Rachel Reeves has delivered the highly anticipated Spring Statement, setting out the government’s plans amid the increasingly challenging economic climate.
While policy shifts and funding changes are at the forefront of charities’ minds, the update sets the tone for a more constrained operating environment for the sector; understanding how the Statement impacts the sector is essential. So, what are the key elements of the statement and what do they mean for you?
Welfare reform: More demand, fewer resources
The policy shift that has perhaps grabbed the most media attention. The Statement confirmed the government’s intention to push on with its far-reaching welfare reforms – aiming to reduce the budget by £4.8 billion over the next five years. These reforms include:
- Halving the health element of Universal Credit for new claimants and freezing it from inflationary uplifts until 2030.
- Tightening the eligibility criteria for Personal Independence Payments.
- Stricter work capability assessments and increased eligibility checks.
These changes will hit people with disabilities and those on low incomes. Scope estimates that 700,000 disabled individuals could fall into poverty whilst the government analysis indicated a further 250,000 entering relative poverty.
For charities, especially those supporting disabled people, as well as community support centres, food banks and shelters, this announcement represents a looming surge in demand. With resources already stretched from increasing costs, charities will need to prepare for increased volume and complexity of casework. Modelling future demand and stress-testing budgets will be essential to remaining resilient. Charities should also bolster their frontline support strategies and ensure their safeguarding protocols remain robust.
National Insurance Contributions (NICs): A direct hit to charity budgets
One of the most controversial measures confirmed in the Spring Statement is the rise in Employer NICs from 13.8% to 15%, coming into effect this month. Despite widespread lobbying for relief to charities, no such hand has been extended.
The sector-wide impact is estimated at an additional £1.4 billion annually. For many charities, particularly in the social care and support services sector, this rise will compound financial pressures at a time of already increasing demand.
Charities have limited ability to pass these costs onto local authorities who are struggling to balance their own budgets - therefore it is vital for charities to revisit staffing structures and budgets, re-evaluate funding agreements, and alternative organisational structures such as shared services or collaboration models to absorb some of the cost increases.
Forward-looking financial modelling will be critical and Trustees will be faced with challenging decisions to balance staff retention, service levels and reserves. The impact is already being seen in waves of redundancies in some of the UK’s largest charities which can be expected to continue.
No new support for charities – silence on the sector
Not only did the Chancellor turn a blind eye to reliefs on Employer NICs, Reeves’ speech did not include any reference to the Charity sector. Whilst this omission will heighten attention on the upcoming Civil Society Covenant, it also underscores the importance of continued advocacy within the sector. Whilst the NCVO and ACEVO are working with the government behind the scenes, charities must have a strong voice to ensure their realities are considered in future announcements.
There is now an expectation that support to charities, should it materialise, will be included in either the June Spending Review of the Autumn Budget. In the meantime, sector leaders have urged the government to collaborate with them to avoid exacerbating existing pressures.
For now, charities will need to continue operating in the challenging funding environment without targeted relief; they cannot wait for interventions and will have to be proactive in seeking collaborations and alternative funding sources.
Regulation – lighter touch or thinner oversight?
The Chancellor confirmed the government’s intention to cut administrative costs by 25% and reform regulatory approaches across multiple sectors, including civil society. The Charity Commission and Care Quality Commission are likely to be within the scope of this shift.
On the surface, a lighter approach to regulation may reduce the administrative burden for charities. However, there are concerns about whether this change will come with sufficient resourcing for regulators to maintain trust and oversight, particularly in safeguarding, financial transparency, and governance.
Trustees and finance teams should prepare for possible changes in compliance expectations, reporting thresholds, and enforcement styles. Now would be a good time to review organisations’ governance, ensure policies are up-to-date, and engage with working groups shaping the reforms.
On the surface, a lighter approach to regulation may reduce the administrative burden for charities. However, there are concerns about whether this change will come with sufficient resourcing for regulators to maintain trust and oversight, particularly in safeguarding, financial transparency, and governance.
Restructuring in public services: Changes to partnership working
A significant change in the Spring Statement is the planned abolition of NHS England with its responsibilities transferred to the Department of Health and Social Care. This is part of a broader strategy to reduce the size of the state and increase ministerial control.
For charities delivering NHS-funded services or working in partnership with integrated care systems, this represents a period of potential disruption. Public sector restructuring often brings delays in commissioning, changes in local decision-makers, and uncertainty in funding streams. Charities should map their dependencies on NHS or local authority grants and contracts. Maintaining open, proactive communication with public sector partners will be essential and there may be opportunities within the £3.25 billion transformation fund – particularly for organisations working on probation, foster care, or health technology.
Aid cuts and reputational risk
For charities working internationally, the further reduction in the Official Development Assistance budget from 0.5% to 0.3% of Gross National Income (GNI) – intended to divert resources to defence – places UK aid at its lowest level in over 25 years.
The aid budget will not be set in fixed cash terms (rather than adjusting for GNI fluctuations), reducing the predictability for NGOs and potentially undermining the UK’s reputation as a reliable global partner. For UK charities engaged in international development, there will be greater scrutiny from donors, more cautious multi-year planning, and increased competition for remaining funds. It also signals a need to reinforce outcomes reporting, partnerships, and evidence-based advocacy.
Not all negative – opportunity in affordable housing
The announcement of an extra £2 billion for affordable housing – setting a target of 18,000 homes by 2029 – will create potential avenues for charities focused on housing and homelessness. In a constrained fiscal environment, aligning charities’ missions with national priorities could unlock new funding streams. Local authorities will be key delivery partners and charities that can demonstrate social impact alongside housing outcomes will be well-placed to collaborate.
Charities may wish to reach out to local councils and housing associations; reframe their impact metrics to reflect government priorities and consider how they could add further value to the housing agenda.
The Spring Statement may not have brought relief for charities, but it does send a strong message about the years to come. Costs will rise, demand will increase and direct government support is far from guaranteed. Whether its reworking financial models, stress-testing budgets, or sourcing additional funding, charities will need to adapt, advocate and stay resilient.
Much attention will now be focused on the June Spending Review and Autumn Budget – the window to influence government is open. The sector must use its collective voice to advocate in the interests of their beneficiaries, and Trustees must ensure their organisations are prepared for further changes.
