Charities should expect to see income from donations and government grants continue to be squeezed while demand increases, NCVO has warned in its annual review of the operating environment.
The Road Ahead: A review of the voluntary sector's operating environment, published today, says that the combined effect of decreased public funding and pressures on donations “will put even more pressure on charities and their volunteers, especially the smaller ones that have been struggling for a long time already”.
Because inflation is expected to be above the Bank of England’s target of 2 per cent charities should be aware that “donations will be worth considerably less by 2020 than previously expected”.
NCVO said that the “poorest households are still expected to be over 10 per cent poorer by 2020” and that all households will be affected by pressure on income, “with average disposable income expected to grow just 0.1 per cent in 2017 and stay well below previous forecasts into the 2020s – potentially placing pressure on donations”.
Government spending cuts
NCVO also predicted that income from government sources will fall.
“Charity income from government sources has previously tracked departmental spending fairly closely,” the report says, “so it is likely that it will continue to fall at least in line with the spending cuts. A particularly sharp drop in spending is expected between 2018/19 and 2019/2020.”
NCVO warned that “lower public spending will be particularly noticeable at the local level” particularly for those involved in social care. The report highlights that increases to council tax will “not cover the increased costs of the national living wage to the sector”.
The report also says that funding for “non-statutory services will continue to decrease” because available funding will be focused on statutory services, which will experience more demand “due to demographic change”.
‘Part of the solution’
The report says that government departments are likely to be focused on issues related to leaving the European Union and said charities “will need to be alert and respond quickly to proposed changes in the law”.
NCVO also said the sector “will be as relevant and necessary as ever” to tackle the divisions that the Brexit vote exposed.
The report pointed to the establishment of the new Number 10 policy unit for charities as an example of a “wider reset of the sector’s relationship with government”.