Alternatives to government funding sought to fill hole in charity finances

Laura McCardle
Tuesday, December 17, 2013

The dual challenges of rising demand for services and reduced state financial support are creating a perfect storm that could sink all but the largest children's charities over the coming year, warn voluntary sector leaders.

Christmas is the season of giving, and at this time of year many charities try and tap into this goodwill by raising their public profile in an attempt to encourage extra donations.

But making themselves more visible in a bid to boost fundraising could become a year-round necessity for many charities if they continue to feel the brunt of government funding cuts.

When Children England, a membership organisation for the children, young people and families voluntary sector, asked its members to identify their biggest challenges, 72 per cent selected reduced statutory funding.

This came second only to a rising demand in services (75 per cent), which, along with funding cuts, presents a "perfect storm", according to Nick Davies, policy manager at Children England.

"While not all charities are affected, many of those that are play a vital role in local child welfare and protection systems," he says.

"With further deep cuts still to come, we are hugely concerned about the long-term social and financial costs for children of service rationing and withdrawals."

In May, the National Council for Voluntary Organisations (NCVO) published an update to its 2011 Counting the Cuts report, extending its earlier predictions for the future of the sector.

Based on the latest economic forecasts from the government's independent fiscal body the Office for Budget Responsibility, data on charities' accounts and statistics from local authorities, NCVO estimates that charities' income from government will sit at £1.7bn in 2017/18 if cuts are made proportionately, which is 12 per cent lower than it was in 2010/11.

"Because local authorities' budgets have been hit so hard, many charities have experienced a knock-on effect from that and charities that previously received grants from local government are likely to be the most affected by the cuts," explains Charlotte Ravenscroft, head of policy and research at NCVO.

"Obviously, it will depend on the individual organisations, but we know that charities are under a great deal of pressure and many have experienced cuts to their grants, particularly at a local level.

"Charities are responding to that by trying to raise their fundraising income and diversifying their income so that they are more sustainable in the longer term."

According to Ravenscroft, the cuts to statutory funding, particularly to children and youth organisations, are forcing charities to "adapt, diversify, innovate and fundraise".

Claudia Wood, deputy director of think-tank Demos, goes further, saying funding pressures "have changed the landscape beyond all recognition".

"Trying to do much more with much less will certainly lead more charities to make difficult decisions about how they prioritise their activities - campaigning or raising awareness are luxuries many cannot afford when they are struggling to provide frontline support," she explains.

"Over the longer term, this could change the face of the voluntary sector. The divide will grow between the largest national charities - which will soon be the only ones left with the capacity to bid for contracts - and smaller organisations, with the latter becoming financially more and more fragile."

Alison Garnham, chief executive of the Child Poverty Action Group, believes funding cuts have hit children's charities the hardest because children's services have been made a low priority by the government and charities are forced to fill the gaps.

"We are seeing Sure Start and welfare rights advice services downsized or closing regardless of whether they are local authority-run or contracted to charities," she says. "This is because of decisions by central and local government on what to protect, what is a statutory requirement and what is a lower priority.

"The problem at the heart of this is therefore that services for children have been made a low priority and are much more exposed to the impacts of austerity than other groups."

The National Children's Bureau estimates that children's charities will lose more than £400m in statutory funding in the five years leading up to 2016, which Dr Hilary Emery, chief executive of the charity, fears will have a devastating impact on the services they provide.

"When we consulted with charities about austerity measures in 2012, we found they were doing their best to adjust to the financial climate and many were considering cutting staff, reducing the range of services they offer and developing consortia and mergers," she says.

"Unsurprisingly, some charities faced closing down entirely. It appears many charities are struggling to develop new business and funding models that can plug the gap in funding."

Despite the bleak outlook, Davies is hopeful that much of the sector will survive. "Although the situation is undoubtedly grim, we are confident that the sector's commitment, persistence and ingenuity will endure," he says.

"2014 will be a crucial year for the future of England's children and it is vital that the sector continues to speak up and campaign in the face of a sometimes hostile environment."

CASE STUDY: REACTING TO THE CHANGING FUNDING CLIMATE

Extra pressures resulting from cuts to statutory funding have forced the National Youth Advocacy Service (NYAS) to change the way it bids for contracts.

The charity, whose independent advocacy services for children and young people in care are commissioned by local authorities, NHS trusts and private residential care providers, fell victim to significant funding cuts and found itself under extreme pressure to successfully bid for contracts as an increasing number of services went out to tender.

Aware that NYAS is operating in a more competitive world and that local authority and legal aid budgets were reducing, chief executive Christine Renouf made the decision to invest in a business development team. "We appointed an experienced manager and two bid writers who worked very closely with our operational managers to secure existing contracts and identify new opportunities," she says.

"The investment paid dividends and in 2011/12 and 2012/13, we expanded our advocacy services."

While Renouf was pleased with the progress the new team made, she realised that services could only be expanded so far because the charity was unable to afford the cost of growing the supporting infrastructure.

"The impact of public spending cuts highlighted our overdependence on statutory funding," she explains.

"We decided we needed to diversify our income sources and appointed a trusts and corporate partnership fundraiser - we now have a five-year fundraising strategy with incremental annual targets.

"Although we have exceeded these targets in the past two years, we are not underestimating the challenges of raising voluntary funding in the current economic climate."

Competitive market model does not best serve children

Kathy Evans, chief executive, Children England

"Children England's recent member survey feedback echoes refrains from our earlier research reports - Counting the Cuts (2011) and Perfect Storms (2012). Three quarters are challenged by increasing demand for their services (75%) and reduced statutory funding (72%). So the big squeeze is very much still on, and we know that the same is true for our local statutory colleagues. That was even before the Autumn Statement revealed more planned welfare cuts and 'efficiency savings' that can surely only hit vulnerable families and local services harder.

"Whether our own organisations are at risk or not, we should all be concerned that one in 10 of our members were not confident of continuing their services for the next 18 months. Service reductions and closures hurt the children and families to whom their help is no longer available, and they also have knock-on impacts on the remaining services in an area, as they find themselves oversubscribed, facing levels of need and risk that they weren't established or trained to manage. Unison's recent survey of charities' staff highlighted the dangerous 'hairline fractures' emerging - 15 per cent feeling unable to monitor or act on suspected neglect or abuse, and 23 per cent not confident to raise concerns about service quality with their own managers. They cited market competition as the source of staff anxiety about honest disclosure of their concerns, and over half of our members confirmed they are spending more time and effort to bid for less income.

"However we are funded, voluntary and statutory services for children are locked into interdependence with each other. We are an ecosystem not a market. The combined forces of severe local authority budget reductions, competitive tendering, grant withdrawals and mid-contract cuts could split the fractures in children's services wide open. The competitive marketplace assumes the financially fittest will survive, and those who can't don't deserve to. It's a ruthless, highly arguable assumption to apply to the collaborative task of caring for children and families, and one that could soon leave us little more than a small group of contractors on a merry-go-round of costly TUPE transfers, while being driven inexorably downwards in price and quality of service.

"At Children England, we are responding by collaborating with our members and statutory colleagues to campaign together on children's services in 2014. We need to tell government there are no more 'efficiency savings' to be found without creating bigger holes in the safety net for children. 'More for Less' cannot be an infinite expectation."

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