A report published today by the National Council for Voluntary Organisations (NCVO) suggests that charities in England and Wales are facing a cut in their funding to the tune of £2.8bn over the next five years.
Counting the Cuts bases its calculation on figures of the government’s projected spending plans released by the Office for Budget Responsibility.
NCVO made its calculation by assuming that each government department will continue to fund the “third sector”, but in proportion to that department's total spending. With every department having to make substantial savings, that means that the amount payable to charities will decline in line those budget cuts.
Even so, the report warns that this may underestimate the scale of the financial impact on charities. It points out that, as a result freedom of information requests, they have discovered that almost half of all local authorities will also reduce the proportion of their spending on the sector as well as their net spending.
"Putting an authoritative figure on the extent of the cuts to date has been like trying to pin jelly to the wall," said Karl Wilding, head of policy and research at NCVO. "Estimates have varied widely and this report provides a solid baseline figure based on the government’s own figures.
“Many charities are unwilling to speak out for fear they will jeopardise other funding streams but we currently face the perfect storm of an increase in demand and nearly £3bn public sector cuts – this is a significant cause for concern because it will significantly hamper the ability of charities to support those most in need.”
In response to the findings, a spokesman for the Cabinet Office explained that the “Big Society” offered the voluntary sector opportunities to grow, adding that “our reforms will allow the voluntary sector to bid for public service contracts worth billions of pounds. Just over a week ago Big Society Capital launched with an expected £600m to give the sector access to much needed finance, which will help them expand and bid for these new contracts. And we’re doing more to support giving and philanthropy including measures in the budget estimated to be worth £600m over the lifetime of the parliament. This is just the start.”
Although the report focuses on the position south of the border, there are fears that the impact could just as hard in Scotland. In the view of John Downie, director of public affairs at the Scottish Council for Voluntary Organisations (SCVO), “The NCVO report demonstrates some of devastating impact that will be felt over the next four years by the coalition government’s austerity measures. However, our own estimates for the drop in spending on the third sector in Scotland are even more dramatic.
“While this report just looks at funding to the sector through the Scotland Office, cuts to the Scottish block grant are much greater cause for concern. Conservative estimates put the drop in block grant at 11 per cent over the spending review period. If the Scottish government were to pass that on to charities and voluntary organisations, the sector could lose as much as £200 million, leaving thousands of vulnerable people without the vital lifelines they rely on.
“We are confident however that the Scottish government will not pass on a cut of anywhere near this size but continue to invest in the third sector, to ensure that the sector can increase its economic contribution, have a stronger presence in delivering public services and to use its expertise in employability to create opportunities for our young people.”
He said that the figures used in the NCVO report were based on spending by central government departments in Westminster. That meant looking at spending by the Scotland Office rather than the Scottish block grant. SCVO point out that the Scottish third sector has a turnover of £4.4bn, 42 per cent (£1.8bn) of which comes from central and local government. Using the same calculation as NCVO, it argues that funds the Scottish sector receives from central and local government funding would be cut by over £142m.
In a statement, SCVO pointed out that “the most important issue for us is the impact on the block grant – if we assume that the Scottish government, and subsequently local authorities and government agencies, were to pass that cut on the voluntary sector, the total cut as a result of government spending cuts to the third sector in Scotland would be £203,280,000.
“SCVO does not believe that the Scottish government will pass a cut that size onto the third sector. They want to invest in sector and their desire is for the third sector to increase its economic contribution, have a stronger presence in delivering public services and to become more sustainable. And in relation to the prevention agenda they know it’s the only way they can reduce spending on public services in the long-term.”
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