As the message sinks in that rebalancing government deficits will inevitably lead to much reduced public expenditure, the attention of charities is increasingly turning to streams of revenue that are less reliant on a political will for their existence.

There is a sense of a collective squaring of the shoulders and slight jutting of jaws as chief executives rehearse aloud a new mantra about moving into ‘sustainable’ activities that will deliver ‘surpluses’ rather than hunting about for increasingly rare public subsidy. Those jaws may need to jut a little more to hide the dawning realisation that the modest percentage of turnover that ‘profits’ represent (if you’re successful, that is) will also have to provide the resource needed to develop and grow the business, with far less prospect of capital grants to ‘get things off the ground’. The problem is that upgrading IT systems, revamping websites, hiring and firing, product development, marketing, and a host of other expenses all require investment which chips away at that surplus. And, let’s face it, making profits in the first place is not actually all that easy in the current climate.

In this context, CFDG’s election call for better tender processes for public service delivery makes a lot of sense. The lighter regulation on, for example, trading, that CFDG also requests would be very helpful too as would its request for the removal of anomalies in the tax system that frustrate sensible collaboration between charities. These are all good nuts and bolts technical changes that will make a lot of difference if they can be achieved.

Additionally, the Institute of Fundraising’s plea for more investment in fundraising is crucially important. People are huge supporters of charities and continue to give through thick and thin. Enhancing fundraising skills and capacity will make a really noticeable difference. In conjunction with simpler mechanisms for reclaiming tax, this could positively transform the sums given to charities by billions of pounds each year.

Capital and investment

The developments mentioned above are in the realms of the possible but they are not here yet. This is why the capital that is already in the sector is so important and why it is imperative that investment managers deliver the best possible returns on existing endowed assets, which provide so much of the sector’s unrestricted income.

But this is easier said than done and the prospects for investment markets going forward are very far from clear. After the wholesale slaughter triggered by the collapse of Lehman Brothers and what followed, the nerve of the investment industry is only just now beginning to recover and with it the shattered confidence of investors.

The debates have already started as to the best way forward, where and how to invest, how to protect assets from the threats of inflation and market volatility, how to avoid the illiquidity traps of certain alternative assets, what level of distribution to target, etc. These topics form the core of the programme at the Charity Investment Forum on 9 March where charity investors and investment managers will address these issues together.

Alongside sustainable trading and increased fundraising, investments need to take up some of the slack left by reducing public expenditure if charities are to deliver the services the public needs and expects.

Daniel Phelan is editor-in-chief of Civil Society Media