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Why Brexit Poses a Huge Risk to Charities and Volunteering

22/06/2016 08:11 | Updated 22 June 2016

On Thursday we are about to make arguably the biggest decision the British electorate will make in a generation. I had always intended to outline the issues for civil society of withdrawing from the EU before thousands of charities and millions of volunteers across the country made their decision. In light of recent events, I want to do this as factually and in as non-partisan a way as possible.

For civil society organisations, the prospect of the UK voting to leave the European Union constitutes a leap in the dark - particularly with regard to the economic implications for the sector post-Brexit. These can be categorised as both direct risks to funding and the indirect consequences of prolonged financial volatility.

In terms of direct contributions, the National Council for Voluntary Organisations (NCVO) estimates that in 2013/14, charities received around £308million direct funding from the EU. Through the European Structural Investment Funds (ESIF), for example, funding is directed at targeting geographically the areas in which private investment may be lacking, with the aim of promoting economic competitiveness and boosting employability.

As part of the ESIF, 20% of the EU's structural funds budget is ring-fenced for projects that develop greater social inclusion and could be worth an estimated £500m in England alone over the lifetime of the programme (2014-2020). Likewise, the EU structural funds provide significant scope for the devolved nations of Scotland, Wales and Northern Ireland, with the voluntary sector able to play a crucial role in these areas to support disadvantaged communities and invigorate the labour market.

In addition to the ESIF, our membership of the EU enables voluntary organisations to bid for funding from a wealth of other programmes, including those aimed at: preventing violence against women and children; promoting high-quality and sustainable employment; and supporting small and medium-sized cultural enterprises. Over the period 2014-2020, voluntary sector organisations in the UK are eligible to bid into a funding pot totalling upwards of £13billion.

It is without doubt a very significant concern for the voluntary sector that equivalent funds would not be made available by future UK Governments in the event of our withdrawal from the EU. Of course it may be possible for budgets to be reallocated, but would charities be a priority? Amidst promises of more to the NHS, farmers, fishermen and so on, where would charities fit in? If the money didn't come, who would be able to make up the shortfall? Charities need to know, as this in itself would be a considerable hit.

But perhaps even more important to civil society and fundamental to sustaining its income from public, private and voluntary bodies, is a strong economy. Leaving the EU, as all sides have acknowledged, would cause economic uncertainty and threaten our economic security. The Bank of England suggests a recession could result: this would have wide-spread implications for funding in the voluntary sector.

First, any economic shock would inevitably precipitate a more rigorous focus on fiscal consolidation, with public finances stretched to cover only essential public services. Secondly, there is the prospect that any market volatility could affect charities through both diminished investment returns and reduced incomes from grant-making trusts and foundations.

Finally, any period of growing levels of unemployment, combined with a fall in average real wages, would mean more demand for services of charities at the same time as leading to a reduction in individual disposal incomes and thus the ability to donate to charitable causes. It is a potentially a potent double whammy. In addition, it is likely contributions from the business community would fall, as economic uncertainty necessitates a firm focus on the commercial, possibly to the detriment of social responsibility and charitable giving.

There have been no definite answers to these questions in the debates to date, so as to reassure voluntary organisations that they will not take a huge hit from a UK withdrawal from the EU. With this absence of information, charities have been advised to put in place appropriate contingencies to try and offset not only losses from direct EU funding, but also absorb any indirect financial consequences to maintain their survival in a post-Brexit world.

This is the crux of the matter for civil society: this unprecedented situation really does represent a step into the unknown. For decades, the country and the voluntary sector have been inextricably linked to the EU - not only financially, but also in terms of regulatory approaches to delivering essential services. Leaving the EU will undoubtedly present a series of new challenges, both in the transition but also in the long-term.

Specifically for civil society, the risks of EU withdrawal are huge. At a time when the country needs charities and volunteering to be at the top of its game, they could be compromised, overwhelmed by demand and starved of resources. Brexit is a huge risk to the stability of the sector, one that may take decades to recover from.

Rob Wilson is the minister for civil society and Conservative MP for Reading East

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