25 March 2011
Including the ringing endorsement of Community Investment Tax Relief in Budget 2011, below is a listing of all the key announcements of relevance to the CDFI sector. The sections are lifted from Budget 2011 and the Plan for Growth publication.
Both documents can be downloaded from the Treasury website
Access to finance announcements
CDFIs were mentioned as vehicles to help address access to finance:
“Those in deprived areas or disadvantaged groups can find it difficult to borrow money to start up or finance an existing business. They often need small loans that are more risky and more expensive to administer and thus are not attractive to banks. Community Development Finance Institutions (CDFIs) provide loans (sometimes referred to as ‘micro-finance’) in these circumstances. However, they have difficulties raising capital to lend and many do not yet have a sustainable business model.” (The Plan For Growth p63)
- Future of the Community Investment Tax Relief – The Government will renotify CITR to the European Commission and consult in advance of renotification on how the scheme can be made more effective. (Budget p53, The Plan for Growth p64)
- Government announces the interim launch of the Big Society Bank. The Big Society Bank will increase access to finance for civil society organizations through social finance intermediaries, including community development finance institutions. It will be funded from England’s apportionment of the £400 million held in UK dormant bank accounts, subject to the release of these funds by the Reclaim Fund. The initial release of dormant account funds for the UK is estimated at £60-100 million. An additional £200 million has been contributed by the main UK banks as a result of Project Merlin negotiations. The Government is working with the Big Lottery Fund on interim arrangements to enable investments as soon as dormant accounts money becomes available in the summer, using existing state aid exemptions. (The Plan for Growth p64)
- Reforms to delivery of ERDF: including explore whether applications for the second round of bids for the Regional Growth Fund can be aligned with the process for applying for the ERDF. (The Plan for Growth p65)
- An extension of the Enterprise Finance Guarantee (EFG). The Government has also changed the design of the EFG to encourage its use by smaller and specialist lenders such as Community Development Finance Institutions. (The Plan for Growth p65)
Other enterprise announcements
- The establishment of 21 new enterprise zones, with ten new urban Enterprise Zones being announced within the following Local Enterprise Partnership (LEP) areas: Birmingham and Solihull; Leeds City Region; Sheffield City Region; Liverpool City Region; Greater Manchester; West of England; Tees Valley; North Eastern; the Black Country; and Derby, Derbyshire, Nottingham and Nottinghamshire.
-the Government will offer up to 100 per cent discount on business rates to businesses located in Enterprise Zones for five years.
-all business rates growth within the zone for a period of at least 25 years will be retained and shared by the local authorities in the LEP area, to support LEP economic priorities and ensure that the returns from EZ growth are reinvested locally.
(Budget p31, The Plan for Growth p33)
- New Enterprise Allowance. As announced on 5 January 2011 by DWP, the New Enterprise Allowance scheme will be extended to provide support nationwide to individuals entering self-employment who have been unemployed for more than six months. Under the scheme, claimants will be able to access mentoring support, loans and an Allowance payment for up to six months. (Budget p55)
- The Government will improve guidance on businesslink.gov.uk to help businesses and other organisations make better choices about legal form and ownership model, including employee ownership. It will also improve the availability of advice for individuals, including public sector employees, about all other issues and questions involved in setting up and running different types of social enterprise. (The Plan for Growth p79)
Other areas of interest
- Legislation for mutuals and Industrial & Provident Societies. The framework for mutuals needs to be modernised to remove complexity and inflexibility, and to address governance issues and overregulation. The Government has committed to a programme of reform, including to: commence the Co-operative and Community Benefit Societies and Credit Unions Act 2010. This will modernise the outdated name ‘Industrial and Provident Societies’, improve corporate governance, and allow some co-operative and community benefit societies law to be brought in line with company law (The Plan for Growth p79)
For CDFIs who are registered charities:
- Introduction of a Gift Aid small donations scheme – From April 2013, the Government will introduce a new scheme to allow charities to claim Gift Aid on up to £5,000 of small donations without the need for Gift Aid declarations. This promises to be a significant step forward, particularly for smaller charities. (Budget p37)
- Change Gift Aid rules to allow an increased limit for ‘thank you’ gifts – The Gift Aid rules will be changed to ensure that the benefit limit for ‘thank you’ gifts from charities is increased from £500 to £2,500 from April and Government will publish new guidance to clarify what counts as a ‘benefit’. (Budget p37)