This blog looks at the impact of the austerity measures and in particular, the retraction in public sector spending on charities. I am concentrating on medium sized charities partially because I work for one (and hence have first hand experience) and partially because I believe that the public sector funding cuts have affected these charities more than their larger and smaller counterparts – feel free to correct me if I’m wrong.
Over the past decade, medium sized charities have tended to earn the majority of their income from managing and delivering contracts for services funded by the public sector, usually local authorities. The current austerity measures, all over the country, but particularly in the North of England, have resulted in a high percentage of public sector contracts, with voluntary sector agencies, being significantly reduced or completely eliminated. Many charities have been affected, in particular those providing preventative and non-statutory services.
Contemporaneously most local authorities, as a result of the reduction in financial allocation flowing to them from central government, have been forced to implement a mixture of raised eligibility criteria and higher charges for services leading to a reduction in the number of people either able or willing to access public sector funded services.
The consequence is that charities are faced with diminishing funds, increased demand for their provision and pressure from local authorities to reduce the unit cost for any public sector funded contracts which they still retain. I don’t have any magic answers to these problems (my own charity has suffered very large cuts in income from contracted services) but I do have some details of measures my charity has adopted to enable us to go forward with more optimism into the future.
1. The first and potentially most controversial change is a move towards charging the end user the economic cost for some of the services provided to them. This change was thoroughly scrutinised by my Trustees who were worried that some beneficiaries would not be able to afford the services they need. Eventually, after much debate, they decided that it was better to provide the service at economic cost and assist the poorer beneficiaries with advice and assistance to aid affordability rather than cease to operate vital services or be restricted from introducing new services which are wanted and needed.
2. Next we have embraced non-primary purpose commercial trading with guidance and support provided by a national social enterprise called advant~age. Many charities operate some form of trading, but it is often in the form of primary purpose trading e.g. selling training courses about their particular specialist area. Utilising products and sales channels provided by advant~age we are now selling an ever expanding suite of commercial products incorporating travel insurance, commercial insurances, stairlifts, funeral plans, wills, power of attorney, equity release etc. Product sales can be face to face or made just by encouraging supporters to purchase via a link from our website to the advant~age site. It has been simple to set up and operate as advant~age does all of the hard work in sourcing the products and providing sales support. Last year we made over £16,000 commission from trading in advant~age products and we are anticipating this sum increasing each year.
3. Finally we are reducing expenditure where we can in the traditional manner. We are scrutinising all cost centres and budget lines to see where we can make savings, however small; but to be honest there has been very little saved in this way, as we were already pared to the bone. More success has been gained by becoming much more assertive in our approach to purchasing. Internally, our staff have become price Rottweiler’s – they just won’t let a supplier go until they have cut their charges. As suppliers lose contracts as a result of business customers shrinking or going to the wall in the recession, so they become more willing to negotiate on price. We have also had substantial amounts of expert professional help with this as through our 800 Group charity consortium, we have been able to utilise the services of a dedicated purchasing manager who undertakes aggregated purchasing for the seven charities and has saved the 7 charities collectively over £250,000 in 2011/12.
Our belief is that the combination of these strategies will ensure that we have greatly reduced reliance on external bodies for our future financial survival; which brings me neatly to the title of this piece – “Unchaining the Wolf”. One collateral aspect of the reduction in public sector funding going into charities, I believe, will be a reduction in the reluctance of charities to speak out forcefully against the local authority/public sector when warranted. In the recent past, a certain element of self censorship has existed as charities have been wary of “biting the hand that feeds”. In essence we have tended to become a little too cosy with our funders and respond like lap dogs, doing our master’s bidding on demand. In future, the golden chains of funding won’t be there to make us think twice and I can foresee charities being far more prepared to challenge statutory authorities more vigorously. What has been termed the civil society is soon going to become far less civil and far more prone to standing up for itself and its beneficiaries. The lapdogs will revert to their true nature. Watch out local and national government, the wolves are slipping their chains.
Thanks for reading – and please do respond.
Courtesy of Dil Daly, Age Concern Liverpool & Sefton via NWVCS Leaders Views