The media gather for the Chancellor's speech on College Green outside the Houses of Parliament in Wesminster, 12 noon.

Today is the most important day for the UK charitable sector in 13 years. As I type, the Chancellor George Osborne has just finished his announcement to the House of Commons on cuts to the UK budget.

Like many, I’ve been glued to the TV set. Given that government funding makes up 38% of the UK charitable sector’s income, and 13% of charities get over half their income from government, it is difficult to underestimate the significance of the speech.

This is a summary of the main points for charities:

  • Local councils will get a 7.1% a year reduction to their budgets every year for the next four years. The Chancellor pledged to remove ring-fences from council budgets from next year, with the exception of the schools and public health budget.
  • The voluntary and community sector will benefit from a new £100m one-year transition fund to help cope with the changes
  • Whitehall departments will lose £6bn, with the Home Office, Ministry of Justice, the welfare bill and capital spending on social housing and prisons hit hardest. Each department will publish a business plan next month identifying the source of cuts.
  • Spending on the NHS and schools budget will both rise and there is an additional £2bn commitment for social care over four years.
  • As anticipated, the Chancellor confirmed changes to structures of government services – GPs will take charge of health commissioning and personal budgets will be expanded for children with special educational needs and adults with long-term care needs.
  • The ‘Big Society’ was mentioned only once at the start of the speech, although Osborne reiterated the point that we ‘are all in this together’ several times.
  • Also… there will be an estimated 490,000 fewer public sector job in four years time, more quangos will be axed, there is money promised for mental health therapies and dementia, Train to Gain is to be axed, there will be more than 75,000 new adult apprenticeships, and programmes for pre-school children receive a cash boost.

So what does all this mean for charities? There are two things I want to pick out from between the announcements.

First, although the Chancellor pledged to support charities, the scale of cuts means that organisations that provide what could be labelled by government commissioners as ‘discretionary’ services should brace themselves. By that, I mean services that government is not, strictly-speaking, obliged to provide. Youth work, short breaks for the families of disabled children and crime prevention projects, for example, all potentially fall into this category.

Second, and related, are we going to see the end of many preventative services? A feature shared by many discretionary spending items is that they aim to act now to stop problems occurring in the future. An example of this is domestic violence advice for women that prevents a cycle of abuse from escalating, or work with young people on the verge of exclusion from school.

But as money becomes tight, we know from past experience that budget holders tend to focus on crisis not prevention. Perhaps the biggest challenge to policy makers is not to fall prey to the disease of short-termism which so often seems to be to a trait of our political system.

If government stops funding preventative work it won’t just be a shame, it will be a disaster. It’d be yet another burden to pass on to the next generation who already have enough problems not of their making. Remember the adage: if you think prevention is expensive, try paying for the cure.

After two years of fear and speculation, today we have had some real clues to the future shape of the charitable sector. It is clear that no stone will be unturned in the search for savings. We’ll learn more in the coming weeks and months, for example when the Scottish Budget is announced in March and when many public contracts are up for renewal in the spring. This is just the start.

For more commentary from NPC on the cuts and the impact of the economic downturn, read our cuts paper published on Monday or previous blog entries.

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