Analysis from Pro Bono Economics has warned charity income will decline by £2.2 billion in real terms by the end of 2023/24

Experts from across the third sector have hit out at the UK government following its autumn budget statement on Thursday, as analysis reveals charities will lose billions by 2024. 

Chancellor Jeremy Hunt outlined spending plans for Britain in Westminster, including £55 billion in tax rises and a squeeze in public spending in what the Tories said was an attempt to tackle spiralling inflation. 

Mr Hunt has been forced to defend his financial decisions, claiming it was not possible to tackle the current financial situation by taxing the wealthiest, denying that his plans are a tax raid on working people. 

The Office for Budget Responsibility (OBR) has warned that household incomes will fall by 7% over the next 18 months. 

But it is not just household incomes that will drop, with analysis from Pro Bono Economics warning of challenges that lie ahead for households accessing charities’ services, estimating the impact on charity finances and the sector’s ability to meet increasing need.

Taking into account rising costs, government spending plans and household finances, the group said new data from the OBR shows that charity income will rise by around £1bn in cash terms during 2023-24 (1.6%), but if costs rise in line with broader inflation then the real value of that income for the charity sector will decline by £2.2bn over that time period. 

This is roughly a 4% real terms decline from the expected level for 2022/23.

Charities focused on employment and training, non-profit playgroups and nurseries, and law and advocacy charities are particularly exposed to this risk, as government income makes up such a significant proportion of their income.

If volunteering rates are affected by this recession, it will come on the heels of a tumultuous period in volunteering. 

While the pandemic led to a five percent rise in informal volunteering rates, it prompted a comparable fall in formal volunteering. 

Many charities have not yet had the chance to recover from this blow to their volunteering pool, and it is one of the factors affecting their ability to meet demand. A social recession would exacerbate this. 

Matt Whittaker, CEO of Pro Bono Economics, said: “With the country now in recession, living standards are set for the biggest hit on record. Surging inflation, spiralling borrowing costs and rising unemployment mean household budgets will come under severe strain. As has been the case throughout the cost of living crisis, the demand for charity support will be substantial.

“The government has taken important steps to protect the most vulnerable in the Chancellor’s Autumn Statement, but benefit uprating will not kick in until the spring and timelines for additional payments are still unclear. Charity demand is already rocketing and will only intensify as we head into winter. Given the enormous pressure on public spending and household budgets, charity income will inevitably dip as people have less to give and government funds are stretched.

“Based on these OBR figures, we estimate charity income will decline by £2.2 billion in real terms by the end of 2023/24. This all comes on the tail of unprecedented upheaval resulting from the pandemic, which has seriously weakened the charity sector’s resilience and ability to cope with increasing pressures from inflation.

“Through the worsening economic headwinds in the coming months, charities will continue to support the most vulnerable and aid those left stranded by public service backlogs and delays. But the sector will need strategic investment now and in the long-term to weather this storm and future crises.

“The sector’s potential as a partner to government should also not be ignored. Given the vital role that charities play in getting people back to work, government will benefit from close engagement with the sector in its review of economic inactivity. It is also important the sector is engaged with the Energy Efficiency Taskforce, especially considering the challenges faced by smaller community groups in investing in energy efficiency.”

Charities supporting the most at risk in Scotland have shared their relief that benefits and the benefit cap will rise with inflation but said the autumn statement is not enough to stop ice from cracking under struggling families

They called for the UK government to now match Holyrood level of investment in family benefits. 

John Dickie, the director of Child Poverty Action Group (CPAG) in Scotland, said: “There will be relief for families across Scotland and the rest of the UK that benefits and the benefit cap will rise with inflation. 

“But this is only the fourth time UK benefits have risen by inflation in the last ten years. As a result there are almost 4 million children living in poverty in the UK, over a quarter of a million of them in Scotland alone. Today’s package will not stop the ice from cracking under those struggling families.

“If the Scottish government can find the resources to provide a £25 a week cash boost for each child in low income families, as it has done with the roll out of the Scottish child payment this week, then so too can the UK government. 

“The chancellor now needs to go further and work to restore the value of UK family benefits so that our social security system never again leaves children so brutally exposed to the kinds of health and economic shocks we have seen in the last few year. Scrapping the two child limit and a £20 uplift to child benefit would be good places to start.”

Citizens Advice Scotland chief executive Derek Mitchell added: “Some of the measures announced today are welcome and very much needed, however the key thing is that the support will not arrive until next year, so the most vulnerable face a long and cold winter of worry and anxiety.

“The cost of living crisis is forcing people to make impossible choices in spending. Across the CAB network we see a frightening link between people struggling with energy bills and food insecurity.

“That is why it is the right decision to boost benefits by inflation, and frankly there shouldn’t have been a debate around it at all. The alternative was real terms cuts to the incomes of the poorest at a time when the price of food and energy are soaring.

“Cost of living payments to those on means tested benefits, pensioners and the disabled are also welcome, but begs the question if social security levels are adequate in the first place. Our evidence suggest they are not.

“Even with the further cap on energy prices people will come through a harsh winter and then face a shock on the spring as prices go up significantly.

“CABs are on the frontline of this crisis and we would encourage anyone worries about money and bills to seek advice, we are for everyone regardless of background or circumstance and we don’t judge, we just help.”