The Blog

Can Councils Justify Disproportionate Reductions In Charity Funding? Should Charities Complain?

In my opinion in these difficult financial times, it is imperative that the voluntary and community sector and councils work even more effectively together. They must strive to find common cause and not fall out.

I am delighted to have been invited to speak and join the panel at a Charities Aid Foundation event in Parliament on Monday 10th June to discuss local authority funding to charities.

This event will focus on the 'Back Britain's Charities' campaign which was created by the Charities Aid Foundation (CAF) and National Council for Voluntary Organisations (NCVO) following the publication of the UK Giving 2012 report. This report found that giving to charity has fallen by 20% over the past year. Indeed, further research has found that one in six charities fear being forced to close over the next year, and that 67% of charities have seen an increase in demand for their services. Combined with cuts in funding from local and central government, charities are struggling to do more with a great deal less. And specifically, the Campaign feels that too many local authorities have disproportionately cut their funding to local charities.

From the Campaign's perspective, a 'disproportionate cut' is defined as a reduction in spending to charities from local authorities being greater than the proportion by which they are cutting their total budget.

Applying this definition, research carried out by 'Compact Voice' has shown that many councils are in fact cutting funding to charities disproportionately. The 'Counting the Cuts' report is based upon Freedom of Information (FOI) requests to councils, and collates the data to create a picture of the relationship between local government and councils. The latest update was released in May 2013, and found that:

• 50% of local authorities responding (71 out of 141) had disproportionately cut voluntary sector grant funding in 2011/12

• even if the voluntary sector were experiencing only proportionate cuts, funding will be £1.7 billion lower (12%) by 2017/18 than it was in 2010/11

• only 59% of responding local authorities reported holding consultations on changes to policies and funding

• local authorities responding to FOI requests reported spending 8.4% less on grants to the voluntary sector than they did in 2011

• in 2010/11 the voluntary sector received £6.3 billion from central government and £7.1 billion from local government

These are startling figures - and should be a wakeup call to local government and central government.

As a trustee of several charities including the National Association of Voluntary Community Action (NAVCA), I am acutely aware of the financial challenges being faced by charities across the country and their concern that they are facing deeper cuts than many others in receipt of local authority funding. Of course, in the current fiscal climate, cuts are inevitable. Local authorities quite legitimately have to decide what expenditure will maximize outcomes, best meet needs and ensure that they meet their statutory obligations. And whilst the voluntary sector often provides quality and value for money, this is not always the case. So, it follows that there are hard choices to be made. However, for such choices to be 'informed', they must: focus on outcomes (including social outcomes); use the Social Value Act to maximum effect; be made only after having consulted and involved key stakeholders including the local voluntary sector; and be open and transparent with regard to the underlying reasons for decisions being taken.

No sector has a monopoly on social benefit or service excellence, and no organisation has an absolute right to exist or to be supported financially. And what matters are outcomes for people and communities rather than the continuing existence of organisations or services in any sector. That said, if a voluntary sector body is put out of business, it will not be there to serve its beneficiaries and communities in the future.

Over the last three years, as local authorities have been forced to make hard and often painful expenditure decisions, their relations with the voluntary and community sector (VCS) has often become strained. This is deeply regrettable, is not in the interests of local communities or citizens, and worse, has the potential to create a harmful, unhelpful souring of the relationship between local government and the voluntary sector - both nationally and locally.

In my opinion in these difficult financial times, it is imperative that the voluntary and community sector and councils work even more effectively together. They must strive to find common cause and not fall out. After all, both councils and the voluntary sector have a shared commitment to serve communities and citizens. There should be a mutual respect between the two - based on recognition of what they share, their differences and their specific pressures and constraints.

Charities have to recognise both the political legitimacy, as well as the political, statutory and financial pressures under which local authorities operate. And in particular, charities have to understand that local government has borne unprecedented cuts from central government since 2010, with an average of some 28% of grants cut (with some experiencing over 40% reductions). With still more deep cuts expected in the Chancellor's Spending Statement later this month, it is imperative that charities and local government work together to find common cause to challenge the Government's public expenditure policy.

Equally, local authorities should not assume that charities can bear heavy cuts - especially ones imposed with very short notice - or to subsidise or simply take over former state services and still continue to serve their communities as before. Many charities are stepping in to meet needs - for example food banks and the fallout from the social security changes.

Nor should local authorities take advantage of a charity's mission-driven approach when seeking to drive a hard contract price - often in ways that they could not get away with if the provider were a business rather than a charity. Grant funding is vital in order to build capacity and local authorities must not seek to undermine charities' independence, their right to speak out, their ability to be innovative or their responsiveness to beneficiaries. In particular, local authorities should never take decisions that will impact on the voluntary sector without first consulting and fully exploring the options and potential consequences with the sector.

At the Charities Aid Foundation event, I will offer five pieces of advice each to local government and to the voluntary sector.

A local authority should:

• through its political leadership and senior officers, commit to: working with and supporting an independent voluntary sector; testing policy and budget decisions against that commitment; and accepting the right of the voluntary sector to challenge and sometimes oppose their decisions

• involve the voluntary sector in all its key strategic policy, financial, strategic commissioning and practice decision-making, recognising the sector's voice and representation roles as much as its service delivery capacity

• sustain grant programmes in addition to contracted services

• when procuring services competitively, ensure appropriate opportunities for large and smaller voluntary organisations to bid and contract on a realistic basis; contract in ways that allows the voluntary sector to innovate and not have to subsidise the authority; and avoid business sector-led, prime-sub-contractor models which push risk onto the voluntary sector disproportionately and dangerously

• persuade and cajole the wider local public sector to act in unison with the local authority on such approaches; and consider total human, social, financial and physical resources available in a place irrespective of their sector of origin - public, business, voluntary and communities

In turn, the voluntary sector should:

• strive to better understand and appreciate the pressure, constraints and challenges facing local authorities; and join in representations to central government

• seek to build their collective local capacity to respond to the opportunities offered by local authorities to participate in the manner outlined above

• be fearless in challenging and opposing local authority or government policies and practices that are harmful to their beneficiaries - drawing whenever possible on practical examples to underpin these interventions; and respecting the fact that a local authority will inevitably and from time to time, make decisions with which the voluntary sector is unhappy or opposed to

• wherever possible diversify contracting and funding sources; and develop new funding streams

• where appropriate, explore setting up consortia to bid to run local services when and if the local authority or others put these out to tender; and in the right circumstances be willing to work in collaboration, both with local businesses and as delivery partners to businesses bidding for public sector contracts - but only if this makes operational and financial sense, and is consistent with a voluntary organisation's mission and values

The current period of austerity and recession is doing lasting damage to public services, communities and our fellow citizens. However, it does not follow that local government and charities should waste energy and lose strategic focus by fighting amongst themselves as a result of central government cuts and austerity. Surely at this more time more than any other, they must work in partnership and in so doing, build or in some cases rebuild mutual respect and trust for each other; and share limited resources. And remember - both are on the side of the same communities and citizens.