Charities That Receive Public Funding May Have Big Problems In 2024 As More Cuts Bite

17th October 2023

Highlighted in the John O'Groat Journal was a report to the Thurso Community Council that Thurso Development Trust could have to make big reductions in their services if grants are cut in the next budget round.

This may be just the start of funding cuts that will hit across the whole sector that are in receipt of public funded grants or contracts.

Public bodies such as councils and health boards are already seeing their budgets hit for many reasons and more is already being flagged up by Highland council and others. Use of reserves may help a little but that trick can only be used once.

Essential services for children and the elderly will probably be prioritised but for others getting funding will get harder.

Charites may raise some funds by donations but for many the biggest shares comes from grants or contracts.

Charities have grown over many years to serve the public in many ways and they have staff who could be affected in a reduction in funding.

A recent article by Charity Excellence sets out the position in great clarity and detail.

Funding Cuts Report
Our initial assessment of the Public Sector cuts to charity funding was first published in Aug 23 and then as a final report in Sep 23. Cuts to public funding for charities are estimated at £1bn pa, we believe that there is a high risk of widespread charity closures and it might be 2025 before we recover to pre-crisis resilience levels, if then. Our report provides recommendations on how that could be prevented. Last update 13 Oct 23.

Charity Sector Cost Of Living Crisis - Funding Cuts Report
This resource is a summary of our Charity Exellence Insight Briefing - £1bn Public Funding Cuts + Potential Widespread Charity Closures. If you would like a copy of the full report e mail me at charityexcellence@gmail.com.

Our Big Data shows that sector resilience has been falling since late 2021 and our sector predictive model, has forecast the path of the crisis very accurately, sadly. The Cost of Living (CoL) crisis has been both longer and deeper than Covid and the public sector funding cut risk we highlighted last year has now materialised. Cuts to public funding for charities are estimated at £1bn pa, we believe that there is a high risk of widespread charity closures and it might be 2025 before we recover to pre-crisis resilience levels, if then.

EXECUTIVE SUMMARY - GOVERNMENT CHARITY FUNDING CUTS
Synopsis. The Government is (rightly) investing heavily in growing the economy but the impact of the crises on society has been at least as great and the general public and our public services are already paying a heavy price for that. Our analysis indicates that the 2023 Spring Budget departmental budget increases have not flowed down to charity front line services, effectively creating a £1 billion funding cut in real terms. We think that the risk of widespread charity closures is high and that we will now not see full sector recovery until 2025, if then.

Public Funding. The Spring Budget 2023 included that departmental spending would grow at 4%. However, in our Public Funding survey, only 6% of respondents reported a contract funding increase in line with or above inflation and 94% that grants have been cut of which 39% were either significantly reduced or not renewed.

Impact On Charities. Five percent of 5% of charities told us that believe they will be able to achieve more or significantly more and another 9% that there will be no change. Eighty six percent reported they will be worse off, of which nearly a third (32%) face significant financial challenges and another third (34%) have a serious cash flow problem or have or may have to consider reducing or closing services, making staff redundant, merging or closing their charity. We think the main impact will be on health and social care charities, and to a lesser extent charities working in education, employment and justice.

We think the cuts will:

Cause significant further harm to both Society and public sector services and.
Rather than making savings, come at significant financial cost.
Causing potentially widespread charity closures and irreversible harm with.

The cuts disproportionately impacting the most vulnerable.
Possible Responses. We believe that the Public and Government would wish to see the additional funding made available in the 2023 budget being used to support front-line delivery. The most obvious way to ensure that is to ensure charity contracts and budgets should be increased at least in line with inflation. We recognise the current very difficult financial position Government finds itself in, but the current cuts will not deliver real savings, quite the opposite. However, if Government were to take ambitious and robust action by transferring high-cost public services into high value charity delivery, this would not only generate real savings but also much larger savings.

Moreover, we think that Government, the Sector and grant makers coming together and acting quickly, collectively and robustly, also has significant potential, despite the desperate shortage of funding. Unlike the funding needed, this is within our control and, no matter how bleak, we can still make a difference.

Our front-line charities have performed heroically through Covid, the CoL crisis and now this, but they're heroes not miracle workers. We must now provide them with the resources and support the need.

Read the full report HERE

https://www.charityexcellence.co.uk/

SCVO
Programme for Government proposal Transparent voluntary sector funding