Charities and the Cuts
A major new survey shows that the recession has increased the demand for charities’ services at the same time as the cuts and the increase in VAT will make it harder for charities to provide those services. The survey found that
not only will the sector be hit by departmental spending cuts, but also by decreases in other sources of income. This is largely due to market forces and decreases in the general public’s disposable income.
We expect that the cuts, particularly those to welfare, will increase demand for services, causing further pressure for charities to meet beneficiaries’ needs.
The survey, the fourth report in a series by the Charity Finance Directors’ Group, the Institute of Fundraising and PwC was carried out in August. The report, Managing in a Downturn: responding to life after the Comprehensive Spending Review, was published last week. Charities will be hurt by the cuts in benefits and tax credits and the 330,000 public sector redundancies. The Departmental cuts will hit hard, because important Departments that provide statutory funding for charities are taking bigger hits than the average. The average Departmental cut will be 19 per cent, but in Culture, Media and Sport it will be 24 per cent and in Communities and Local Government 36 per cent. The local government cuts are already leading to cuts in local authorities’ grants to charities – the report cites the example of Sheffield, where funding for voluntary organisations has been cut by 15 per cent.
The cuts, below inflation pay rises and households struggling to pay off debt will all feed through to lower incomes for charities. In addition, one third of charities expect the VAT increase to have a ‘major’ or ‘considerable’ effect on them.
The government essentially has two arguments to defend the cuts. One is that front line services won’t be affected, because “after thirteen years of Labour, there is a lot of wasteful spending, a lot of money that doesn’t reach the frontline.” The Sheffield example suggests that isn’t the case.
The other is that the Big Society will fill the gaps – precisely the sort of work that charities do. And that is happening already: the survey reveals that 39 per cent of charities say they have seen an increase in demand for their services due to the recession.
But 31 per cent of charities getting statutory funding say that one of the ways they will address the shortfall in public spending is by cutting back services. (For those that do not get such funding the figure is even higher – 40 per cent.)
Mr Cameron seems to believe that the cuts will open up space for the ‘little platoons’ to fill the gap. It’s rather analogous to Mr Osborne’s belief that the public sector is ‘crowding out’ private sector investment. And equally mistaken – the cuts are the enemy of the Big Society, not its friend.