How to measure the health of the charity sector

With the relaxation of Covid-19 regulations on Monday 19 July, this is the first week of ‘freedom’ we (in England) have collectively experienced since the first lockdown of March 2020. It’s something I, and I imagine we all, have been looking forward to for a long time. And yet, I’m not really feeling it, and I don’t think many people are.

The reason for this is quite simple—the number of positive covid cases keeps rising and rising. In the end, thanks to the vaccines, this may not be the problem that we have all become accustomed to treating it as. Or maybe it will. Ultimately, we will continue to live under the shadow of this number for some time to come, whether we fully understand it or not.

Bearing in mind NPC’s interest in the well-being and productivity of the charity sector, I wondered if a similar number can be found to help us better understand the health of our sector, as England takes this big step towards its freedoms.

The quest for a number

The financial health of the charity sector seems an obvious place to start. If charities are not financially sound, they can’t help people to the best of their abilities. However, it is surprisingly hard to find rigorous and up to date information about income in the sector. We have good data in the NCVO almanac, but it has a two-year time lag. Lots of polls have been run recently, which generally share worrying results from charities, but it is very hard to do these in a way that represents the whole of the sector accurately.

On giving, we also struggle to find out how this has changed recently. This is unless individual charities report falls in their income. Meanwhile, CAF’s UK Giving and Covid-19 report from 2020 (now somewhat out of date) which polls donors, suggests that charity donations may have actually increased between January and June 2020.

There was rightly a great deal of worry about the impact of the lockdowns on events fundraising. Unfortunately, it’s also pretty difficult to work out how much events fundraising is currently contributing to the sector. We know about high profile events, such as the virtual London Marathon in 2020, which raised £161m for charities but this is only the tip of the iceberg when it comes to the total money raised for charities through events and sponsorships.

A lot (but not all) of the data on this is held by major giving platforms such as JustGiving, GoFundMe or Virgin Money Giving and frankly they could be a lot more forthcoming about how much gets raised for different events. In June, JustGiving reported a 157% increase in the number of appeals between March 2020 and June 2021 compared to previous years. However, they don’t tell us what these appeals were in aid of. Plus, GoFundMe recently reported ‘spikes’ in the number of appeals using words like ‘rent’ and ‘bills’, suggesting an increase in personal appeals on these sites rather than charity fundraisers.

On government funding for charities, last year we found that charities which got a large share of their income from the government felt more ‘insulated’ from the pandemic. It is worth noting here that any post-pandemic belt tightening might have a very negative impact on some charities.

Redundancies and closures

A simple, if brutal, metric we could use to understand the health of the sector would be charity closures and redundancies. If the sector is at reduced capacity, services and those who rely on them will be adversely affected.

Again, we are somewhat hamstrung by a lack of data here, charities do not appear as a sperate category in most labour market statistics. Modelling by Pro Bono Economics suggested that as many as 60,000 people in the sector could lose their jobs as a result of the crisis (out of approximately 900,000, so roughly 7%). At NPC, we monitored all the publicly announced redundancies in the sector from March 2020 to the end of 2020 and we reached a figure around 7,000. New redundancy announcements have been made since then though, and indeed even some this week.

Charity closures are another area where things are tricker than one would like. Charities tend not to spectacularly go bust (though of course this does happen occasionally). What is more common is that charities wither as their incomes reduce, leading to reduced services. Eventually perhaps they do fail or they limp on with a smaller team, doing less but still doing something.

That said, more than 13,000 charities missed the deadline to submit their financial documents in January 2021, more than double the number that missed the deadline last year. This could be an indicator that these organisations are in some sort of financial difficulty, brought about by the crisis. The Chief Executive of the Charity Commission also recently revealed that the ‘percentage of charities with incomes of more than £500,000, which had either negative or no free reserves, had increased from 9% in April last year to 28% this March.’

A fool’s errand

By this point, you might be wondering, can the health of the charity sector ever be summed up in a single number? Well no, as you can see, probably not.

Charities are all so different in size, delivery model—in most conceivable ways really—that talking about a ‘sector’ is probably (in my view) misleading in a lot of cases. But the ‘sector’ would benefit from having more up to date data on its operations, even if there can be no single metric that adequately demonstrates the current health of the country’s charities.

Being able to answer basic questions about income, redundancies and operations in a timely fashion is all part of standing alongside businesses and government as a major force for change in society. These metrics, if we can get hold of the data, will offer us valuable insight into how charities are faring as we move into a restriction free England. If the crisis is to have any silver linings, it will hopefully be that we recognise the need for more data that can enable us to review the health of our sector.