Cut and dried? What’s the real impact of the government cuts to the UK voluntary and community sector?

We hear constantly that the double knock of the continuing recession plus government cuts have hit many charities hard, but it’s very difficult to get an accurate picture of exactly what is going on across the sector as a whole.

Last month (August), the trade union-backed website ‘False Economy’ published a report 'False Economy: Why cuts are the wrong cure' [external website] based on Freedom of Information requests which estimated that the voluntary sector will lose at least £110m in local authority funding this year.

NCVO’s ‘Counting the Cuts’ report [external website] suggests that this is a massive understatement and that if one includes central government department cuts this total is probably nearer £2.8 billion over the next five years.

Two regional studies recently published studies of the charities in their areas. LVSC, London Voluntary Service Council’s, Big Squeeze campaign [external website] reports over half (51%) of the voluntary organisations they surveyed have had to close services over the last year and 54% expected further service closures over the next year, while 81% had experienced higher than usual demand for their services

Voluntary Organisations’ Network North East's (VONNE) 6-monthly results of their ‘Surviving or Thriving’ survey [external website] revealed that, with 81% of respondents sourcing some, or all, of their income from public sector grants, 73% have seen a decrease in funding, 40% have lost staff, and 59%  have experienced an increase in demand for their service, leading 64% to dip into their reserves to cover costs.

Of course self-selected, smallscale (both the VONNE and LVSC surveys consisted of 120 organisations) survey responses  should be treated with some care, but they can be seen as at least indicative of what’s happening to some in the sector.

As always in the sector, getting meaningful evidence is very difficult, and as we noted in last month’s e-news piece on open data, the current Government’s decision to axe a number of surveys of the voluntary sector may mean that piecing together and prising apart the effects of the cuts and the recession will probably be further hampered.

The deepest cuts

What is becoming evident is that, as NCVO point out: “There is considerable evidence that cuts are not being applied consistently, proportionately or strategically.”  And certainly NCVO’s analysis of the local government spending settlement shows that local authority areas with higher deprivation scores are facing bigger cuts. This is also borne out by LVSC’s survey.

Since new research [pdf document] from the University of Southampton shows that charities in deprived areas are less numerous and more likely to receive statutory funding, it seems apparent that already less-well-served areas will be disproportionately hit by cuts.

Furthermore, according to LVSC: “preventative services are being disproportionately cut especially in advice, children & young people and health services”.

Since employment and training charities are reliant on statutory sources for 70% of their income; and educational, housing and social services charities receive around 50% of their income from statutory sources (NCVO Almanac 2010); such cuts are likely to be storing up problems for the future.

The wider impact may have a silver lining

Charities are reporting that the global recession has increased demand for their services and many say they are struggling to survive a decrease in their income. However, it is hard to establish, from the evidence provided, how much of the sector this is actually affecting.

Is this the end of the voluntary and community sector as some commentators are warning?

In our view, definitely not. The formalised voluntary sector has been around for hundreds of years and we’ve survived recessions, world wars and governments before.  But will it spell change?  Possibly; and there are those within and without the voluntary sector, DSC included, who have said that losing government money may turn out to be a good thing for the sector in some ways.

Commentators as disparate as Harry Cole, Editor of the rightwing Guido Fawkes Blog [external website], and Rob Dyson (Whizz-Kidz & Guardian blogger)  have both concluded that if a charity can’t survive such modest cuts they’re probably unsustainable anyway and that we need to diversity our income streams. In hard times, survival of the fittest makes the whole species stronger, and the reality is that a cause is unlikely to die with the closure of a charity.  

But, while some are worrying about shearing the sheep so close to the skin that they sometimes get nicked, what they forget are the plain facts about the make-up of the voluntary sector: Nearly eight out of ten charities have no financial relationship with the state whatsoever. 

Only 36% of the UK voluntary sector’s total income comes from the state and even that only equates to about 2% of total government spending. Some 4000 larger charities out of 180,000 are really the only ones directly affected by statutory cuts.  For the rest of us, it’s pretty much business as usual.  

Where next for the voluntary sector?

So what does all this mean in practice? Well, for starters, we need to stop being so fearful of the future.  The majority of voluntary sector organisations will survive any statutory cuts – either because we don’t get state funding in the first place or because we are not solely reliant on it. 

Secondly, many charities can and should use this as an opportunity to really seriously think about diversifying income sources. I am oddly reminded of a poem by Robert Cecil Day-Lewis which ends with the lines: “How selfhood begins with a walking away, and love is proved in the letting go.”

Perhaps the Government’s tough love for the voluntary sector will be the making of our independence?

This post was originally published by DSC e-news in 2011.