Beating the cuts

By Guest contributor 15 July 2013

By Jenny North, Director of Policy & Strategy for Impetus – The Private Equity Foundation.  

It doesn’t take long to become inured to big numbers. If you’d been told 5 years ago that between 2011/12 and 2017/18 Local Authority spending power would decrease by 50%, you’d have been shocked – wouldn’t you? But when the recent Comprehensive Spending Review for 2015-16 announced a further 10% cuts to LA budgets, in addition to the 33% already imposed, it made front page news only briefly.

The speed and scale of these cuts is unprecedented. And voluntary sector organisations delivering services under local authority contracts, or in receipt of grants, will not escape their effects. NCVO estimates that charities’ income from government will be 12% lower by 2017/18, and many will experience far greater falls in funding.

The new report from Impetus – The Private Equity Foundation, Beating the Cuts, illustrates the reality of that drop in income for charities. Based on the experiences of two of our portfolio organisations, Street League and Teens & Toddlers, both of whom lost sizeable income streams around 2010, the report demonstrates how to build resilience in the face of cuts.

The funding we provided to these organisations was not enough to mitigate the end of a government strategy which had seen contracting or grant opportunities proliferate. In these circumstances, the management support and pro bono expertise that Impetus-PEF supplied were far more critical. Although both charities faced specific challenges, principles emerged that any organisation could use as a guide:

  • As Diana Whitmore, Chief Executive of Teens & Toddlers, says: ‘You have to keep refining and strengthening the funding proposition.’ This is not about bending your offer to fit any commissioner’s priorities. It requires a strong focus on outcomes and evaluation. Knowing what your service actually achieves allows you to identify new commissioning and grant opportunities in a changing policy environment.
  • Matt Stevenson-Dodd, Chief Executive of Street League, says: ‘Focus on outcomes and doing one or two things really well rather than trying to be all things to everyone.’ Many charities are delivering one or more activities with no evidence of efficacy – stopping these is a crucial step towards cost-efficiency.

There are more lessons for charities in the report. But while talking to Street League and Teens & Toddlers, it became clear that there were actions that commissioners must take as well – not only to avoid demoralising their local partners in the voluntary sector, but to enable innovations in services, essential for any Local Authority trying to navigate the cuts without abandoning the most vulnerable. These include:

  • No salami-slicing: most well-run charities have already cut their costs, and there is almost no scope to deliver the same services at a lower price. Instead:
  • Commission based on outcomes, not on cost. For the two organisations in our report, more intensive interventions have proven much better value in terms of cost per outcome than apparently cheaper “light touch” approaches.
  • Payment by Results must be made easier for charities to handle – contrary to popular belief, many charities have the capacity and willingness to be paid by results. But the practical and financial barriers to entry can be forbidding.

Commissioning better services, more cost-effectively, requires partnership between commissioners and delivery organisations. Getting to 2017-18 with local services that do not fail those who need them most depends on this. Maintaining a clear focus on impact for beneficiaries is the best route for sustainability for charities facing cuts now or in the next couple of years. More importantly it’s the best reason not to go out of business.