After weeks of speculation and mounting pressure, chancellor Rachel Reeves delivered her budget last month as she attempted to shore up the government’s ailing fortunes and kickstart an elusive economic recovery.
Measures include the scrapping of the controversial two-child benefit cap. Reeves is also looking for increased tax revenue, with a freezing of tax thresholds for three years, which is expected to generate an extra £8bn as some salaries rise, plus taxes on electric cars, gambling and houses worth more than £2m. And National Insurance payments will be imposed on salary-sacrifice pension contributions above £2,000.
The key point for the co-op movement was the announcement of a call for evidence from the Department for Business and Trade on “how we can better support co-ops for grow.”
A Co-op Party spokesman said: “This is the first time in a generation that co-operatives have been mentioned in a chancellor’s budget speech. It’s a historic moment for our movement and a recommitment to the government’s ambition to double the size of our sector.
“For growth rooted in communities, genuinely driven from the grassroots, a thriving co-op economy is vital. More resilience, more productivity, more wealth and power shared.”
In a post on LinkedIn, Co-operatives UK said: “It’s brilliant that the government has used this budget to open the call for evidence on business support for co-operatives. This is a once in a generation opportunity for our sector. Co-operatives UK is ready to help co-operatives large and small, in every sector, have their say. We’ll circulate initial thoughts in the coming days.”
It also welcomed lower business rates on small retail and hospitality properties as a “welcome relief for all our bricks and mortar co-operatives” but noted continued cost pressures with further Living Wage and employer National Insurance increases.
The apex also noted the £13bn in integrated settlements for strategic authorities, adding: “We hope these authorities allocate some of their new business support funds for co-operative development”.
Similarly, it hoped the planned deployment of £2.5m a year from the British Business Bank’s plans to deploy £2.5bn a year would see “a proportionate allocation to schemes that cater to co-operatives” of £15m, “which would be a gamechanger for their growth”.
The apex added that it will assess the potential impact of the High Value Council Tax Surcharge on large co-operative HMOs (houses in multiple occupation), and welcomed continued support for research and development. “We will publish an advance assurances scheme for small and medium sized businesses to gain clarity on key elements of R&D tax relief claim,” it said.
More contentious is the cut in capital gains tax relief on business sales to employee ownership trusts, from 100% to 50%. This is expected to raise £900m for the Treasury but David Alcock, partner and head of social business at Anthony Collins, called the move “surprising and disappointing”.
“This has been a success story over the last 11 years and has been a significant contributor to the overall growth in mutual models,” he said.
“The government risks disincentivising EOTs for a marginal financial gain, which given the manifesto commitment to double the size of the co-operative and mutual sector seems counterproductive.”
But he welcomed the call for evidence as “a positive step forward as these organisations could play a critical role in delivering community services”.
Co-operatives UK said: “We are thankful that HM Treasury retains the employee buyout Capital Gains Tax (CGT) relief, albeit at a much lower 50%. In our view, this change makes business support and finance for mutualisation more important. It also strengthens the case for making the low cost worker co-op model eligible for the relief, as this will make mutualisation an economical option for a wide range of businesses.”
Meanwhile, the Co-op Group welcomed Reeves’ long-promised business rates reform, “giving small, local retailers greater certainty to invest in Britain’s communities and high streets”.
CEO Shirine Khoury-Haq said: “Today’s budget provides the clarity and certainty that small shops and local communities have been waiting for. ”
The Group used the budget date to announce its latest £1bn spending pledge, including price reductions as household budgets continue to be squeezed, alongside store investments, apprenticeships and procurement from UK farmers.
Related: Co-op Group pledges £1bn to economy after Reeves budget
Plunkett UK, which represents rural community businesses, was more critical, noting a lack meaningful support for the sector. “It is deeply disappointing that today’s budget announcement contains no measures that materially benefit rural community businesses – particularly given the government’s manifesto commitment to double the size of the co-operative sector,” said CEO James Alcock.
“This disconnect is frustrating, especially considering the positive dialogue we have had with officials across government. While those officials have demonstrated a genuine understanding of, and support for, our work, that support does not appear to have translated into decisions within the Treasury or No. 10.”
Nick Plumb, director of policy and insight at Power to Change, said: “The chancellor has committed to work with the Impact Economy to crowd in more investment to areas receiving Pride in Place funds – now let’s make sure communities decide how it’s spent. Progress on the manifesto commitment to double the size of the cooperatives and mutuals sector is welcome but this needs to include all community businesses. We know community businesses deliver grassroots growth – collectively contributing £5.8bn to the national economy – so we’ll make sure they’re part of this promising agenda.
“While it’s good to see progress on promised reforms to business rates, we’re disappointed that new lower multipliers focus only on the retail, leisure and hospitality sectors. A future for the high street that looks beyond retail needs a policy solution that does the same. If the government wants thriving high streets, it must back community businesses with permanently lower business rates.”
Meanwhile, Jonathan Atkinson of retrofit specialist Carbon Co-op welcomed the scrapping of retrofit fund ECO. The government will instead direct funding to households facing fuel poverty. The Treasury hopes this will save the average household £150 on their energy bills from next April.
“ECO was a terrible programme,” said Atkinson, “overly dominated by the big energy suppliers, with a track record of poor quality and a lack of benefit both to the taxpayer and the homes that received works.
“We welcome the move to funding energy efficiency through the tax system, a far more progressive approach than energy bills and hope to see the new Warm Homes funding programme take a more place based approach to renovation that includes partnerships with retrofit co-operatives.”
Emma Bridge, CEO of Community Energy England, said: “Yesterday’s budget saw the Government make important progress on making energy bills fairer while supporting further fuel poverty work and electrification on our way to Clean Power 2030.
“Community energy organisations are ideally placed to play a key role in the successor scheme to ECO, providing trusted advice and funding to home owners and SMEs alongside local authorities and installers. We now urge the government to swiftly publish the Warm Homes Plan and Local Power Plan. These will empower thousands of communities to step up and play their part in insulating the homes of the most vulnerable, and to start generating their own clean renewable energy.”
