Almost nine in 10 charities that deliver public services are subsidising their grants and contracts, with most considering withdrawing from them, a NCVO survey has found.
The True Cost Of Delivering Public Services: A Survey Of Charities In England reads: “For decades, charities have warned that contracts and grants are not keeping up with inflation. This problem has become much worse over the past few years due to rapidly rising prices.
“Contracts are not covering the true costs of delivering public services, let alone providing any surplus to improve support to communities.
“Charities are increasingly subsidising public services with voluntary income and reserves. They’re risking their long-term sustainability to meet urgent needs now.”
Findings
Some 73% of charities who responded to the survey said they could not meet demand for the services they are funded to deliver.
Meanwhile, 39% said they had reduced the number of people they were supporting.
Some 87% said they were subsidising their grants and contracts and 72% said they had withdrawn from public service delivery altogether or were considering doing so.
Survey respondents reported that it had been a long time since their income from the government met the true costs of delivering services.
Indeed, 40% said their grants and contracts never covered their true costs, 44% said their grants and contracts have not covered their true costs since at least 2020 and one in 10 said that their grants and contracts have been underfunded for over a decade.
The survey reports the inflation rate first rose above the Bank of England’s 2% target in May 2021. It peaked at 11.1% in October 2022.
Despite this, since April 2021 only 17% of survey respondents received increases to all or most of their grants or contracts.
Some 44% reported not receiving any increases at all and 39% said a minority of their grants or contracts had increased.
The survey also found that 39% of organisations are reducing the number of referrals they will accept, 39% are reducing staff numbers and 23% are changing the types of referrals they will accept.
Impact on staff and volunteers
Some 83% of survey respondents said that underfunded grants and contracts are making it more difficult to recruit and retain staff and 38% are also seeing an impact on volunteer recruitment and retention.
Only 1% of respondents said they were subsidising some of their public service delivery with surplus income from other grants and contracts.
Some 45% of respondents said it’s becoming more difficult to pay the national minimum wage without subsidising, or it will become more difficult within the next year.
Nonetheless, 69% of respondents said that they have good or very good relationships with at least some of their commissioners.
Vibert: We need to see urgent action
Sarah Vibert, chief executive of NCVO, said: “The underfunding of government grants and contracts is unsustainable.
“Back in November 2023, ahead of the autumn statement, we were clear that if the issue isn’t addressed, charities will close, vital services will be cut, and communities will be failed. We’re already seeing the impact that this lack of action is having and are deeply concerned that more charities will cease operating if this is not urgently addressed.
“Charities are shouldering the financial burden of meeting the shortfalls created by underfunding to make sure that vital services continue to reach those who need them most. We need to see urgent action from the Chancellor at the budget to properly fund these grants and contracts so that our public services and our communities can thrive.”
In 2023, NCVO carried out the survey of 331 charities that deliver public services, most of which had an income of between £100,000 and £1m.
NPC chief executive Dan Corry said: “This report comes just weeks after NPC's State of the Sector representative survey of charity leaders found that 62% cross-subsidise public contracts - with 67% saying they do so most or every time.
“Across the sector, alarm bells are ringing about public sector contracts.
“We welcome today's report from NCVO once again highlighting this important issue. NPC and NCVO are both calling for action, including charities re-assessing their own risks in this area and government offering more support in this week’s budget.”
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