Funding Is Tough For Charities

The voluntary sector is hugely important to the economy of the South West. There are over 6,400 organisations, with around 65,000 people in paid employment, in Devon and Cornwall, and this excludes thousands of volunteers, according to research published by South West Forum, an umbrella body for voluntary organisations.

The voluntary sector also contributes £1.2billion to the local economy, almost 7% of the total GDP of Devon and Cornwall.

However, many charities and voluntary groups in the region are finding it difficult to secure adequate levels of funding. Competition for grants (for example through Big Lottery Fund) is intense, and this funding tends only to be short term, leading to uncertainty for the future.

Many organisations providing important services to the community on behalf of public authorities often struggle to secure enough funding as the authorities themselves are under pressure to cut budgets. Charities should only provide these sorts of services if their full costs are covered, but in practice many organisations do not achieve this.

Budget adds to problems

Against this background, the Chancellor’s recent Budget means some charities face further anxiety. The cut in the basic rate of income tax from April 2008 will reduce, at a stroke, the amount of money charities can receive through donations under the Gift Aid Scheme. The Charities Aid Foundation estimate charities across the UK could lose up to £100 million.

So what are the consequences if this situation continues?

Firstly, more and more smaller charities and voluntary organisations will close or merge with larger organisations who are able to carry on their activities more efficiently. I am seeing this trend at first hand through my involvement with several mergers and assets transfers in recent years.

Secondly, people considering setting up new voluntary organisations will look at joining forces with an existing organisation if they can achieve their objectives. This would avoid spreading the available funding even more thinly.

Thirdly, charities and voluntary organisations will be less reliant on grants and far more entrepreneurial in their fund raising activities, so that they can become more self-financing. Charities will increasingly have to establish or increase their trading operations. This could be a good thing as organisations should not put all their funding eggs in a single basket and need to have a variety of funding sources.

Finally we will see an increasing number of non-charity social enterprises, such as the new Community Interest Companies. Over 800 of these are now registered. Their primary aim will still be to fulfil a community object as a not private profit organisation, but with the flexibility to trade and raise funds without the constraints of charitable status.

One thing is for certain, standing still will not be an option.

Published 02/04/2007.