The 3 million apprentices that the government hopes to have in place will partly be paid for by the new apprenticeship levy, whereby every employer with a wage bill of over £3m per year will have to contribute 0.5% of that wage bill to the government.  The National Living Wage is fast approaching and pensions auto enrolment continues.  So larger organisations – of all kinds and across all sectors – will face an increasing responsibility to help foot the bill for the “high-wage, low-welfare” economy George Osborne spoke of.  Organisations that employ large numbers of relatively low paid staff  consumer – co-operatives in the retail sector, large charities providing public services, social enterprise spin outs – take note.

Charities and others who depend on business rates relief will be relieved that there was no early announcement of changes from the review of this regime.  However, the devolution of local authority funding will be complete by 2020, with local authorities keeping their receipts from business rates and no more central government grant.  We have already seen an increased reluctance to give discretionary rate relief to third-sector organisations under the current set up, and these further changes will make colleagues feel rightly nervous. Communities will also wonder about the effect on community asset transfer policies of councils being able to spend all of their capital receipts.

On the funding front, third-sector organisations and faith groups will be relieved to see that the Chancellor resisted the temptation to raid the Big Lottery funding pot.  The Government will also continue its support for social impact bonds, suggesting an ongoing interest in “payment by results”.  Arts and culture organisations will breathe a sigh of relief at the protection of the Arts Council grant.

For those supporting the most struggling neighbourhoods, there are some hidden risks here.  No uniform business rates could mean significant differences between the ability of local authorities to generate income – what of those councils that serve areas of market failure, or rural areas?  What will be the impact on services as a result?

Tellingly, the Chancellor didn’t mention the reduction in budget for the Department of Communities and Local Government, which settled at an overall reduction of 30% in its funding.  There is no information yet on the future of the community rights programmes, the encouragement of community-led housing, or the support for neighbourhood planning.  So, whilst the initial headlines may not have been as difficult as some feared, the real impact will remain to be seen – and felt.

For further information

Please contact David Alcock

Contract management pitfalls – payment
Contract management pitfalls – payment

In the second part of our series on contract management pitfalls, we look at the risks and opportunities presented by payment mechanisms in construction contracts.