Does the rise of the ‘super major’ charity spell the end of the voluntary sector as we know it?
When the Civil Society Almanac 2016 was published in April it seemed to contain the first really good news about the UK voluntary sector that we’d had in ages.
The Almanac showed that overall charity sector income rose by 5.8% in 2013/14 to reach £43.8 billion. This was the first reported rise in overall income for the sector since the heights of the global recession, and welcome news in an era of continued austerity accompanied by growing donor suspicion and witch-hunting.
Sector income has shown its first increase since 2009/10 and has finally passed its previous peak of 2008. Within this, income from individuals (including donations and earned income) reached its highest level since 2000 at £19.4bn, and government income increased by around £0.5bn. Voluntary sector overall spending also increased by 3.5% to £41.7bn for the first time since 2009/10 and this has been accompanied by an increase in jobs, and a big increase in youth volunteering.
Like a sickly baby finally reaching its proper milestones, we proud parents have reason to rejoice again! But hold on. All may not be as it seems. The rise in income is not a rising tide for all charities. In fact the growth in income was predominantly experienced by the very largest organisations – those with an annual income over £100 million – the new ‘super major’ charities.
These ‘super major’ charities saw their income rise by £1.7bn in 2013/14 and in their proliferation of number this year (2012/13-2013/14) were such an anomaly that NCVO decided this year to create a new category just for them. They still make up only 0.02% of all charities by number, but between them account for nearly one-fifth (18.4%) of the total income of the sector. Between last Almanac and this, the number of these now ‘super major’ charities increased from 33 to 40 – although this largely indicated increases in income to existing major charities rather than new entrants.
The super majors, unsurprisingly, experienced the largest increase in government income, which increased by over £400 million for this group, accounting for the vast majority of the total rise in government income across the sector. As we know, larger organisations are usually the best placed to receive the increasingly large-scale contracts on offer from government at both a national and local level.
For example, the International Rescue Committee (IRC UK) received over half of its funding (£81m) from the Department for International Development (DfID) in 2013/14 and The Shaw Trust received £102m, mostly from the Department for Work and Pensions’ (DWP). St Andrew’s Healthcare received the largest amount from government (£188m) for the delivery of mental health services. https://data.ncvo.org.uk/a/almanac16/income-from-government/
Suspiciously, or opportunistically, the Almanac notes that: “the reported rise in income of some super-major charities correlates with areas of government spending that increased overall or where new programmes were launched.”
On the other side of the fence, small and medium sized charities experienced a fall in overall income in 2013/14, and did not benefit from any increases in government grants or contracts. Smaller charitable organisations have, for some years now, been reporting difficulties in competing for contracts which seem to be scaling up, reducing the focus on quality services and introducing obstacles such as payment-by-results which make it harder for smaller organisations to compete with their larger ‘city cousins’. Sir Stuart Etherington, chief executive of the NCVO has commented that: "The problem is not larger charities winning contracts at the expense of smaller charities, but that public service procurement is done in such a way that only large charities could win these contracts to begin with.[1]"
So are we seeing the emergence of a two-tier voluntary sector?
Some would doubtless argue that this is what it has always been, but that differences are somewhat exacerbated by current circumstances. Others might claim that this is a long-term trend beginning to become much more clearly demarcated and warranting further attention.
Grist to the mill of the second school of thought, NCVO published a further report in February this year, commissioned by Lloyds Bank Foundation for England and Wales[2], which concluded that:
· Income for smaller charities is unstable
· The income mix for small and medium-sized charities has shifted from government income to earned income
· Smaller charities fared worse (proportionally) than larger charities
Commenting on the report, an NCVO researcher said:
While some individual organisations are clearly weathering the storm and even thriving, the policy environment is generally favouring the growth of larger organisations. These are more stable financially and have the resources to bid for remaining government funding in an increasingly competitive marketplace. Jennifer Crees, Research Officer, NCVO online blog[3]
If fortune continues to favour the large then this natural selection process seems an inevitable ongoing consequence. Yet many feel that that the very heart of the UK voluntary sector is made up of the tens of thousands of small to medium-sized charities and community organisations which beaver away in their local areas providing crucial, unique and often unrivalled support to the population in need, and tackling social deprivation and disadvantage in local communities. Under the headline figure of voluntary sector income growth these organisations are still suffering the effects of the recent global crisis and subsequent policy changes and are in greatest danger of collapse unless conditions change.
And conditions may yet change this picture, which, it should be noted, is already two years old. The figures on which the Almanac is based date from 2013/14 and although they surely represent a turning point after the global recession, they don’t take into account the recent crisis in confidence in the charity sector (which may hit the largest, most well-known, charities hardest); nor do they show the effects of a long and gruelling recession which left around one-third of charities with annual incomes of less than £1 million with no reserves to withstand future shocks or further grinding down or eroding of incomes. And, as they say, the future is another country.
[1] https://www.ncvo.org.uk/about-us/media-centre/press-releases/1343-big-charities-continue-to-grow-as-smaller-charities-struggle
[2] The Squeezed Middle: Small and medium-sized charities in a changing financial landscape. (https://www.ncvo.org.uk/images/documents/policy_and_research/funding/financial-trends-for-small-and-medium-sized-charities-ncvo-lloyds-bank-foundation-2016.pdf)
[3] http://blogs.ncvo.org.uk/2016/02/11/the-squeezed-middle-small-and-medium-sized-charities-in-a-changing-financial-landscape/