Representation to: Autumn Statement 2016 From: Charity Retail Association Date submitted: 22 September 2016 Contact: Matt Kelcher, Head of Public Affairs and Research 4th Floor, 356 Holloway Road, London N7 6PA 020 7697 4075 matt@charityretail.org.uk Charity Retail Association s representation to the Autumn Statement 2016: charity shops and business rates relief Who we are The Charity Retail Association (CRA) is the only body in the UK which represents the interests of charity retailers. We have nearly 400 members representing around 80 per cent of all charity stores in the UK. Our members range from national chains, to individual hospice shops, and everything in between. The evidence in this representation has been calculated in close conjunction with our members and from independent research carried out by the cross-party think-tank Demos. Introduction The Autumn Statement is the perfect opportunity for the government to give certainty to the charity retail sector by introducing a simplified and consistent system of rate relief for charity shops in England. Offering business rates relief to charity shops already represents great value for money to the taxpayer. The system contributes to a viable network of charity stores which raise around 300m every year for charitable causes. These causes range from running local hospices, to funding pioneering medical research, to combatting poverty. However, as this representation will also demonstrate, the current system can also be complex to administer for both Councils and charities, and in some cases lead to a postcode lottery. The CRA believes that with one simple reform delivered through the Autumn Statement namely an increase of the mandatory rate relief element to 100 per cent for charity shops in England these issues could be overcome and the sector would be freed to make an even bigger contribution to our economy, society and environment.
The system at present Purpose Charity shops have always benefitted from tax concessions in England under tax law. This is primarily because all funds raised by a charity shop go to fund the work of the charity, which provides a clear public benefit. Britain s 10,000 charity shops, therefore, serve a charitable purpose in the same way as many other properties owned and used by charities. Relief is also granted in recognition of the wider social benefits that charity shops bring with them. Most notably these include: 1) Boosting reuse and recycling 2) Providing jobs 3) Providing volunteer opportunities for people seeking employment 4) Tackling social isolation and loneliness in older people 5) Supporting high streets Mandatory rate relief In 2013-14 (the last year for which DCLG has published figures) the total cost of mandatory and discretionary rate relief to charity shops was 69 million. This figure represents less than 5 per cent of the total relief from business rates granted to charities across the country In return for this 69 million concession, the charity retail sector generates over seven times as much money which goes to fund charitable causes. It is clear that the current limited mandatory relief granted to charity shops represents a small part of the overall rates relief system, and even a small part of the charitable rate relief system. Mandatory rate relief has proven to be a success story which more than pays its own way. Discretionary rate relief In addition to the current system of mandatory rate relief, granted by central government, local authorities may grant an additional 20 per cent of discretionary rate relief. However, our research indicates that a tiny minority of just 14 per cent of shops receive this additional support from their local authority. Furthermore, our members report that the basis upon which an additional 20 per cent relief is granted can fluctuate greatly between (and even within) Councils, as there are no clear national criteria which must be met to automatically secure the discretionary relief.
Case Study One of our members is based in East London. They run a small chain of stores which raise funds to provide a range of support, rehabilitation and training services to people facing the problems of homelessness, addiction or social isolation. Five of their seven stores are in the London Borough of Tower Hamlets, where each store receives the full additional 20 per cent of charitable rate relief from the council. The other two stores are run on the same basis and raise funds for exactly the same cause. However, they are located in other East London boroughs and do not receive a penny of discretionary rate relief. Devolution The CRA has great concerns that these dual problems of very few discretionary rates being granted, and a postcode lottery of councils who chose to grant them could be exacerbated following the planned full retention of business rates by local authorities. This is because as local authorities become more reliant on business rates as a source of income they are likely to be less inclined to grant the additional 20 per cent to charity shops in their area. Furthermore, if as part of the devolution, local authorities gained discretionary power over all business rates relief, they may not be inclined to grant the 80 per cent relief our members currently rely upon. This could further accelerate the development of such a postcode lottery, which could undermine the viability of the charity retail sector in certain areas of the country, starving them of charitable funds as a consequence. The simple solution: 100 per cent relief These problems can be overcome, and the future of the charity retail sector can be secured for the long term with the introduction of one simple reform at the Autumn Statement 2016 increase the rate of mandatory relief for charity shops from 80 percent to 100 per cent in England. At present, administrating the process of discretionary rate relief with applications, appeals and adjudications can be a time consuming and costly task for local councils. Taking the decision out of their hands and delivering a level playing field is a marketbased policy which will allow charity shops to survive and thrive in the areas which need them most.
It would also cut red tape for charities who would no longer have to dedicate resources to applications and appeals with their local council in a bid to secure discretionary relief. This would allow them to dedicate even more resources to their charitable cause. As has been outlined above, the system of business rates relief for charity shops in England is relatively inexpensive and represents excellent value for money for charity shops with a huge net payback to communities across the country. Were rate relief to be increased in this way, we would also expect an increase in the attendant social benefits charity shops bring to the country. These are summarised below. Social benefits Charity shops in England are rooted in their local communities and contribute a great deal to these communities. Some of the key benefits of a thriving charity retail sector are: 1. Reuse and recycling In 2015, the charity retail sector were able to sell or recycle over 90 per cent of donated clothing, over 90 per cent of donated books and 85 per cent of donated electrical goods. This diverts waste away from landfill 373,000 of textiles last year alone whilst improving recycling and re-use rates. This is of direct benefit to local authorities across the country, as it saves them significant sums in Landfill Tax, which 1 April has been 84.40 per tonne in England, Wales and Northern Ireland. 2. Jobs The charity retail sector provides over 21,000 jobs in the UK. We know from broader research that these employees are often closely integrated into their community. 70 per cent of charity shop managers are from the local area in which the charity shop is located and with 40 per cent having lived there for more than 20 years. These local jobs are also stable. Just over 40 per cent of shop managers have worked in their charity shop for more than five years, of which almost a third have been involved for more than ten years. 3. Employability Over 218,000 people volunteer in charity stores nationwide the largest single group of volunteers in the country. These opportunities can help boost their employability skills.
Volunteering in charity shops can help equip young people and the long term unemployed with the skills they need to find full time work in the retail sector. 80 per cent of charity shop volunteers believe that volunteering has helped to learn new skills and valued this process. 4. Mental Health Volunteering can also help to combat social isolation and loneliness amongst older volunteers. 61 per cent of charity shop volunteers believe that volunteering has a positive impact on their physical and mental health and over 80 per cent think it improves their self-esteem and confidence. This is why Community Service Volunteers (CSV) estimate that for every 1 spent on volunteers, 3.38 of value was created including through improved health outcomes. 5. High Streets It is extremely important to realise that charity shops are not direct competitors to commercial interests, but their partners on the high streets. The donated stock that our members sell is not available to other retailers. Charity shops help to reduce vacancy rates and therefore keep the high street populated and busy, even during the recent severe economic downturn. This has a clear advantage to local economies. Many shops are tightly woven into their local business economy and receive donations of end of season stock from nearby high street brands. Others provide a service which no one else can match. Furthermore, to take the example of specialist book shops, we know that book shoppers enjoy browsing in multiple book shops. Therefore a critical mass of book shops in an area for example; Charing Cross Road or Stockbridge in Edinburgh - can attract more custom for all shops. Case study One of our smaller members, Concern Worldwide, reports that: Our shop in Derry is a second hand book store. Derry is the second largest centre of population in Northern Ireland and has no dedicated national book retailer. Concern run the only charity book store in the city, [thereby] adding to the vibrant mix on the high street. Conclusion: How you can help This brief has demonstrated that the current English system of 80 per cent mandatory rate relief to charity shops represents sound value for money as it helps to generate huge amounts of financial, economic and environmental value.
In return, the charity retail sector; raises significant amounts for local charitable causes; contributes to a thriving high street; provides hundreds of jobs and thousands of volunteering opportunities, and; boosts recycling and re-use rates. Were a 100 per cent mandatory relief to be introduced specifically for this sector, it would be able to contribute even more in these areas and be able to develop long term business plans with certainty. This would also remove a layer of bureaucracy from the relationship between councils and charities. The Autumn Statement would be the perfect opportunity for the government to announce this community-led, market-based, positive solution. Sources Demos report, Giving Something Back, Measuring the social value of charity shops. Authors: Ally Paget, Jonathan Birdwell. Publication date: November 2013 Demos report, Measuring Social Value: The gap between policy and practice. Authors: Claudia Wood and Daniel Leighton. Publication date: June 2010 Regular quantitative and qualitative surveys of the CRA s membership CRA report, Business Rate Survey. Based on sample of 47 per cent of all charity shops in Northern Ireland conducted in December 2015 House of Commons, Written question 8615, Charities: Non-Domestic Rates, 14 September 2015