed with a reset of business rates baselines in 2021-22 and will maintain the existing 100 per cent business rates pilots for a further year. The Government will consult on reforms to the New Homes Bonus shortly, with a view to implementing reform in 2022-23.
  • 6.79 To support the response to Covid-19, BEIS’s settlement includes over £500 million to support the continued delivery of Covid-19 loans, including paying for the 12-month interest-free period on the Bounce Back Loans and Coronavirus Business Interruption Loan Schemes
  • 6.81 To support the Government’s Ten Point Plan to accelerate the UK’s progress towards Net Zero, ahead of hosting COP26 in 2021, BEIS have been allocated over £3 billion of new funding. This includes:
    • Providing over £1 billion towards the construction of 4 new Carbon Capture and Storage plants by 2030
    • Confirmation of over £1 billion to make further progress towards delivering the Government’s commitment to invest in the energy efficiency and heat decarbonisation of schools, hospitals and homes
    • £240 million to support industry to produce low-carbon hydrogen at scale and over £80 million to test its use in heating buildings
    • £500 million to be spent in the next four years on the development and mass-scale production of electric vehicle batteries and support for associated supply chains
  • 6.87 To support the world-leading culture and heritage sectors, SR20 includes:
    • Over £150 million to continue to strengthen our cultural and heritage infrastructure,
      including through the Cultural Investment Fund and Museums Infrastructure Fund, enabling
      the development of British Library North and continued investment in the Heritage High
      Streets programme
    • More than £100 million of capital investment for DCMS-supported bodies working across
      culture, heritage, and sports
    • Over £320 million for our internationally renowned galleries and museums.
  • 6.88 The settlement also provides:
    • Over £150 million in 2021-22 for upcoming major events, including the 2022
      Commonwealth Games in Birmingham, Festival UK and the celebrations for the Queen’s
    • Over £60 million for Sport England to increase participation in sport and support vital
      projects in communities across the country
    • Almost £100 million to deliver the National Citizen Service (NCS) and invest in youth
      facilities. The Government will review its programmes to support youth services including
      the NCS in the spring.
  • 6.89 The Government will achieve efficiencies in the Office for Civil Society by rationalising work
    to better deliver the Government’s priorities for the sector.
  • 6.92 SR20 includes a doubling of the Government’s flood and coastal defence investment to £5.2 billion over six-years, commencing next year
  • 6.94 To support the Government’s ambition to tackle climate change and reduce carbon
    emissions, this settlement includes:

    • £92 million for the Nature for Climate Fund to keep the UK on track to restore more
      peatlands and plant England’s share of 30,000 hectares of trees a year by the end of
      this Parliament. This will include expansion of the Urban Trees Challenge Fund and new
      investment in Community Forests, to bring trees and woodlands closer to where people live.
      This will support an additional 1,000 green jobs
    • An increase to the funding for National Parks and Areas of Outstanding Natural Beauty to
      more than £75 million, with a further £7 million to progress the England Coast Path and
      Coast-to-Coast National Trail.
    • An additional £40 million investment in nature recovery through an extended Green
      Recovery Challenge Fund
  • 6.100 This settlement will provide £3.6 billion of funding in 2021-22 to deliver labour
    market support, reflecting the Government’s priority of getting people into work. This includes
    funding for:

    • The new 3-year long £2.9 billion Restart programme to provide intensive and tailored
      support to over 1 million unemployed people and help them find work
    • Work search support measures announced in the Plan for Jobs. This includes the Job Entry:
      Targeted Support, Job Finding Support, the Youth Offer, and Sector-Based Work Academy
      Programme placements. It also provides additional funding to build on the commitment to
      double the number of work coaches
    • The £2 billion Kickstart Scheme to create new, fully-subsidised jobs for young people across the country. This settlement confirms funding for over 250,000 Kickstart jobs.
  • 6.101 SR20 additionally provides investment to get more disabled people into work and to
    improve DWP’s health assessments system. It also provides funding to enable DWP to deliver
    efficient frontline services and ensure that support will be targeted where it is needed most,
    including supporting the most vulnerable in society.
  • 6.104 This will include:
    • Funding to continue HMRC’s transformation into one of the most digitally-advanced tax
      authorities in the world. This includes £146 million to extend the successful rollout and
      operation of Making Tax Digital for VAT for businesses below the VAT threshold and for
      Income Tax Self-Assessment businesses and landlords with income over £10,000.
    • £22 million to modernise the Valuation Office Agency’s (VOA) IT systems, enabling the
      agency to become more flexible, efficient and resilient, and £31 million to support the
      revaluation of Business Rates in 2023
  • 6.111 SR20 confirms an additional £4.7 billion to the devolved administrations through the
    Barnett formula in 2021-22:

    • The Scottish Government will receive an additional £2.4 billion through the Barnett formula,
      with £1.1 billion of core funding and £1.3 billion in relation to Covid-19
    • The Welsh Government will receive an additional £1.3 billion through the Barnett formula,
      with £560 million of core funding and £770 million in relation to Covid-19
    • The Northern Ireland Executive will receive an additional £0.9 billion through the Barnett
      formula, with £380 million of core funding and £540 million in relation to Covid-19.