What’s in store for the charity sector?

Digging into the details of the Spending Review

22 October 2010

Wednesday we gave our reaction to the Spending Review announcement. Today we dig into more detail about what the cuts and changes will mean for charities.

John Copps on how education charities might be hit

The schools budget and support for early years are among the few areas of government to benefit from Wednesday’s announcements, albeit very modestly.

There will be a 0.1% increase every year for schools, and more money for pre-school children. But this includes a ‘pupil premium’ for disadvantaged children – which looks like it is simply a reallocation from existing programmes. Elsewhere, there are overall savings of 12 per cent over the next four years in the non-schools budget.

Charities will find have to react fast to these changes. The organisations that will be most resilient will be those that sell directly to schools, chiefly because the heavy cuts to local authorities. To do this requires a good marketing strategy and an in-depth knowledge of how schools work. A trustee board and staff including teachers will be valuable.

I also fear that the ‘nice-to-have’ services won’t survive, as education budgets pick up some of the slack from elsewhere. For example, charities’ work with the most disadvantaged young people may be forced to become shorter and sharper as local authorities refuse to pay for longer-term work.

Angela Kail on the impact on charities working in the community sector

It’s hard to tell what will happen to charities working in the community sector, because one of the main themes of the CSR is further localism. There will be big variances in the services commissioned nationwide. Charities will have to fight their corner with their local authority—without being able to rely on a umbrella body to make their case to central government. With 7% cuts to local authorities’ budgets, areas that might be considered ‘discretionary’ will be cut. We can expect this of community development, financial exclusion, and parenting work. Even older people who have done relatively well out of the CSR, may find some services that older people charities provide, such as befriending, may be considered discretionary spending by local authorities.

Charities who help people through the court process, especially asylum seekers, will be badly hurt by the legal aid reforms. The National Association of Probation Officers have said: “The severe cuts to legal aid…will mean some individuals will have minimal or no representation in court.”

The changes to housing benefit will have charities in the homelessness field worried. While some people might think it reasonable that single people under 35 on housing benefit can’t get a flat on their own, it’s difficult for vulnerable people, such as domestic violence victims, to share houses, and takes a lot of work to make sure the other people in the house are suitable. The homelessness sector will need to think about how it can provide more support to vulnerable people.

The large cuts to the justice budget mean fewer people going into prison, but also less funding for the probation service. We can only hope that local authorities and the probation service provide more help to stop ex-offenders re-offending rather than retrenching.

Sure Start, the education system for pre-school children, is facing cuts of 9% and a refocus on the most disadvantaged children. Charities which deliver these services will have to cut back and make sure they are targeting the poorest.

Iona Joy on the impact on health and social care

On the surface it looks as if health has had a lucky escape. There will be a real increase in spending, a £200m fund for cancer, and expanding access to psychological therapies for people with mental health problems.

So do health and social charities have anything to worry about? In a word, yes. The switch from service commissioning from Primary Care Trusts to GP consortia will be no small headache. And the beneficiaries of health and social care charities – the long term sick, disabled and elderly – will have plenty to worry about.

£2bn extra for social care sounds generous (NB £1bn coming from the NHS). But most social care is funded by local authorities, which are facing a 7% reduction year on year – cumulatively 28%. So some local authorities may still reduce services or put pressure on service providers to lower their prices, not least in the expectation that the £2bn might plug a gap. I worry that it won’t, and so does Mencap.

Disabled people and older people will be affected by the substantial cuts to the welfare budget. Scope for instance is incandescent about changes to the mobility allowance for disabled people. The CSR claims that it will protect the most disabled people’s allowances, but who will be the judge of eligibility?

Employment is one of the issues that bother disabled people and people with mental health problems the most. Many want to work, and it’s frequently charities that help them to do so. But the news for charities running employment schemes is sparse. There is mention of a Work Programme to help the long term unemployed and disabled people, and how charities might be used to deliver this, but no mention of how this will be funded. With local authority budgets being cut and plans for the Work Programme somewhat vague, I’m concerned that some services will be lost.

John Copps once again on how the cuts will affect local authorities

Local authorities have taken a huge hit in the spending review. 7.1% cut per year for four years. Easy to overlook but undoubtedly the biggest blow to charities – around 80% of government income in the sector is from local sources.

All organisations reliant on local authorities will suffer. Following the Chancellors announcement, KPMG issued a stark warning to the private and charitable sector saying that “several financial collapses of companies and organisations within the local government supply chain will result over the near term.” I agree.

Also significant is the decision to un-ring-fence budgets. This new freedom has been widely praised by councils themselves but the ramifications for some charities may be devastating. For example, the failure to protect social care is already causing ire.

In the coming years, I anticipate local government will retreat from ‘discretionary’ services and be forced to focus more or crisis than prevention, as we have already argued.

In a wider context, local government will face terrible decisions, such as whether to cut grants to libraries or victims of domestic violence. Or whether to invest in reducing homelessness or collecting the bins.

And Iona again talking about changes to the sector’s capacity

There is £470m allocated for capacity building in the voluntary and community sector, including a £100m transition fund. This sounds promising – the sector is going to need it. In all honesty the sums won’t make up for what is being cut.

Also the Office of Civil Society is slashing its list of strategic partners, which will erode much of the sector’s infrastructure. NPC is also worried about local infrastructure vanishing – for instance local authorities will be tempted to cease funding CVSs, and the demise of the Regional Development Authorities are also having an effect.

But in the meantime I just hope the £470m capacity building pot is going to be run really well. So here are some pleas to whoever gets to run the fund:

–         Learn from the funds’ predecessors – Capacitybuilders, Targeted Support Fund. NPC evaluated an emergency recession fund recently (to be published in due course) for small charities and found that you can do a lot with modest sums.

–         Provide appropriate funding for the different segments of the charity market. The needs of a £20m 90% statutory funded service charity will be different to a £100,000 community organisation.

–         Allocate some funds to help charities evaluate and evidence their impact. We know that in the medium term government will be looking for evidence of results. But charities constantly tell us that they can’t get anyone to fund evaluations, data collection, measurement systems and so forth. To allocate scarce resources well, we need to know what works, but it costs money to find this out!

–         Do make the application process as painless as possible.

It will be a fascinating – and difficult – to parcel out these sums. I predict that demand will outstrip supply so selection will be important. NPC believes a spot of charity analysis on the large funding requests might help here: to determine the relative merits of candidates and also understand what aspect of the organisation needs strengthening.