It’s a truism in the sector, universally acknowledged, that there is a squeezed middle among charities. What is happening, the story goes, is that the giant combine harvesters of the big boys are gathering all the contracts and the fundraising income, and smaller charities are getting pushed out.
It feels right. A lot of people have produced evidence to this effect, mostly based on the Charity Commission figures which shows the number of charities with incomes over £10m has almost doubled in a decade.
That data doesn’t necessarily show what we think it does, however. Previous interpretations of the figures, which seem to show big charities getting more of the pie, are skewed by the impact of inflation.
I wanted to find another way to look at the same question, so I asked David Kane, a freelance data scientist, if he had information on relative growth of different sized charities.
He looked at the charity in various positions on the NCVO’s list of general charities – which excludes independent schools, universities, housing associations and quangos. He found – somewhat surprisingly – that charity number 10,000 has grown faster than charity number 100. Or to put it another way, the squeezed middle is actually outperforming the top of the sector.
In 2004 the 10,000th largest charity in England and Wales had an income of £221,000. Now the 10,000th largest charity has an income of £588,000. That’s a growth of 167 per cent.
In contrast the charity in position 100 had an income of £32.6m. Now it’s £79.1m. That’s a growth of 142 per cent.
I’d like to look at charities above number 100, but they’re a bit weird. Changes in accounting regulations have skewed the way they report, and actually show a really slow growth in the top charity.
Here’s the comparative growth of charities between 2004 and 2016. The largest charities are on the left, the smallest on the right.
So what’s going on?
One thing I wondered was whether this was actually a game of two halves. Perhaps the huge growth in contract income in the last decade was mostly to the benefit of medium-sized charities, and then it’s been a struggle since. So I mapped it over time, as well, and it shows that the trend is fairly consistent.
Another thing I wondered was whether it might be down to more charities coming on to the register, and the answer is that it is, a bit, but not much. Charity Commission statistics show that in 2004 there were 166,000 charities and now there are 167,000.
Of course, there could be a margin for error there. A lot of charities on the register might be dormant at any one time. The number dropped by 8,000 between 2008 and 2009, after the regulator did a data cleaning exercise.
A number of charities have come on to the register and others have left. We don’t know if they’re evenly distributed. Certainly among the very largest charities we’ve seen new entries, like the Canal and River Trust and English Heritage.
Why might there be faster growth?
If we accept that medium-sized charities are growing faster than large ones – and I’m still not convinced – then we need to speculate about why that might be.
If I had to guess, I’d say that this is down to earned income.
Part of that is government contracts. This may sound surprising, but up until 2010, government income to the sector skyrocketed, and while there is now a narrative that it’s big charities which are getting most of this money, things were different in 2004. A lot of cash initially went to the small-to-medium sector delivering at local level, and while this is probably shrinking again, it’s still a lot greater than it was more than a decade ago.
Similarly, new and emerging social enterprises have been a feature of the sector since the start of the century, and these have tended to be medium-sized organisations. This part of the sector has seen a boom in trading income and the sale of charitable services, in a way that big charities perhaps haven’t.
In truth, though, I’m not sure. I’d welcome ideas about what’s happening here, because I wouldn’t be surprised if the actual answer is something I’ve not thought of at all.
One thing we’d like to do is track an actual cohort of the same charities longitudinally, because that would give some useful comparative data. My colleagues at Charity Finance magazine have started to do that, but it’s quite a lot of work, and they were only able to go back a couple of years. Their sample found something different – big charities growing slightly faster than smaller ones – which obviously brings no clarity at all.
What I think we can say is that we need some healthy scepticism around the prevailing narrative – that the big boys are running off with all the cash. Perhaps they are, but we can’t produce data to prove it.