Last week Prime Minister Gordon Brown admitted something that everyone already knew: that there will be cuts in public expenditure. If the last decade in government was about what to spend money on, the next ten years is about what not to spend it on.

A lot has been written about where the axe should fall. Front-line services in the NHS and schools are likely to be spared, but almost everything else looks vulnerable. The UK charitable sector has got used to voluminous public spending – at the last count amounting to more than 38% of its total income. As spending is curbed, many charities will be hit hard.

The political debate around cuts is fascinating but the practical aspects are what we should be thinking about. One neglected part of this is the far-reaching implications for trusts and foundations.

Perhaps the dominant model in grant-making over the last decade has been to fund the start-up costs of a new programme or organisation, and then look for central government or local authorities to pick up on its success and provide continued funding. But in a world of less generous public spending, this may no longer be a reliable strategy.

So what are the alternatives? Trusts and foundations must think about new models to sustain their impact. I can think of four possibilities, all of which already exist in some form. These are:

  1. Focusing grant-making where government has indicated is a priority and cuts will be less severe;
  2. Forging stronger alliances and partnership with other grant-makers that can commit to longer term funding ;
  3. Focusing on ‘voluntary’ organisations, where future work can be sustained through volunteering; and
  4. Looking towards a model of social enterprise to create businesses with a social impact.

As the strings of the public purse become less yielding, trusts and foundations will have to adjust. To create sustained impact, finding new exit strategies is arguably the greatest challenge that they face.

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