Budget 2026: what it means for the VCSE sector
November 9, 2026
Last week, the government announced its new Budget, with changes that will affect people working and volunteering in the voluntary, community, and social enterprise sector. In this blog, we have summarised the key announcements for the VCSE sector, including cost of living support, devolution, and preventative spending.
Cost of living announcements
There are small contributions towards the cost of living which will make a difference for people that need it, as well as VCSE organisations providing frontline services.
- Household Energy Payment: All households in council tax bands A to D will receive a payment of £100 to support with energy costs. This will provide some relief, but as it is not well targeted will not do enough to help those in severe poverty. The abolition of gas standing charges was also announced, but this comes with the risk of costs being transferred to the unit price for gas.
- The UK government has temporarily suspended import tariffs on a range of food and drink products, and kerosene (which is used to heat housing and public buildings in many rural communities) to help lower household and business costs. This will reduce costs but only by a small amount, and more needs to be done to keep costs down for essential items and bills.
- The government announced funding to end rough sleeping, investment in building more council houses, and a continued commitment to improving skills and training for young people. We expect to see the VCSE sector recognised as a vital partner in supporting vulnerable people and building skills that lead to employment.
- The National Living Wage (NLW), the minimum wage rate for all workers aged 21 and over, will rise by 3.9 per cent to £13.21. The minimum wage for 18-20 year olds will increase to £11.27 and the rates for 16-17 year olds and apprentices will increase to £8.31. We welcome this announcement, but we urge the government to support the VCSE sector to meet these rising costs.
- The Budget confirmed the tax-free mileage rate at 55p for the first 10,000 miles, increasing to 35p for mileage above that, which will support volunteers to do their vital work in areas such as community transport. However, charities and community organisations need an increase in funding to be able to cover these additional costs. There are no indications that local authority spending power will increase, and other funders are unlikely to be able to uprate grants and contracts.
- £190m of additional funding for the NHS to cover winter pressures this financial year is a positive contribution but does not go far enough. We want to see this funding used strategically by ICBs and as part of a co-design process with VCSE organisations, so that it is used most effectively, and not allocated as short term funding. We want to see health systems working in partnership with the VCSE sector from the beginning, so this funding can be spent most effectively.
Fiscal devolution
- Eight more areas will move towards having a Mayoral Strategic Authority and Cornwall will move towards a Foundation Strategic Authority, with another two areas still in discussion. However, there are still six areas* that do not know how devolution will be organised in their areas.* Local infrastructure organisations have a key role in devolution, connecting strategic authorities with the VCSE sector. We already see the benefits for people and communities that come from these successful partnerships. Government has restated its commitment that every area in England will have a strategic authority of some form by the end of 2028. You can read more information on the areas covered here. It is positive to have more clarity for some areas but all areas, especially those also going through local government reorganisation, need clear decisions as soon as possible.
- Mayors will have greater local powers and accountability to target areas and services that need investment, with reform to the funding system for strategic authorities and local authorities. This will include implementing income tax assignment for Mayoral Strategic Authorities (MSAs) from 2028 and giving them a share of business rates from 2027, with an intention to increase business rates retention overall for both local authorities and MSAs. This strengthens the connection between local investment and productivity, and means that the resulting income can be targeted to local needs and priorities rather than having to meet central government funding priorities.
You can read more detail about fiscal devolution here.
Preventative spending
- The Treasury have introduced Preventative Departmental Expenditure Limits [PDEL], which will ringfence spending at the 2027 Spending Review to protect funding that supports early intervention and prevention, and programmes that generate longer term benefits. This is part of reform of the Green Book to move to long-term benefits as priority for investment, rather than preferencing short term returns on decision making. This will enable benefits gained in one area of preventative funding to accrue elsewhere, e.g. preventative funding in social care has direct impacts on health budgets. The Institute for Government (IfG) have emphasised that this technical change must now be extended from central to local government, health systems and police forces.
Looking ahead
The changes announced in this Budget were subtle, with very little new spending or support in the face of rising costs. But through its more technical policy changes, it has laid the foundations for a reorientation of spending priorities. This could make a real difference to communities when applied nationally and locally. The VCSE sector is a vital partner for local and strategic authorities, and we look forward to working with our members so that their strengths and skills are at the table from the beginning.
We will continue to analyse the implications of the Budget for NAVCA members and the wider VCSE sector.
* Those areas are Gloucestershire, Herefordshire, North and West Northamptonshire, Shropshire, Warwickshire and Worcestershire.
