There was mixed news for co-ops and mutuals when chancellor Philip Hammond announced his first autumn statement on 23 November.
He confirmed that corporation tax, which is paid by limited companies and unincorporated organisations, such as co-ops, will fall to 17% – as announced by the former chancellor George Osborne earlier this year. In the past, the rate depended on the size of the profit, but a single rate now applies to all organisations paying corporation tax.
In April, the National Living Wage will increase from £7.20 to £7.50 for those aged 25 and over. Salary sacrifice schemes for computers, gym membership and health screening will become subject to tax from next year.
A £2.3bn commitment was made from the Housing Infrastructure Fund to create 100,000 homes, with another £1.4bn to build affordable homes. The spend includes £7.2bn to support the construction of new homes, including spending by housing associations.
The paper accompanying the chancellor’s speech adds that community land trusts, co-operatives, refuges and almshouses will be exempt from the policy to reduce social sector rents by 1% a year for four years starting from 2016-17.
Carl Taylor, head of strategy at Redditch Co-operative Homes and Ashrammoseley Housing Association, said: “The majority of the money for housing already existed, but the additional £1.4bn which the chancellor announced is very welcome and will result in around 40,000 affordable homes.
“Even more welcome than that was his support for a range of tenures. Previously this government had indicated it would cease funding for any affordable rented homes – but there is a massive need for housing by people who cannot afford to buy. This change is extremely welcome and much needed.
“The budget was insufficient to address the growing homeless problem and, while we might see a small growth in the number of housing co-ops, it is not going to be enough to meet needs and members of those co-ops will continue to face problems from the welfare reform programme.”
Nic Bliss, head of policy at the Confederation for Co-operative Housing, also welcomed elements of the statement, including the additional £1.4bn for affordable housing.
“The CCH also welcomes that the government has signalled an intent to relax its requirement that all of its funding should support individual home ownership,” he said.
“However, until release of the government’s forthcoming housing White Paper, it is not clear what this additional funding will be available for or whether it may be used to develop new co-operative and community-led housing. The announcement of a further pilot for Voluntary Right to Buy (it had been previously planned to launch the full programme by now) and the recent announcement of the government’s intention not to require local authorities to implement Pay to Stay suggests that the post Brexit government is drawing back from housing commitments made by the previous government. In this context it may be concerning that the current government has made no reference to co-operative and community led housing.
“The CCH would welcome the UK government making a similar commitment to co-operative and community-led housing as has been made by the Welsh government which is leading to a number of new co-operative housing schemes. It is welcome that Wales will benefit from equivalent funding for housing under the Barnett formula.”
The chancellor’s paper also refers to credit unions, pledging that from 2018, the government will expand an existing scheme which incentivises credit union membership in communities at risk of being targeted by loan sharks. This will use funds recovered under the Proceeds of Crime Act from convicted loan sharks.
Matt Bland from the Association of British Credit Unions (ABCUL) said: “We welcome the extension of the scheme which helps those who have fallen foul of loan sharks to get back in control of their finances by joining a credit union. Credit unions play a crucial role in encouraging people from all walks of life to save in order to build their financial resilience and to have access to affordable credit in emergencies.
“We’re pleased the government recognises the important role of credit unions. This announcement complements recent efforts to help Armed Forces personnel and employees of the Department for Work & Pensions save and repay credit union loans via payroll deduction, as well as its investment in the modernisation and expansion of the credit union movement.”
The government will also provide £700m to support the roll-out of full-fibre broadband connections into homes and future 5G communications. Malcolm Corbett, chief executive of the Independent Networks Co-operative Association (Inca), which supports local broadband co-ops or alternative networks (altnets), welcomed the news.
He said: “The Altnets are the entrepreneurial companies and communities building new, future-proofed, pure fibre and wireless networks. They are doing a fantastic job and the chancellor’s support signals that government is serious about creating a more competitive environment for new digital infrastructure.
“Digital minister Matt Hancock said that pure fibre and wireless networks are the future. We agree and we are building those networks today.”
But a rise in insurance premium tax (IPT) to 12% from next April is “unwelcome news” for the insurance sector, warned Martin Shaw, chief executive of the Association of Financial Mutuals. “Mutual and co-operative insurers will be faced with either trying to absorb that cost or to pass it on,” he said.
“Either way, the customer suffers and, for discretionary products like healthcare, another price increase due to higher tax means people will be less inclined to keep paying.”
Funds invested in mutuals are also likely to be affected by a new savings bond, said Mr Shaw. A new investment bond, through National Savings and Investments (NS&I), will have an expected interest rate of 2.2% and allow savers to deposit up to £3,000 for 12 months.
Mr Shaw added: “It will provide a new form of competition to mutual savings providers at a rate which is not generally available in the market. That means it is good for consumers, even though the total amount investable is small, but is likely to lead to an outflow of funds from mutuals.”
He added that the expansion of the credit union scheme was “good news for the credit union sector, and a positive endorsement for the hard work they do in providing affordable loans and fair lending practices in at risk communities”.
