The Comprehensive Spending Review revealed a major reduction to the administrative costs across government, with George Osborne's four-year plan slashing a total of £81 billion from public spending, with ACEVO noting the changes could result in charities facing up to £4.5bn hit to their funding.

The chancellor announced a reduction in revenue grants to local authorities by 26% over the period 2011/12 to 2014/15.

Of significance to the charity sector are the cuts to the Department for Culture Media and Sport (-24%), Local Government (-27%), and reform of welfare and housing: with local authority revenue grants no longer protected, and social housing funding cut by 60 per cent.

To enable charities to play their part in the Big Society, the Government has allocated a £100m transition fund for those providing frontline services.

There is, however, little evidence of investment in developing voluntary sector organisations, or in training for charities.

Demands on charities’ services are at unprecedented levels, yet at the same time statutory funding and voluntary income is in decline.

The impact of further cuts and job losses in the public sector – to the tune of half a million public sector jobs cut - and potential job losses in the private sector is likely to mean that there are even tougher times ahead.

ACEVO: £4.5bn hit to charity funding

Stephen Bubb, CEO of ACEVO, warned: “Charities face major challenges in the months ahead with what we estimate could be as much as a £4.5bn hit to their funding.

“I therefore welcome the government’s recognition that these are tough times for our sector and that the sector needs support. So I welcome the strong theme of public service reform with a bigger role for our sector reaffirmed throughout the Chancellor’s announcement.

"In particular we strongly welcome the news of a £100m transition fund to support medium and large sized charities to gear up to deliver more public services in challenging times.

"But what is important now it that we work with both central and local government to ensure that the hit charities take in the year ahead doesn’t become the banana skin on which the Government’s Big Society plans fall flat."

NCVO: transitional support for voluntary organisations is very helpful

Sir Stuart Etherington, chief executive of NCVO, said the sector should be under no illusions. "The coming months will be difficult for the people and communities we work to support. But the announcement of transitional support for voluntary and community organisations is very helpful.

"It demonstrates that the government has listened to the sector and understands the important role we will play in helping to address the challenges we all face in the coming years."

CFDG: time will tell how cuts will play out

The Charity Finance Directors’ Group CEO Caron Bradshaw, noted how these announcements were always only going to be the start. "How these cuts will play out for the sector will become clear over the coming months as the cuts are implemented.”

She observed that finance professionals will need to focus on demonstrating the adverse impacts of the cuts on their ability to deliver services in order to take advantage of the fund.

Bradshaw added: “The Transition Fund offers some good news and is something CFDG has been calling for. What we need now, is for it to be smartly applied so that those who most need it to adapt and change to new funding environment are given support to do so. It must not be used as a get out for local councils, who will see their budgets cut by 28%, to make the easiest rather than the most appropriate cuts.”

CAF: 12 month transition fund may not be sufficient

Hannah Terry, head of policy and public affairs at the Charities Aid Foundation, tied the announcement-in with the Government's Big Society idea: “The Government told us last week that it understood the difficulties facing charities and voluntary organisations, in attempting to deliver the ‘Big Society’.

"Today these words have been backed up with a £100m fund to ease the transition. However, we are concerned that the 12 month lifetime of the fund may not be sufficient to support the sector to play its full role in the radical transformation of public services that the Government clearly aspires to. The Big Society will not be built in a year.

"Removing ring-fencing of local authority budgets is a positive move, but the onus is now on those local authorities take full advantage of this new freedom to deliver better outcomes for people in new and innovative ways.

"Charities and voluntary organisations must play a central role in this transformation, due to their capacity for delivering cost-effective, user-focused services. We would call on local authorities to work in partnership with the voluntary sector during this period of change and not look for short-term and easy savings.

“Finally, we look forward to seeing more detail on the announcements made on charity financing, including payment by results, equity investment in charities and new measures to encourage philanthropy.”

Social Investment Business: shifting the balance of power from the centre

The Social Investment Business chief executive Jonathan Lewis focused on the Chancellor’s commitment to shifting the balance of power from the centre."Cutting red tape and encouraging new providers opens up opportunities for civil society organisations to get more involved in public life and public service delivery.

"This presents real opportunities but has to be done in the right way. I know heads of sector organisations who are concerned they could be seen simply as a substitute for services government can no longer afford. In fact the sector has much more to offer and many organisations are well placed to bring their creativity and ability to innovate to bear on the tasks of both saving money and improving the quality of frontline services.

“We have helped civil society organisations implement job creation programmes, set up parent-led schools and deliver cost-efficient health and social care services in their areas and there is potential to do much, much more."

In its strategy document ‘Building a Stronger Civil Society’ launched last week, the Government stated that the voluntary and community sector sits at the heart of the Government’s ambitions to create a Big Society.

Institute of Fundraising: voluntary sector has crucial role to play in Big Society

Amanda McLean, chief executive designate of the Institute of Fundraising, noted the voluntary sector has a crucial role to play as part of the Big Society. "Fundraising organisations will need to be well resourced in order to grasp the opportunity to compensate for cuts made elsewhere.

"We welcome the announcement of the £100million transition fund for voluntary organisations, and look forward to further clarity around specific support the Government can provide our sector, working in partnership to realise this.”

SCVO: Scottish Government should avoid panic cuts

John Downie, director of public affairs for the Scottish Council for Voluntary Organisations, added: “The UK Government has shown its commitment to our sector through the creation of a £100 million transitional fund for voluntary organisations delivering public services in England.

"Given the importance of our sector to Scotland’s economy and the potential for us to do so much more in public service delivery, we hope the Scottish Government takes a similar approach.

“The challenge for the Scottish Government now is to avoid panic cuts. Any cuts to Scotland’s charities, voluntary organisations and social enterprises would damage the ability of our sector to continue to work at the front line in protecting the most vulnerable people in our society."

The King’s Fund: a reduction in the NHS's purchasing power

John Appleby, chief economist at The King’s Fund, said compared to other departmental budgets the NHS settlement is a generous one.

"But, while the increase in health spending meets the pledge to protect the NHS budget, an increase of 0.1 per cent a year in real terms will soon be swallowed up by cost pressures such as incremental pay drift and the increase in VAT. The net result will be a reduction in the NHS’s purchasing power.

"This places even greater emphasis on finding the £20 billion in productivity gains targeted by the NHS’s Chief Executive - the status of this has moved from an ambition to a commitment. Our work has highlighted opportunities to improve efficiency at every level of the health system. Delivering on this represents the biggest financial challenge the NHS has ever faced but it is imperative if it is to maintain quality and avoid cutting services.

"The £1 billion increase in grant funding for social care could provide some respite for hard-pressed local services and buys time while the Dilnot Commission works on a long-term funding solution. But this money is not ring-fenced so there is no guarantee it will be spent on social care.

"Used wisely, the additional £1 billion from the NHS budget to break down the barriers between health and social care provides a real opportunity to improve service delivery and save money by, for example, reducing the length of time patients spend in hospital. Again though, with the ring fence on local authority grant funding having been removed, and local government funding slashed overall, it remains to be seen whether this translates into increased funding for social care services.

"The commitment to ring fence funding for public health makes good on the commitment made by the Conservative Party in opposition."

Community Foundations for Merseyside and Lancashire: opportunities and challenges

Cathy Elliott, chief executive, Community Foundations for Merseyside and Lancashire noted there is no doubt that the sector adapting to the Big Society agenda is going to put some organisations under pressure.

"But this will bring both opportunities and challenges to the voluntary sector. Organisations with a strong track record and a successful approach will be in a strong position to develop further.

"Charities or voluntary groups who can alter their approach to delivery and transform their culture into sustainable, high impact organisations are likely to see more opportunities for development.

"We predict there will be many changes, there may be examples of consolidation where groups merge or combine in order to be more cost effective in striving to meet the needs of the local community. It is vital that the voluntary sector must therefore work together quickly to create a new 21st century model that is fit for purpose and allows us to meet the new demands ahead. "

Zurich Municipal: Cuts every bit as severe as expected

Andrew Jepp, head of local government at Zurich Municipal, noted: “Now we’re privy to the specifics, the extent of today’s cuts is as every bit as severe as expected.

"While many charities – and public sector organisations more broadly – have, for some time, been implementing effective changes to pave the way for these cuts, activity must now be ramped up.

Grant Thornton: good and bad news for local authorities

However behind the headline local government cut figure, there is both good and bad news for local authorities, noted Damian Dewhirst, associate director in Grant Thornton's Government and Infrastructure Advisory service.

He said: "The unexpected good news is for children and older people. The protection of spending on schools by the maintenance of Dedicated Schools Grant and for pre school children by the protection of Sure Start will ensure that early years provision and education will remain at the heart of local provision.

"The additional funding for adult social care totaling £2 billion from NHS and local authority budgets recognises the pressures of an aging population on the future demand for public services.

"The removal of ring-fencing for all other government spending will give local authorities real freedom, for the first time, to decide how money is to be spent. The downside to this is that the amount of money over which authorities can take decisions is to be reduced. This reduction may be by a greater amount than we had anticipated as a result of the good news for children and older people.

"Quite how far this reduction may go will not become clear until the business plans for the departments that fund local government are published next month. Only then will we get the detailed information about how the overall package of support to local government is made up.

"This will reveal whether the new found decision making freedoms are, in fact, simply a cloak for deep spending reductions and, if so, what the impact will be on individual local authorities."

Providence Row: cuts will mean more homeless

Though the Government’s cuts to housing benefit will result in an estimated 82,000 evictions and lead to a homelessness crisis in London, according to the charity Providence Row.

This figure is in addition to the 2,221 people that already sleep rough on London’s streets.

“There is already a dire housing situation in London with sky-high rents and these cuts will mean that those already struggling will face eviction,” said Jo Ansell, chief executive of the charity.

As part of the cuts announced in the Government’s spending review, the coalition has increased social housing rents to 80% of the market rate.

This is in addition to their previous announcement to cap the Local Housing Allowance at 30% of all private rentals (down from 50%), making 70% of all of London’s accommodation unaffordable to the capital’s poorest – including those on minimum wage, pensioners, carers and those with long term illnesses.

This means tenants will be required to pay more to meet the shortfall between their income and actual rent. In the case of Local Housing Allowance if a tenant falls into arrears, they face eviction and will not be eligible for re-housing help from the Local Housing Authority.

Many of the people that fall into these categories are already in vulnerable situations. Ansell added: “We are deeply concerned that people with mental health problems and addictions will simply be unable to cope with these changes and will end up living on the streets, only to become more isolated.”

KPMG: biggest losers table

According to KPMG, its table of 'biggest losers' amongst government departments, the Communities Department comes off worst.

It faces a huge decline in real expenditure of over 60 percent by 2014-15, with most of this coming through the large cuts in the capital departmental expenditure limits for the department.

Taking the total spending forecasts into account (Departmental Expenditure Limits and Annual Managed Expenditure) and allowing for inflation leaves 16 departments worse off (five by 25 percent or more), one with no change and four better off.”

Real change in departmental expenditure by 2014-15
1 CLG Communities -62%
2 Environment, Food and Rural Affairs -29%
3 Business, Innovation and Skills -26%
4 CLG Local Government -25%
5 Foreign and Commonwealth Office -25%
6 Justice -24%
7 Law Officers' Departments -21%
8 Home Office -20%
9 Culture, Media and Sport -14%
10 Transport -14%
11 Wales -10%
12 Scotland -8%
13 Education -6%
14 Defence -5%
15 Northern Ireland -5%
16 Chancellor's Departments -2%
17 Work and Pensions 0%
18 Health 4%
19 Energy and Climate Change 15%
20 Cabinet Office 31%
21 International Development 33%

Source: KPMG

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