Charities have always played an important part in helping to keep the social fabric of the UK together.
They have often worked tirelessly between the lines of the public and private sectors, picking up slack or filling in gaps whenever the need arises and their collective work over the last few pandemic affected years have been critical for so many people and organisations.
After Covid-19 subsided, there was some initial thought that their services would be less in demand and give them a chance to rebuild their economic and human capital and spend time recovering what had been used in every direction and avenue.
Instead, many are being pushed to the brink of their economic existence because many are finding the demand for their services literally overwhelming.
Why are charities continuing to be at the forefront of societies’ problem areas and why are they not receiving the essential support that many claim is their proper role – as a last resort rather than a first call?
Number of insolvencies other social work activities without accommodation
Figures from The Insolvency Service *up to and including September 2023
Looking at the number of charity insolvencies we can see that during the “covid years” they have consecutively decreased in each year from 2019 but began to rise again in 2022.
Up until the end of the third quarter of this year we can see that they have already surpassed the entirety of 2022’s total and may even end up being double that amount in the final analysis.
Charity at the cliff edge
Many charities in England are on the brink of insolvency after subsidising underfunded local authority and NHS contracts to the tune of hundreds of millions of pounds donated to them by the public, voluntary sector leaders have warned.
Donations, will legacies and charity shop profits are being used to prop up thousands of state-funded services that are in danger of closure, including care homes, homeless shelters, addiction projects and physical rehabilitation support schemes.
The refusal of local authorities, the NHS and government departments to fund the real cost of local service contracts – and the built-in assumption that voluntary sector will deliver “on the cheap” – was threatening the existence of vital local services, the National Council for Voluntary Organisations (NCVO) said.
“It’s potentially catastrophic for communities if these services stop,” said Sarah Vibert, the chief executive of NCVO. “Many services, like homelessness interventions and support for victims of domestic violence or sexual abuse, wouldn’t currently exist without charities.”
She added: “For too long, the goodwill of charities has been taken for granted. [Public sector contract managers] know charities will do everything possible, including subsidising public services with charitable funds, to prevent closing their door to someone. But this can’t continue.”
Although charities have been embedded in delivery of public services for years, the scale of the funding gap has pushed many charities to the edge as inflation and demand has soared, and councils and NHS bodies, many in financial crisis themselves, slash grants and refuse to uplift the value of contracts.
Charities fear more will follow in the footsteps of Leonard Cheshire, the social care charity that has been forced to shut care homes and evict vulnerable residents as a result of a financial crisis caused when its multi million pound subsidy of hundreds of underfunded council contracts became unsustainable.
A detailed NCVO survey of its members reveals bitterness and frustration among charities who feel their focus on the needs of vulnerable beneficiaries is exploited by public bodies which routinely expect charities not to charge for the full cost of the service or to deliver it for “next to nothing”.
The survey of more than 330 charities found:
- The vast majority were subsidising the cost of providing public services. Nearly half had not received an uplift in the value of the contract in the past two years, despite increasing demand and rising wage and energy costs.
- Contracts were often only viable by freezing or cutting staff pay and conditions. One charity made a senior member of staff redundant, then took them back on as a volunteer to do their old job to keep vital services afloat.
- A social care charity started a public fundraising campaign, and sold a building it owned, to raise the cash to maintain a service the council would only part fund. “[We are] not sure we can carry on unless something changes,” it said.
Although there is sympathy for councils and NHS bodies which are themselves in dire financial straits there is anger at public sector “double standards” that accept private contractors must make a profit while routinely expecting charities to run services at a loss, with donors picking up the tab.
A government spokesperson said: “We are backing the NHS with record funding. The NHS resource budget in England will be £165.9bn in 2024-25 – and that doesn’t include the additional £8.1bn for adult social care and discharge over two years.
“Local authorities have seen an increase in core spending power of up to £5.1bn or 9.4% in cash terms on 2022-23, with almost £60bn available for local government in England.”
If you’re running a charity and are feeling the increased pressure, the good news is we’re there to help when you need it.
We offer a free initial consultation for anyone with an ownership interest in their business or within a charitable organisation to discuss what unique issues they face and how they can best get to grips with them.
Charities function like businesses in several ways but differ in other important factors – we know and understand all of them and can advise a charity that is struggling to meet its service provision or other commitments what options it has and how it can implement them quickly and effectively.
Our experienced and knowledgeable advisors will work with them to understand the facts then look at a roadmap to recovery outlining the sensible, measured steps to take to get back on the path to success.
Allowing them to concentrate fully on their primary missions.