How charities are doing more for less

By Charlotte Lamb, principal consultant for involvement and decision-making, New Philanthropy Capital (NPC)

This year half a million more children will be growing up in poverty, unless their parents' wages somehow keep up with inflation, according to the Resolution Foundation think-tank. This is a stark reminder that the people hit hardest by the cost-of-living crisis are those already on low incomes, who spend more of their money on food, housing and energy.

A recent Family Fund poll of families with disabled children found 40 per cent of respondents have gone hungry because there wasn't enough money for food and 92 per cent are struggling or falling behind on household bills.

Poverty creates its own issues, such as the huge impact on children and young people's physical and mental wellbeing, cognitive development, educational attainment and future chances of stable employment.

When things get tougher for children, young people and their families, the need for charities surges. According to the Charities Aid Foundation, 71 per cent of charity leaders worry how they will meet spiralling demand. Unlike with businesses, more demand doesn't come with more money.

Even before winter hit, we were already seeing rising demand for help with necessities. Food poverty charity, the Trussell Trust gave out 52 per cent more food parcels in the year to September 2022 than in 2019, half of which were to feed children.

Youth work charity UK Youth found young people are increasingly turning to their local youth centre for hot food, somewhere warm to do homework, or somewhere affordable to charge their phone.

Most shockingly of all, homelessness charity Centrepoint projected 8.5 per cent more young people aged 16 to 24 would be homeless or at risk of homelessness between October and December 2022 than the previous year.

It is not just physical needs that charities must meet. Financial hardship has knock-on effects too. Bristol youth charity Empire Fighting Chance told us how the loss of opportunities and hope is causing a rise in risky behaviour, gang activity and knife crime, leading to unprecedented police referrals to their service. Youth mental health charities YoungMinds, The Mix and Place2Be were among charities who wrote to the Prime Minister in December warning the cost-of-living crisis could heighten the risk of suicide.

Yet even as charities respond, the same factors that make life hard for children, young people and families also constrain their efforts. A rise in the cost of food, energy and petrol is a big problem if, for example, you run a school breakfast club, a youth centre or transport children to activities. Charities providing goods are also seeing prices soar. Children's clothing is up by seven per cent, babies' clothing by 15 per cent. It is no surprise then that a Charities Aid Foundation survey of sector leaders found four in five are concerned about the cost of energy, rent, fuel and wages.

Perhaps the most sensitive of costs is staffing, which according to the National Council for Voluntary Organisations (NCVO) accounts for 40p in every £1 charities spend. As staff face pressure on their own finances, charities may struggle to keep the people they need to deliver services. Charities working with families, children and young people will already be all too familiar with higher vacancy rates for youth and social workers. Will they be able to compete with better-paying sectors as this crisis drags on?

The government is offering support, which will benefit some children and young people such as help with energy bills. Charities have also won their campaign for benefits to rise in line with inflation, which is very promising.

For charities, the initial government support for energy bills was limited to just six months. NCVO and others successfully called for a 12-month extension – although this is at a lower rate. Whether charities apart from heritage and cultural organisations can access the additional support the government has discussed remains unclear. Meanwhile, the decision to freeze the VAT threshold and employer National Insurance threshold until 2028 will increase costs for some charities.

Many youth and children's charities deliver services for local authorities or the wider public sector. Our work at NPC on commissioning found two thirds aren't paid enough to cover the cost of the work. This could become dangerously unsustainable as inflation pushes charity finances to breaking point yet commissioners are unlikely to be able to pay more as their budgets will be tight too.

Commissioners should therefore expect to start seeing charities handing projects back if they can't be delivered with the existing budget. At our NPC Ignites conference in October 2022, Katie Ghose, chief executive of national disabled children's charity Kids, described how failing to build inflationary increases into the price of tenders meant they could not safely run services and so had no option but to not re-tender or pitch for some new opportunities.

Managing rising needs and costs with little promise of support from the government and concerns about the ability to fundraise will be tough. But as we saw in the pandemic, charities rarely fold. Looking at the impact of Covid-19 on charities, the Charity Commission found that while 60 per cent lost income in 2021, only 97 of the 170,000 charities in England and Wales became insolvent.

The lesson of past crises is that charities will find a way to put children and young people first. If we're clear about our priorities, if we use data, and if we allow insights from children and young people themselves to inform our decisions, then as a sector we can continue to be there for those who need us.

• NPC is a think-tank and consultancy for the charity sector www.thinknpc.org
  
  

TIPS FOR CHARITIES AND COMMISSIONERS

WHAT CAN CHARITIES DO?

• Communicate. Be honest about the impact inflation is having, the decisions you are having to make and how funders and commissioners can help you to keep supporting children and young people. You should be on the same page so you can negotiate a working solution.

• Find new income sources. You may want to liquidate existing assets, take out a loan or social investment or update your strategy for core income streams. Be creative and consider your attitude towards risk in pursuing new revenue streams.

• Review costs. Try to re-negotiate contracts with suppliers, switch to cheaper providers and explore in-kind support. Assess how you can redesign services to rely less on inputs with high inflation – energy, food and fuel – but be clear on where you can't cut without jeopardising impact.

• Do what you can to manage staff turnover. If you can afford to, prioritise pay increases for your lowest paid staff and introduce wider measures such as mental health support and financial advice. Otherwise, think about benefits that wouldn't increase your costs that much such as flexible hours.

• Collaborate and co-ordinate. Work with others whose vision aligns with yours to streamline your services, prevent duplication, and increase overall impact. If children and young people can be better supported elsewhere, signpost them to that support while you focus on your core offer. Work with your peers to push for change for children and young people; a collective voice can have an impact.
  
  

HOW CAN COMMISSIONERS HELP?

• Talk to charities. When contracting, include the voluntary sector early on to understand the needs you're trying to meet and how to get most impact with the available funding. Talk to charities that you already contract to understand how the situation is changing. Continued provision is a shared responsibility.

• Focus on outcomes. Consider how you can focus on outcomes rather than outputs. Allow flexibility to adapt services to maximise impact within pre-agreed budgets. This approach proved valuable during lockdowns and will be vital now. Flexibility here will help the “quality, volume and price” equation “add up” and is key to helping providers cover costs.

• Consider uplifts or other support. If you can, offer an inflationary uplift to your pre-agreed contracts. If you can't, allow services to be re-designed or consider where else you can offer support. For example, through providing office space or services like financial management.

• Offer longer contracts – but be aware they might end early. Multi-year contracts offer valuable stability, especially when updated each year for inflation. Be aware though that more charities are turning down extensions or ending contracts early due to changing context. You should set contingency plans to protect core services for children and young people.

• Change your processes. Think about how your commissioning processes can be more collaborative with local children's charities. Evidence shows that better processes lead to better impact for communities and can save money for local authorities in a crisis.

Compiled by NPC consultant Naomi Chapman

EARLY YEARS
CHILDCARE CHARITY PLANS MORE FOOD AND CLOTHING BANKS

• Charity London Early Years Foundation

• Works with 4,208 children aged up to four years old in 2021/22

• Income £27.1m in 2021/22

• Funding Includes £20m childcare fees, £0.6m donations and £6.2m grant income

For social enterprise and charity the London Early Years Foundation (LEYF), the cost-of-living crisis has compounded the already high cost of living and working in the capital.

Most – 77 per cent – of its nurseries are located in areas of deprivation. It offers fully-funded places for families most in need – about 35 per cent of children who attend.

According to chief executive June O'Sullivan, many competitor nurseries in these areas have closed due to funding issues exacerbated by the crisis so provision is in high demand.

It is costing LEYF more to offer nutritious food as families either go without or are drawn to cheaper less-healthy food, leading to obesity, which the organisation aims to mitigate.

While forming a fraction of its income, LEYF does benefit from donations and these have risen during times of economic challenge, allowing it to launch a scheme offering increased childcare hours.

It also has introduced seven food and clothing banks in recent years, which it has plans to increase.

In order to expand childcare places, there has been an increasing focus on building partnerships including when it comes to SEND support.

Staff are often drawn from “Zone 6 and beyond”, where it's cheaper to live but travel costs are high, says O'Sullivan.

Pay and benefits have been reviewed to attract and keep quality staff at LEYF, but O'Sullivan says this has its limits as government-backed funding rates are less than half the London Living Wage.

LEYF staff were given a cost-of-living uplift to wages in October 2022 and there are other benefits including discounted childcare for children and grandchildren of staff. This increased to a 70 per cent discount in January.

When it comes to doing more for less, O'Sullivan says charities need to focus on what they do well and do more of it and should not be afraid to “trim” where necessary.

“Think about costs – are the costs of roles, resources or services no longer adding value to the core mission?” she says.

YOUTH WORK
CENTRE IS SUPPORTING MORE YOUNG PEOPLE IN DIFFICULTY

• Charity New Horizon Youth Centre

• Works with 1,221 young people aged 16 to 24 in 2021/22

• Income £2.9m in 2021/22

• Funding Mix of trusts and foundations, individual and corporate donations and statutory funding

Young people in London are accessing New Horizon Youth Centre's homelessness services in rising numbers since the cost-of-living crisis took hold.

Some 62 per cent of new service users received support for financial hardship between April and September 2022 compared with 55 per cent in the same three months in 2021.

In 2021/22, the organisation helped 1,221 young people compared with 1,088 in pre-Covid 2019/20.

“We know they will be hardest hit by this crisis and we're already seeing that every day in our day centre,” says Meghan Roach, the charity's director of operations.

Of particular concern are higher food costs. “More young people are coming to us to eat, often their only hot meal of the day,” says Roach.

Nevertheless, the coming year's income has been maintained, which Roach explains is partly due to the organisation's diverse income base. This, alongside fixing its fuel rates until 2024, is helping the charity avoid cost-cutting – so far.

Remaining sustainable, competitive and effective in an already crowded sector is key to its approach and Roach says it continually adapts.

For example, it has been closely monitoring its blended offer – combining remote and face-to-face delivery – and found the post-Covid demand for in-person services has returned quicker than anticipated. “Tweaks” have been made to get the balance right.

Investment is directed to high-impact services such as the Young Londoners' Winter Relief scheme, which is awarding cash grants of up to £300.

Partnership working is at the heart of its strategy with the charity leading the London Youth Gateway, a collaboration between seven leading youth homelessness services. “This is an efficient and cost-effective way of working at scale to meet demand,” says Roach.

EDUCATION
MENTORING CHARITY SEEKS TO DIVERSIFY FUNDING STREAMS

• Charity The Kids Network

• Works with 475 primary school children aged 8 to 11 in 2021

• Income £446,940 in 2021

• Funding 70 per cent from trusts and foundations including the National Lottery with the remainder largely from corporate, individual and community fundraising and partner school contributions

Mentoring charity The Kids Network is expanding its capacity from working with 475 children in 2022 to 700 in 2023 to accommodate “ever-growing” demand for its services, says development officer Adam Jack.

The organisation fills an “urgent gap” by providing early intervention mentoring in areas of high socioeconomic inequality across seven London boroughs, he explains.

It works to build primary-aged children's self-confidence, resilience, and capacity to build positive relationships against a challenging backdrop of family pressures compounded by worsening poverty.

Growing its fundraising team and diversifying funding streams are part of its financial strategy for the expanded service. While the organisation uses volunteer mentors, the extra funds are needed for additional programme managers alongside other key roles.

It has so far managed without cutting costs and has attempted to future-proof against funding cuts by diversifying income.

Increasing numbers of referrals for tailored one-to-one support continues a trend seen during Covid, which triggered a huge increase in referrals. In 2018 the charity delivered one-to-one support to 30 children but expects to work with 680 this year.

“We are seeing an increase in mental health needs and are already seeing an increase in safeguarding concerns,” says Jack. “This number will only increase as low-income families fall deeper into financial insecurity, with families working longer hours, mental health problems on the rise, and incidents of domestic violence becoming more common.”

The charity has given staff on lower salary bands a pay rise to help ease the impact of the crisis on them. It also tries to match local volunteers with children in their local area, to reduce transport times and expenses, which it reimburses.

FAMILY SUPPORT
CRISIS MAKES IT HARDER FOR FAMILIES TO ESCAPE ABUSE

• Charity The Haven Wolverhampton

• Works with women and children affected by domestic abuse

• Income £2.8m in 2021/22

• Funding Via contracts with the local Police and Crime Commissioner and local authority as well as donations and grants

In 2021/22, domestic abuse service The Haven Wolverhampton responded to more than 11,000 calls to its helpline, provided 542 women and children with accommodation and received more than 550 referrals to its counselling service.

However, demand for its services continue to outstrip available provision. So far, funding has remained stable and it has not needed to cut services.

However, higher living costs have precipitated more complex cases. “We're seeing women and children need our accommodation for longer and there's an increased need for basics,” says chief executive Popinder Kaur.

“With the soaring cost of rent and utilities, it's harder for many women to start their journey to independence, particularly for those who are looking to rent privately. We are finding that more women are relying on us for essential toiletries and food parcels.”

Kaur says that in future, staying cost-effective is “crucial” and the charity will look to make efficiency changes, such as improvements to buildings.

There is also an ongoing review of staff roles, ensuring frontline provision is efficient and that all tasks “make as much of a difference to the women and children we support as possible”.

Staff received a three per cent pay rise this year, in an attempt to offset some of the pressures they are also facing.

Alongside this, the organisation has invested in two positions – in HR and data analysis – which will help improve staff wellbeing support.

“Given that our staff are vital to the wellbeing of the women and children we support, we need to look after them,” says Kaur.

“We need to retain their expertise, skills, knowledge and empathy, which are all so crucial to the women and children accessing our services as they recover from the trauma of domestic abuse.”