An analysis by Duncan Thorp
The new UK Government budget announcement contains some good news for social enterprises, Scotland and the wider economy, as well as some uncertainties and new costs.
The extra £3.4 billion to the Scottish Government’s block grant, as well as the rise in the various legal minimum wages and Carers Allowance, could all be seen as welcome steps in the right direction.
Employment Allowance has been raised. That means £10,500 off every small employer’s National Insurance Bill, up from £5,000 and will affect many smaller Scottish social enterprises.
The rise in employer National Insurance Contributions is a significant added cost for bigger organisations and could greatly affect their finances and possibly recruitment, HR, future sustainability and other areas.
Of course, it’s essential that all employees are paid well, and we strongly support the minimum wage as well as the Real Living Wage, but we also appreciate that paying a real living wage can be a significant added cost.
Public and charitable funders must ensure that funding increases for those social enterprises delivering public sector contracts and public services, to cover increased costs.
The UK government must also make progress on their planned procurement reforms, fundamentally extending, embedding and growing social value across the UK public sector.
In addition, all new capital investment and daily public spending must be rigorously geared towards achieving maximum social value and community benefit.
A summary of other key UK Government policy pledges is below:
- Social impact investment vehicle – plans to mobilise private investment to deliver positive social impacts through the development of a social impact investment vehicle. This will bring together socially motivated investors, the third sector and government to tackle complex social problems.
- Small Business Strategy – a vision for supporting small businesses, from boosting scale-ups to growing the co-operative economy, across key areas like creating thriving high streets, making it easier to access finance, opening up overseas and domestic markets, building business capabilities and providing a strong business environment. The paper will complement the new Industrial Strategy and Trade Strategy.
- Simplifying tax administration – a package of measures plus improving the customer experience, in spring 2025, with a focus on reducing burdens on small businesses.
- Prompt payments – from 1 October 2025, companies bidding for government contracts over £5 million per annum will be excluded from the procurement process if they do not pay their own suppliers within an average of 45 days.
- Procurement – increasing government procurement spend with small businesses seen as an important economic growth lever, with further details on implementing this to be set out in the National Procurement Policy Statement next year.
- Finance – making it easier for start-ups and scale-ups to access external sources of finance. This includes extending the Enterprise Investment Scheme and Venture Capital Trust schemes to 2035. Over £1bn across 2024-25 and 2025-26 for the British Business Bank to enhance access to finance for small businesses, including over £250m each year for small business loans programmes, including Start Up Loans and the Growth Guarantee Scheme.
- Trade – Supporting Scottish trade by providing £0.75m to establish Brand Scotland, a programme run by the Scotland Office to promote and champion Scottish investment opportunities, culture and products and services to export across the globe.
- City region deals – £253m for the continuation of all planned City and Growth Deals in Scotland, Wales and Northern Ireland, including £25m for the 10-year investment in the Argyll and Bute City and Growth Deal.
- Taxation of Employee Ownership Trusts and Employee Benefit Trusts – package of reforms to the taxation of Employee Ownership Trusts and Employee Benefit Trusts to tackle abuse, ensuring that the regimes remain focused on encouraging employee ownership and rewarding employees. From 30 October 2024.
Duncan Thorp is policy and public affairs manager for Social Enterprise Scotland.
