Last rites for the “big society” as charities join the critical list

“It’s an idea built on sand.”

So, there's the rub. The spending cuts, coupled with a huge drop in income, have left the charity sector dangerously exposed just at the moment ministers talk of handing over service provision.

The National Council for Voluntary Organisations (NCVO) issued a bleak survey this week showing tht confidence levels in the voluntary sector's financial future are at an all-time low. Respondents also demonstrated low confidence in their organisations' general situation and finances. It reported:

97 per cent of charity leaders expect economic conditions within the sector to be negative over the next 12 months.

The key findings are grim:

  • 35 per cent plan to decrease the extent of services they offer during the next three months.
  • Over half (53 per cent) of respondents said that their organisation's financial situation had worsened over the past year.
  • 55 per cent said they planned to reduce staff numbers over the next three months.
  • 64 per cent of respondents felt that the general situation of their organisation would get worse over the next 12 months. This is an increase of 3 percentage points since the previous quarter.
  • 83 per cent of respondents felt that economic conditions within the UK as a whole will be negative over the next 12 months.

These are significant numbers: the latest Labour Force Survey figures for the fourth quarter of 2010 show that the voluntary sector employs 793,000 people, the same figure as reported during the previous quarter.

The hope for charities had been that the "big society" would end the era for charities of piecework and grants that lasted a maximum of three years. What the sector admitted this week is that the dream has died.

Most charities won't be able to scale up or have the staff capacity to meet the challenge of running services, let alone modernise them.

They had already suffered a drop in income from donations because of the downturn. That is critical, because most charities have incomes of less than £100,000 a year. Even in 2002, back in the good times, more than 42,000 had an income of £1,000.

That's before interest rates on current accounts dropped to the level they are now, VAT, fuel and the rest.

Imagine you're running a lunch club in Gateshead for 30 older people. Membership costs can't go up, but your costs do and the value of any assets will have sunk.

Income usually comes from revenue (yes, those coffee mornings), investments (if you're lucky), donations and legacies.

But people are living longer, the value of their estates has been hit by the recession (the drop in house prices) and many are having to pay for end-of-life care out of their estate.

Research last year by the Cass Business School on 20 leading legacy-earning charities, which together attract more than two-fifths (42 per cent) of all charitable legacies, shows that there was a real annual fall of 3 per cent in their legacy values in 2008-2009.

Ironically, those same people are those most likely to turn to charities for help, particularly for assistance with their care or support through initiatives such as befriending services.

A little-seen announcement by the Care Quality Commission this week revealed that councils have cut the number of people whose care they will fund – adding to the problems.

More older people will be unable to donate, the charities providing care services are going to be squeezed even harder and demand for them to step in will rise.

This is partly why the Association of Chief Executives of Voluntary Organsiations (ACEVO) wrote to councils this week, asking for reassurance that even in the toughest of financial climates the voluntary and community sector won't be treated unfairly. They don't have much hope.

Part of the problem is the early settlement made with the Treasury by the Ccommunities Secretary, Eric Pickles. It resulted in 28 per cent budget cuts for councils which will be front-loaded. Pickles helped kill the PM's "big society" initiative before it even got off the ground.

And old issues remain unsolved. The cost of tendering for public-sector contracts is still a problem, the Cabinet Office admits. Small charities are up against major PLCs with dedicated bidding teams. The promise of future cash streams remains exactly that.

One respondent to the NCVO report warned:

The idea that the Big Society will provide all the answers is built on sand, as many of us will fold and simply not be there to provide the support for individuals disadvantaged by current cuts.

The only remaining question is: where will the wake for David Cameron's grand design be held?

Chris Smith is a former lobby correspondent.

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It's a stab in the dark: the myth of predicting your student loan repayments

Even the company responsible for collecting repayments admits that it can't tell students what they'll be.

In response to renewed calls to overhaul the student finance system, the universities minister Jo Johnson insisted last week that the "current system works". He pointed out that a university degree boosts "lifetime income by between £170,000 and £250,000".

What he failed to mention is that not even the people administering the loan system can tell students what they will be expected to pay back each month, because they can't work out what they'll earn. 

When asked by the New Statesman why it had pulled an online calculator designed to tell students what their repayments would be, the Student Loans Company (SLC) said it wasn't "possible to answer customers' questions about how long it will take to repay their loan or how much they will owe at a point in the future because there is no accurate way of predicting their future earning".

The confusion around student loans stems from the fact that, unlike loans from banks, their repayment is income contingent.

Until May last year, the SLC had a calculator on its website which students and parents could use to predict how much they may have to repay in the future. But after Andrew McGettigan, a higher education journalist, emailed the SLC noting that the calculator did not take into account gender inequality in future salaries, it was swiftly taken down. 

It was in response to queries about this calculator from the New Statesman that the SLC admitted that there was no accurate way to predict future repayments. The organisation added that it was "exploring new and better ways to present information" to its customers. 

This admission appears to undermine Johnson’s “fair and equitable” description of the student finance system. If even SLC can't say what repayments could look like, how do we know? 

Further controversy around student loan repayments is expected when a report is published later this year by the Department for Education on student finance and expenditure. This is expected to highlight the discrepancy between the maintenance loans students receive and rising rent costs. 

There are still a range of unofficial student loan calculators on the internet, but many use overly optimistic projections for future earnings. McGettigan says this is because they are based on salary trends from the 1980s to the 2010s. He also adds that these unofficial calculators are all based on the official one that was removed – and that they also do not take into account the impact of Brexit. It's a stab in the dark.

The SLC notes that "every student who applies for their student finance online must navigate a page of key repayment information that outlines six points". Student loans are inherently complicated by design, but as Amatey Doku, NUS vice president (higher education), makes clear, this has consequences for fair access to higher education. “We know that BME and poorer students are more worried about high levels of debt than any other group, but the current system does not provide adequate support for those about to enter it.”

Students seeking advice from an independent body will be hard-pressed to find one. The independent Student Finance Taskforce set up by the coalition government in 2011, which sought “to reassure potential students about what they can expect when applying for university and beyond”, was quietly discontinued and never replaced. 

Read more: Jeremy Corbyn's opponents are going down a blind alley on tuition fees

Further confusion surrounds the government’s framing of student finance to sixth formers. Beyond the debate surrounding tuition fees, there is the assumption that has never been made explicit by either political party, which is that students who have a household income of more than £25,000 are expected to have some form of financial support from their families for living costs.

Are parents made aware of this before their children apply to university? Unlike in America, where parents are encouraged to put money away into a “college fund”, the British government never openly encourages parents to save specifically to send their children to university. 

Although there is “no specific date” for its publishing, the Department for Education's report is is believed to argue that, much like the NUS’s debt report did in 2015, that the current system results in poorer students having to take excessive part-time work during the university term. Some also have to take on commercial loans. The stress of both can have an adverse effect on students' mental health.

All this, and not even the organisation responsible for collecting repayments can tell students how much they will be paying back.