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Two-thirds of large charities will cut frontline services2

Finance | Niki May Young | 29 May 2012

Three-quarters of large charities have already or will be making redundancies in the next year, and two-thirds will be cutting frontline services according to a survey looking into the commissioning landscape for charities.

Charities with an income over £800,000 which receive some form of government funding were surveyed in When the going gets tough: Charities' experiences of public sector commissioning, with 101 responding. The research, conducted by New Philanthropy Capital and Zurich aims to understand how the new commissioning world is affecting the charity sector.

The research found that the majority of charities responding to a high level of government funding cuts are shedding staff or services as a result. 

Funding cuts

Similar to other studies conducted in this area, the research found that local authority cuts are hitting charities the hardest. Some 36 per cent said their overall government income had reduced compared to last year, with 12 per cent saying it had been reduced by 20 per cent or more. However 59 per cent said they were experiencing cuts in funding from local authorities with 23 per cent saying that these cuts are over 20 per cent. Circa 50 per cent said their overall government income stayed the same and 17 per cent said it had increased.

Charities were questioned on their perceptions as to why they were suffering the cuts, with much of the blame focused on the commissioning process. Some 53 per cent believe the price commissioners will pay has gone down and 46 per cent believe the service being provided through commissioning has been reduced. Around 26 per cent say that the service they provide has been cut altogether while 29 per cent said they had lost out on contracts to other charity, public sector or private sector providers. 

In addition 20 per cent said that the awarding of contracts and grants had been suspended and circa 42 per cent said grants had been cut altogether or were not being renewed.

The survey states that in response to these cuts, charities are, "having to make tough choices about the front-line services they provide for the people the are trying to help. Cuts are also having an impact on the size and structure of organsiations, and even their ability to survive".

Over 65 per cent have cut or expect to cut frontline services as a result of cuts, while 85 per cent have, or expect to change the services they provide to beneficiaries in the next year. 

The research highlights a high level of uncertainty in the sector with 30 per cent unsure of whether they are at risk of closure, while 9 per cent either had already suffered closure or expected it to happen in the next year. 

Staff are also feeling the brunt of cuts with 73 per cent of respondents having already made, or expecting to make redundancies in the next year.

Responses to the survey

Dan Corry, NPC chief executive said in his foreword to the survey that, "Of course, everyone finds periods of change difficult, and if new types of contract produce better outcomes more cost effectively, then we should surely pursue them. But we need to keep an eye on what is happening to providers as a result of all this. If we create a world with fewer charities providing services, then we may have lost something precious."

Responding to the research, shadow minister for civil society Gareth Thomas painted a harsher picture: "This is further grim evidence that ministers are not providing the leadership charities need.

"Huge cuts in funding, government contracts not delivering what ministers promised and the charity tax debacle are all eating away at the capacity of Britain's charities and community groups to make our communities stronger."

But current minister for civil society Nick Hurd himself did not respond, instead a spokesperson for the Office for Civil Society said:

"We know it is a very challenging environment for charities, especially those dependent on taxpayer funding. The sector cannot be immune from cuts but at the same time we are opening up more opportunities for charities to help us deliver better public services.

"Through interventions like Big Society Capital and a new Investment and Contract Readiness Fund we are helping ambitious charities access the capital they need to expand their services."

Directory: New Philanthropy Capital | Zurich Financial Services
Who's Who: Gareth Thomas | Nick Hurd | Dan Corry