The cuts are coming… What do they mean for charities?

By Clare Yeowart 25 May 2010

So, the first round of public spending cuts (or, as the government prefers to call them, ‘savings’) have been announced: George Osborne and David Laws yesterday unveiled details of £6.2bn of savings they want to make in 2010-2011.

Over the last few months, lots of people have been asking us what the cuts will mean for charities. We all know that they cannot escape unscathed, and that cuts could have a very damaging impact on the 38,000 voluntary organisations that have a direct financial relationship with the state. Particularly as 23,000 of those get over half their income from government.

We also know that certain types of organisations are likely to be more vulnerable than others. Charities that do preventative work, for example—after all, when it comes to the crunch, it’s difficult to save a programme that may not yield results for five or ten years at the expense of support for people in crisis. Similarly, it seems likely that charities that deliver clear cost savings—such as reducing crime or getting people into employment—have a better chance of keeping their funding than charities doing less tangible things like improving self-confidence and social skills. Though, of course, all these outcomes are interlinked.

But we’ve found it’s hard to give a more precise answer to questions about where the axe will fall. Have yesterday’s announcements made anything clearer?

As many in the media have been quick to point out, Government has focused on the ‘low hanging fruit’—cutting the costs of consultancy, travel, quangos, recruitment and so on. No big surprises there. Until further details about departmental savings are published, the full implications for charities won’t be obvious. But I just thought it’d be worth flagging up a few initial points at this stage.

First off, it’s interesting to see that a flagship ‘early intervention’ programme, Sure Start, is being protected. Indeed, its funding will continue to be ring-fenced, so local authorities can’t choose to divert it to other services—despite the fact that other restrictions on how local government spends its money are being lifted.

Secondly, the removal of these restrictions on local government funding makes it even more difficult to generalise about where the axe will fall. More than ever, this will depend on local priorities. In theory it should mean that councils have greater flexibility to respond to local needs. This is obviously a good thing. But how will it pan out in practice, and does it heighten charities’ uncertainty about future funding?

Finally, Communities and Local Government (CLG) is facing one of the biggest cuts—£780m in 2010-11—second only to Business, Innovation & Skills. CLG has an important role to play in working with local communities and the charities that support them. All we know so far is that the main £29bn grant to Local Authorities will not be cut. So where will the savings come from? What will happen to the charities it funds? And what does all this mean for David Cameron’s vision of the Big Society?

As we approach the budget on 22 June we will be keeping an eye out for information that will help us answer these questions. Watch this space and please do join in the debate!

Postscript, Wednesday 26 May: I’ve just seen that Karl Wilding, Head of Research at the NCVO, has started a really useful new blog analysing the implications of public spending cuts for the third sector. It’s definitely worth checking this out. Drawing on Treasury data and the NCVO’s own estimates of departmental funding, he suggests that the sector may face in-year cuts of £148m, equivalent to 0.4% of total sector income this year, or 1.2% of statutory income. Karl wants to build up this picture from the ground, so, from tomorrow, charities will be able to submit their own data too.