In-Depth Budget Response from The Wheel (Updated)
The Wheel, a leading representative and support organisation for the community and voluntary sector, has warned that Irish charities are under mounting financial pressures as they grapple to meet increased demand for their services in a highly uncertain funding environment.
‘‘While we welcome the fact that Minister Lenihan has protected the incomes of the unemployed in Budget 2009, the rapid rise in unemployment and the increase in hardship that will be experienced by low income earners as a result of tax and VAT increases will further increase demand on charity services,” said Deirdre Garvey, chief executive of The Wheel.
“Cuts in the budgets of certain Government departments may result in a reduction in grant funds available to the sector – funds the sector relies on to meet the needs of the most vulnerable.” Garvey warned that the full impact of these cuts will only become apparent in the coming weeks as the relevant departments adjust their spending.
“The half percent increase in VAT, to 21.5%, will also place further pressure on community and voluntary organisations, because - unlike those operating in the business sector - they are not entitled to a VAT rebate on expenses.”
The news comes at a time when charities are already experiencing a drop-off in corporate and private giving due to the turbulence in the financial markets. Nonetheless, Garvey predicts that the full effect of the economic turmoil on the sector’s income will only become clear in the medium term: “Research conducted by nfpSynergy, a London-based research group, found that there is a delay of up to 17 months between a fall in GDP and a drop in charity organisation’s incomes.”
The community and voluntary sector has, in recent years, become a significant player in the national economy (the economic value of non-profit enterprises in the community and voluntary sector in 2004 was €3 billion) and the sector now employes over over 40,000 full-time and 23,000 part-time staff.
“History has shown that strong and active community and voluntary sector is essential to help balance the national accounts and restore economic stability,” said Garvey.
Update on 16th October
The Wheel has today issued the following further advise regarding the Budget.
How will Budget 2009 affect your community/voluntary organisation?
Members will be aware Budget 2009 has been dominating the news. Organisations in the community and voluntary sector provide a wide rage of services and supports for the most vulnerable people in our society and there have been a wide range of announcements that will impact directly on clients and members of our organisations: the income levy, the vat increase, nominal increases in benefits, as well as a wide range of changes to eligibility criteria - jobseekers allowance, medical cards for people over 70 years, etc., amongst many others.
There are many sources of analysis that your organisation can turn to for guidance as to how these changes will affect your members and clients, and a selection of initial reactions is presently available at:
INCREASE DEMAND FOR THE SERVICES OF CHARITIES - BUDGET HAS NOT HELPED
The rapid rise in unemployment and the increase in hardship that will be experienced by low income earners as a result of tax and vat increases will further increase demand on the services our organisations provide. The budget did nothing to assist community and voluntary organizations to rise to this challenge, indeed reductions in departmental budgets and the VAT increase are going to add significantly to the burdens that charities are currently carrying in serving their clients/members needs.
SIGNIFICANT REDUCTIONS IN MANY GOVERNMENT DEPARTMENTS BUDGETS
Reductions in the budgets of Government departments may result in a reduction in grant funds available to the sector - funds our organisations rely on to meet the needs of the most vulnerable. The full impact of these cuts will only become apparent in the coming weeks as the relevant departments adjust their spending. Members that are in receipt of funding from Government departments are advised to check with the relevant departments to ensure that their funding will not be affected by the budget reductions proposed. One starting point would be to check the Estimates document published to accompany the Budget (it details the Government's expenditure plans for 2009) here: www.budget.gov.ie/2009/downloads/CombinedBudgetEstimates2009&SPCP.pdf
RISE IN VAT BY 0.5%
The half percent increase in VAT, to 21.5%, will also place further pressures on charities and community and voluntary organisations - because unlike companies operating in the private sector - charities are not entitled to a VAT rebate on expenses. The increase in VAT represents an increase in the tax on our organizations and the work that we do. This is very disappointing for charities and The Wheel will be working to encourage Government to abolish VAT for charities with renewed vigor.
NO INCENTIVES FOR FUNDRAISING OR FOR INCREASED DONATIONS
The Wheel is disappointed that Government did not take the opportunity to incentivise fundraising in the 2008 Budget by reducing the Minimum Donation Threshold for tax relief from the present ceiling of €250 per anum.
REDUCTIONS IN BUDGET AT DEPARTMENT OF COMMUNITY RURAL AND GAELTACHT AFFAIRS
While there have been some significant reductions in planned expenditure across a range of budget headings in the Department of Community, Rural and Gaeltacht Affairs, The Wheel understands that the Department has sought to protect front line services in its budget allocations and that funding agreements already in place will be honoured.
The Wheel will be keeping a close eye on developments in respect of this Department's funding programmes - as they are especially important in supporting the strategic development of our community and voluntary sector.
If you would like more detailed information on how the budget might affect your organsiation, please contact Ivan Cooper, The Wheel's Director of Advocacy, at firstname.lastname@example.org