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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.