Kirsty Weakley: How many charities have to shut their doors before government acts?

07 Apr 2020 Voices

After a month of lobbying, the Treasury has still not unveiled a bespoke package of support for charities. Kirsty Weakley reports.

Fergus Burnett

It has been two weeks of lockdown, three weeks of social distancing, and one month since charities warned of a cash flow crisis. So why is there still no emergency government fund to help the sector through this? 

The charity sector is facing its biggest challenge in living memory, and every day counts. But with a month of the crisis having now passed, there is still little detail about what specialist government help it will be able to access. 

From the outset, charities have been clear that they can and should play an important role in various aspects of the national coronavirus effort. But they can’t do so while they are worrying about how to pay the bills. 

Leaders have been warning that the sudden drop in fundraised and trading income will lead to charities closing - just when many of them will be most needed. 

Some of the measures introduced to help companies that are struggling simply do not work for charities, and charities of all sizes have appeared across most of the mainstream print and broadcast media to explain this point.

Meanwhile demand across the sector is increasing at a phenomenal pace. 

Hospices and other health charities are facing similar challenges to the NHS, food poverty charities are struggling due to disruption in supply chains, and charities that provide all kinds of advice to people have seen calls to their helplines increase and web traffic reach all-time highs. 

A bespoke package of support is supposed to be on the way, but details are vague and the package is now likely to come too late for some.

What is the scale of the challenge?

NCVO estimates the funding gap over the next 12 weeks to be at least £4bn. The true gap will probably be much more.

Over half the charities that responded to a survey by the Directory of Social Change said that they will collapse within six months if they don’t get additional help.  

This does not feel like an over exaggeration or charities crying wolf. Typically charities hold between three and six months’ expenditure in their reserves. So if we expect some level of serious funding disruption to last up to six months, then it obviously constitutes a very real threat to the existence of many charities. 

Government is the only institution with pockets deep enough to provide emergency funding at the scale needed. 

A month of pleading

The first major call for help came when sector bodies wrote a letter on the eve of the budget (10 March). They stressed the need for grants or light-touch loans for charities facing a cash flow crisis. 

“Fundraised income and trading income are the bulwarks of many charities’ business models. Disruptions to both represent real risks to solvency for many organisations, and more widely a loss of funds to invest in charitable activity at a time when they may be more needed.” 

But while the chancellor, Rishi Sunak, would reveal measures to deal with the likely economic impact of coronavirus, he made no specific mention of charities. This was despite promising to “do whatever it takes” to get the country through. 

It was particularly disappointing that one of his key measures was not available to a large proportion of charities. To be able to access the Business Interruption Loan Scheme, organisations need to be receiving over half their income from trading activity. 

Who is on team charity?

Then, two weeks’ ago, NCVO warned that the sector stands to lose at least £4bn over 12 weeks, and told the government that time was of the essence. 

On social media, charities mobilised around the phrase #EveryDayCounts, with the Charity Finance Group creating a logo and resource pack to make it easy for charities to join in. 

Just about every major news outlet has featured charity leaders explaining how they are furloughing staff, shutting premises and facing tough decisions with their main income sources coming to a standstill. 

Politicians from all parties have added their voices to the mix.  

Danny Kruger, MP, former Number Ten adviser and author of the government's Civil Society Strategy, intervened at the end of last week to call for a billion-pound package for charities.  

Former charities minister, Rob Wilson, wrote in the Telegraph: “Literally thousands of charities could be gone within a matter of weeks without action”. When he was in office, Wilson was big advocate for helping the sector to become more sustainable and less reliant on grants, and pushed the social investment agenda forwards. For him to be calling for government grants is therefore significant. 

The Digital, Culture, Media and Sport Committee has also taken an interest, convening an evidence session over video link with Karl Wilding, chief executive of NCVO, Martin Houghton-Brown, chief executive of St John Ambulance, and Chris Wade, director of engagement at the Motor Neurone Disease Association.

Wilding could not hide his frustration with government when he said that his team was sending the same information to officials again and again. 

“At times it feels like we are providing the same evidence in new and different ways,” he said. 

The message is clear and consistent. The sector is running out of influential people who can make the case. Yet still there is no action.

Ministerial reassurances 

The prime minister, the minister for civil society and other cabinet ministers have all at least alluded to a package being in the works. 

On Friday 27 March, Michael Gove, chancellor of the Duchy of Lancaster, said that a package of support is expected to be announced in the coming days. 

Last week Penny Mordaunt, paymaster general at the Cabinet Office, said the package was expected to be large. 

But Treasury officials remain tight lipped. They insist that measures are already in place to help charities, and have not publicly acknowledged drawbacks. 

As mentioned above, many charities are excluded business interruption loans because they don't generate enough trading income. There is also confusion about the definition of "trading".
Meanwhile, furloughing only works for roughly one-third of charities, such as arts centres which have been forced to close their doors. For those providing health or community services, it does not.

Are charities at the back of the queue?

The chancellor has already announced funding worth hundreds of billions of pounds, so it feels baffling that a rescue package of up to £4bn is a source of much dispute. 

One possible explanation is that charities are not the only sector lobbying the Treasury. Other sectors are also calling for extra money. 

Another is that the media campaign has largely focused on the household name charities. Big brands sell papers, but large charities don’t have a particularly good relationship with Conservative MPs.

We’re never far from a Tory backbencher having a moan about charity chief executive pay, and many MPs have not forgotten the fundraising scandal from 2015.

Unfortunately, an outdated idea of what charities are still persists. Almost every politician will speak warmly of local charities in their constituency, and there are rare examples of MPs with real practical experience in the day-to-day running of a charity, such as Mordaunt. However, as a group, politicians and their officials lack the understanding of the scope and complexity of the sector. 

For years charities have been an afterthought. That has been compounded by the all-consuming Brexit process, where charity issues have also been sidelined. Sector bodies spend a lot of time explaining how new bits of government policy either don’t work for charities or inadvertently harm them. 

The Civil Society Strategy, launched nearly two years’ ago, was supposed to signal a new dawn in charity and government relations. This crisis shows that nothing has changed. 

Tragically while charities are pleading with government, explaining how they work, or trying to bend rules to work for them, they are not focusing on delivering vital services or mobilising volunteers. 

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