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Government admits it "can't save all charities" with its coronavirus support package

01 May 2020 In-depth

It took some time but the government has unveiled its charity support package. However, it was much less than the sector had hoped for.

The government response to the coronavirus has been, to use a phrase that can be applied to so many elements of the current crisis, unprecedented.

Government support for businesses was announced quickly to help them mitigate the effects of the coronavirus “lockdown”. Some of this support was available to charities, but it was not tailored to their needs, and as a result not all charities were covered by all of the measures.

 The sector was vocal in raising its concerns and justifying the need for specialist government support, as the measures to contain the coronavirus outbreak stifled income at the same time as many charities were experiencing increased demand.

Promises of a package of financial support were coming from senior politicians, including the prime minister and the chancellor of the exchequer. Yet, days kept passing without any announcement on the details or amount being made available.

Then on 8 April, at the government’s daily coronavirus press briefing, the chancellor of the exchequer Rishi Sunak took to the podium to make the announcement. He began by saying that the government’s efforts to mitigate the economic effects of the pandemic were based on the premise that “we depend on each other”.

He said: “We promised to do whatever it takes, and I am striving every day to keep that promise. But when I say that we all depend on each other, I don’t just mean the relationship between individuals, businesses and the state. One of our greatest strengths as a country is our civil society. The local charities who provide so much compassion, care and community to the most vulnerable in our country.”

He added: “British people, businesses and foundations are already doing their part to support our charity sector. And today, we in government will do our part.”

£750M package

He said that the government was making £750m of funding available for charities. £370m of the funding is aimed at “small, local charities working with vulnerable people.” Of this £60m, was earmarked to be spent in Scotland, Northern Ireland and Wales. In England, the money will be distributed by organisations such as the National Lottery Communities Fund.

“We all know who they are; those small charities in our villages, our market towns, in pockets of our cities,” Sunak said. “The unsung heroes looking after the vulnerable and holding together our social fabric.”

A further £360m was pledged for “charities providing essential services and supporting vulnerable people as we battle the coronavirus”, with £200m of these grants going to hospices. The rest will go to “organisations like St John Ambulance and the Citizens Advice Bureau…as well as charities supporting vulnerable children, victims of domestic abuse or disabled people,” Sunak said.

He also said the government would match public donations to the Big Night In, a joint fundraising telethon from Comic Relief and Children In Need broadcast by the BBC on 23 April. This included £20m going to the National Emergencies Trust.

£750m will seem to many as a considerable sum, but it fell well short of what the sector had been calling for. NCVO had estimated that the charity sector as a whole would miss out on at least £4.3bn in the first 12 weeks of the strict social restrictions put in place to limit the spread of the virus.

Despite promising to do “whatever it takes”, even Sunak acknowledged this when he said: “There are nearly 170,000 charities in this country; and the truth is that we will not be able to match every pound of funding they would have received this year.”

Later, in response to a question, he added that government would not be able to save every charity, or every business, and protect every household.

It was for this reason, Sunak said, that the decision had been taken to target the support at certain sub-sectors. “Some charities are on the front line of fighting the coronavirus, and others provide critical services and support to vulnerable people and communities,” he explained. “For them, shutting up shop at this moment would be to contravene their very purpose; their entire reason to exist. Those charities have never been more needed than they are now; and they’ve never faced such a sudden fall in their funding.”

Hibernation

What then are the options for those charities that cannot take advantage of the government’s charity-specific support?

Sunak said that charities should take advantage of the rescue package for businesses. He highlighted the Coronavirus Job Retention Scheme. This is the programme which allows organisations to “furlough” workers that are temporarily unable to work due to the impact of the coronavirus. The government will then provide the funds to pay 80% of their wages, up to £2,500 a month. In essence this allows the charity to go into hibernation, but this not ideal for beneficiaries and won’t be suitable for all charities.

A poll of 539 charities carried out by the Charities Aid Foundation on March 31 and April 1 found that 26% of charities strongly agreed that they would need to use the government’s job retention scheme and furlough staff. Nearly half of charities, 47%, said the scheme does not apply to them.

Many charities, including some of the largest, have already announced their decision to furlough workers, with some choosing to top up the government funds to ensure workers still receive 100% of their wages.

Amongst these are Oxfam, which furloughed around two-thirds of its UK workforce. Similarly, Age UK furloughed 70% of its staff. The Teenage Cancer Trust placed 60% of its staff on furlough, while its senior management team, including its chief executive, took a 25% pay cut. The situation also meant the charity needed to make four roles redundant.

As well as the option to furlough, some charities may be able to use the Coronavirus Business Interruption Loan Scheme which was announced in the Budget, which took place in March prior to the “lockdown”. Charities are eligible, but only if they receive half of their income from trading activity.

Other options

As the chancellor alluded to, a number of foundations and businesses have made funds available to the sector.

For example, Barclays has launched a charity foundation providing £100m to support charities. Half of the funds will be given out via direct funding. Most of this will be distributed in the UK, but some will be distributed to overseas charities. The other half will match employees’ charitable donations.

There is also evidence that foundations are attempting to make it easier for charities to access funds during this difficult time. Around 90% of foundations who responded to a survey by the Association of Charitable Foundations (ACF) said they had relaxed reporting rules for charities due to the current crisis. Around four in 10 said they were considering converting restricted funding into unrestricted funding, while five in 10 said they were not. In addition, over 60% were planning to establish a new fund or realign some of their existing funding to focus on people and causes impacted by the crisis. The results come from an online survey of 56 foundations.

The public has also been called upon for support as a number of charities have launched emergency fundraising appeals. But, as with all these options, they are unlikely to fill the growing financial black hole across the entire sector.

What next?

Given the large gap between the support available and the estimated amount needed, what will be the next steps?

Some may hope that the government package is an initial announcement and that the government will make further funding available, perhaps encouraged by some political pressure. For example, the new Labour leader, Keir Starmer, described the government funding for charities as “a welcome first step” but added that “more is needed”. He also thanked charities for going “above and beyond” to help during the crisis.

Siobhan Endean national officer for the community, youth and notfor-profit sector at trade union Unite said: “We will be strongly lobbying government in the weeks ahead, with cogent arguments and examples to make the case for the extension of the financial measures that we believe are necessary to support charities and the many vulnerable people they help on a daily basis.”

With the “lockdown” extended by at least another three weeks on 16 April 2020, some charities will view these lobbying efforts as increasingly urgent.

The chancellor may believe that “we depend on each other”, but a number of charities might argue that they cannot depend on the government to guarantee their future. 

Tristan Blythe is editor of Charity Finance magazine

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