Why government and philanthropists must come together for charities now

The country is in a very deep crisis. Our number one priority is rightly trying to avoid as many deaths as we can. But at the same time we must do our best to minimise the decimation of the rest of our economy and society as we struggle through this process.

The kind of approach the government took in response to the 2008 Financial Crisis must come into play again, and the Chancellor’s announcement of a major financial package £330bn (15% of GDP) of state guarantees for bank loans to firms will go some way to doing that. But as many charities have rightly been pointing out, its focus on businesses largely ignores the huge social sector we have in the UK. There are hints there will be something specific for the charity sector from government very soon. This will be vital for charities, both to tackle the crisis, and simply to stay afloat.

But as well as government support, there is a wealth of support that philanthropists could provide as well. And there are promising signs from the philanthropy world.

It is heartening that many independent funders have rallied around, not only to fulfil their commitments to charities, but to do what they can to make life easier for them. At the time of writing, 150 funders have signed a pledge by London Funders committing to adapting around charity’s needs, flexibility on reporting deadlines and financial restrictions and to open communication.

This is a fantastic first step and will alleviate some of charities’ worries. But the squeeze on funding could go beyond the cancelling of fundraising events in the first few months of the crisis. The government has reacted as it has because this is an economic crisis as well as a public health one, and we know from the experience of the 2008 financial crisis that a recession will have an impact on charitable giving.

CAF research from 2009, suggested that giving was down 11% in the first year of that crisis. In the United States, IRS data suggest that giving by people with incomes of over $200,000 fell by $31bn from 2007 to 2009 and other research suggest it took until 2015 to return to pre-crisis levels.

It seems almost trivial in the face of the challenges faced by people directly affected and the heroic efforts of front line workers, but philanthropists and funders also face pressure from the crisis. With the FTSE100 down about 2000 points since February and the Dow Jones about 8000, their value, and what they are able to give, is diminished. Which is why it is appropriate, even among the ongoing to crisis, to ask what we can do to stop a contraction of philanthropy and do whatever we can to help private money into tackling the crisis, and supporting charities in the aftermath. And to ask what government can do to support this.

In a crisis, funders, the government and even the general public want to support the response but often don’t know what to fund. This can sometimes reduce the amount they give, and when they do act it may mean they don’t give as effectively as they could.

At NPC we are working with philanthropists and partners on how they can more effectively fund charities now. And we want to hear more ideas about what can be done.

Because without them, charities are going to be in big trouble.  They typically have virtually no or very limited reserves. Most don’t have assets to take loans out against – and very few do have such loans.   Many are reliant on fundraising through events that now can’t happen. Many get support from bits of the public sector – especially local government – but these are going to be under severe pressure in the next few months.  Many charities get some of their income from contracts too – and they have business models based around new ones being won to replace old ones coming to an end. They too will be looking at whether other priorities will mean no new contracts are available.

Some areas within the charity sector will have specific issues around coronavirus – from those working with adult social care to those working with the homeless. We need them to continue to help us get through the crisis and beyond, yet many will be under severe financial stress let alone personal stress.

This is an irreplaceable sector – employing three quarters of a million, delivering crucial services, harnessing and enabling armies of volunteers. It is often the heart of a local community; charities are often the glue that keeps our society going. I know from my time in government that they tend to get pushed down the priority lists – they are not seen as key by the Treasury, they have weak lobbying power within Cabinet, it is thought that they will somehow survive anyway so they can be left alone. This is a major mistake. Government can’t stop all the pain that will happen as we rightly try to fight off coronavirus, but they need to work with the philanthropy community to develop a package for the sector and they need to deliver it now.

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