Charities face £2bn income dip in the wake of spring statement, economists warn

24 Mar 2022 News

The charity sector could see a £2bn drop in income, at a time when more people will be turning to the sector, according to new analysis.

Pro Bono Economics (PBE) has conducted a full analysis of how the policies announced by the chancellor yesterday will affect the sector. 

The analysis says there is expected to be a nearly £5bn shortfall in charity income, when compared with 2019 forecasts. 

Inflation reaching 8.7% will directly impact charities’ finances, PBE says. For example a £20 donation in 2021 will be worth £17.60 in 2024.

Increase in pressure

PBE says that the policies outlined in the spring statement yesterday do not go far enough to support the most vulnerable. 

This will increase pressure on charity services, which are already stretched due to the pandemic. 

“Despite already running hot, large parts of the charity sector will have to step up another gear, this time to support those most vulnerable to this cost-of-living aftershock,” the report says. 

PBE says foodbanks and advice charities are already witnessing an increase in demand. 

Widening wage gap

Charities will also find it harder to pay their staff a salary that keeps pace with inflation. 

Last year, PBE said that inflation meant that there was likely to be a £2bn wage gap for the sector’s workforce. 

Now PBE estimates this gap will be £3.3bn by 2024.

“We estimate that a typical charity with an expenditure of £1m would need to factor in an increase in staffing costs of least £75,000 by 2024 to ensure staff are not worse off,” the report says. 

‘Policymakers need to act’ 

PBE called on the government should look at ways to help the sector. 

Matt Whittaker, CEO at Pro Bono Economics, said: “It is imperative policymakers are alive to this predicament and act to remove the barriers preventing charities supporting people in most need. 

“As government looks to improve the skills, innovation and strength of the private sector, it should be looking to do the same for charities. Doing so is crucial, particularly in the areas of the country where charities are weakest. By strengthening and deepening its relationship with charities, government would also be in a much stronger position to make a difference to the most vulnerable families.

“Meanwhile, those who have benefited from today’s measures and an increase in savings over the pandemic are a particularly important target for charity fundraisers. In difficult times, generosity from the wealthiest can make an enormous difference to others, as we have seen with the outpouring of good will in response to appeals concerning the war in Ukraine.”

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