Meeting the challenges of Austerity 2.0

Austerity policies brought in by the Conservative and Liberal Democrat coalition government of 2010 hit charities hard. This saw government funding cut and capital funding canned.

 

A decline in government contracts for charities is also an unwelcome legacy of this era. While more than eight in ten of all government funding was from contracting in 2010, the proportion was less than a quarter by 2020, according to NCVO analysis published in 2021.

 

Many charities failed to survive without government funding, most famously Kids Company. While many others looked to diversify their income streams, such as by growing their legacy fundraising and trading arms.

 

Now the onslaught of the cost-of-living crisis has seen the emergence of Austerity 2.0 and charities are seeing a further erosion of government spending.

 

In 2021, charity income from central government fell by 3% compared to the previous year. The cut in funding from councils to charities over this period was 9%, according to the NCVO.

 

Government funding cuts come as demand for support is also increasing, underlined by research released by food poverty charity Fareshare last year. This found seven in ten food bank charities are supporting people who need help for the first time. Nine in ten charities warn they cannot meet extra demand.

 

Meanwhile, fundraising is faltering amid Austerity 2.0. According to the Charities Aid Foundation. 4.9 million people chose not to make a one-off donation to charity during the autumn of 2022 due to the cost-of-living crisis.

 

Already several charities have been forced to close. Among the latest is Cornwall-based mental health charity Sea Sanctuary, which in the New Year announced its closure after a last-ditch fundraising plea failed.

 

Charities in 2023 will have to adopt different strategies to ensure they remain viable and offer valuable support to struggling communities. Here we explore some of the options.

 

 

Offer money not food parcels

 

Instead of offering disadvantaged families food parcels charities are being urged to give them money to choose their own support.

 

The move would be a more efficient way for charities to offer help, as families know their needs best. It would also help give them control over their lives in uncertain times.

 

In addition, offering money not goods and food parcels can save charities vital money on overheads, such as leasing premises.

 

The proposal has been put forward by the New Philanthropy Capital, whose policy manager Theo Clay said: “Instead of forcing people to be passive and grateful recipients waiting upon generous charity, why would we not give people some of their agency back?”

 

He added: “In giving goods rather than cash, we’re saying that we know best. Why aren’t we allowing people to make their own choices about how to overcome the barriers they face?”  

 

The move is already being adopted in Canada through the New Leaf Project that supports homeless people in Vancouver, adds Clay.

 

 

Stop relying on legacy giving

 

Charities have relied on strong growth in legacy income in recent years, fuelled by COVID-19 increasing people’s awareness of their own mortality and desire to leave money to help others. This has been particularly prevalent among younger charity supporters, who are becoming more interested in writing wills. 

 

Rapid increases in the value of properties have also significantly boosted the value of legacy donations in recent years.

 

But a fall in the value of homes amid the cost-of-living crisis and the rising cost of borrowing will see sums generated for charities from the sale of homes fall markedly.

 

Consultancy Legacy Foresight predicts a 3% fall in legacy income over the next two years due to plummeting value of property. Figures from property website Home.co.uk found that prices fell by 2.4% in a single month at the end of 2022.

 

Amid Austerity 2.0 charities need to find new ways to generate income to ensure they are not too dependent on the dwindling value of legacies.

 

 

Make life easier for supporters

 

The cost-of-living crisis need not be a barrier for people to support charities. Fundraisers are urged to take soaring every day costs faced by their supporters into account, by reducing costs involved, such as fundraising event entry fees. 

 

Among those already making this move is Kiltwalk in Scotland, which last year raised £8m for good causes.

 

For this year’s event the fee is being cut from £32 to £20 “in recognition of soaring inflation” say organisers. This move is being underwritten by the event’s backer the Hunter Foundation, set up by philanthropist Sir Tom Hunter.

 

 

 

Encourage funders to tackle recruitment challenges

 

Charities are struggling to afford to pay competitive wages needed to hire and keep staff amid Austerity 2.0.

 

Analysis in 2022 found that large charities, those reliant on government funding and voluntary sector organisations based in the Northeast of England are most at risk.

 

This is where funders can help out, according to research published by the charity  IVAR, which is calling on foundations and trusts to offer charities funding specifically aimed at recruitment and retention issues.

 

Ways funders can help include focusing on multi-year, unrestricted funding as well as allowing charities to adapt and change budgets to meet changes, such as the need to boost salaries. Charities are urged to talk to trusts and foundations to see how funding can help then survive this latest wave of austerity.