Crisis after crisis, many charities have faced a surge in demand as they are under pressure to fill in vital gaps in public services. But where’s the funding to match?
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Charities play a fundamental role in providing public services, through mental health organisations, children’s and youth services and housing to name a few. Even some of the country’s most well-known services are run by charities – St. John Ambulance, Citizens Advice and the RNLI are all household names.

But as the pandemic waned and the cost-of-living crisis deepened, it seems like charities were almost expected to take up the widening gaps in public services. Instead of going to the NHS for mental health services, for example, people reach out or are referred to charities providing those services instead.

Many charity leaders have noticed the change. According to the Charities Aid Foundation (CAF) Charity Landscape report 2022, 91% of sector leaders believe that charities will be expected to fill gaps in providing public services. This rose to 94% in 2023, the organisation has revealed. Similarly, a small poll on Twitter asking if people thought there had been an increase in charities filling in gaps in public service saw 97.9% of people voting ‘yes’.

“Charities are expected to deliver public benefit, just by their very nature and there are shifts in terms of what’s critical and the service and service needs according to population,” explains Helen Moulinos, CEO of advocacy charity POhWER.

“In the last couple of years, we’ve had one crisis after another, we’ve had the pandemic, the energy crisis, the cost of living crisis, the benefits crisis and the NHS as a result of cuts is receiving unprecedented demand they can’t fulfil and it does feel like a bit pass the parcel of crisis services.” But this isn’t a new thing. “I see many other chief executives having to fill in the cracks of government-run services, I don’t think this is a new trend.”. “As charity leaders we’re living with this burden to bear every day, but I think the key part of this is about what the government considers critical changes from year to year.” POhWER receives half a million requests for support a year and it’s becoming “nearly impossible” to deliver people-centred services in the current climate, Moulinos says.

A CAF spokesperson adds: “The UK’s charity sector plays a crucial role helping communities up and down the country – but it is stretched. The sector has been hit hard by the cost-of-living crisis, rising inflation and squeezed donations. At the same time, there is more and more demand for the services they provide.”

It’s evident that across the sector charities are feeling the effects – stuck in a cycle of short termism. In 2022, a Cranfield Trust survey of over 300 charities in Wales found 85% of leaders said having time to be both strategic and operational was their “major leadership challenge”. It’s not a stretch to believe that this is the same, if not worse in 2023. They are stuck fighting fires and dealing with a current slew of issues rather than planning for what may come in the future.

A funding crisis

According to Nicole Sykes, director of policy and communications at Pro Bono Economics, the government spends in the region of £15 billion on grants and contracts with the charity sector, with the spending divided equally between national and local government.

The government also plays a role in helping to subsidise all work undertaken by charities through the £5 billion in tax relief that the social sector benefits from annually. But the role it plays in directly funding the charity sector’s work has changed since the financial crisis. Pre-2008, government sources made up 35% of charitable income. By 2018-19, that had fallen to 28%, by 2022 it was only 26%.

The reduction in funding has had a rippling affect across the sector, not only making organisations more reliant on public funding, but lessening the faith the sector has in government aid. This shows in CAF’s 2022 report, which said two thirds (64%) of leaders are pessimistic about government support.

“I think at the moment, the thing that’s being whispered in the corridors of power in the sector is that the government may be passing the buck to the sector and uncaring as whether we succeed or fail in the delivery of these services,” says Moulinos. The sector itself feels as though it sits very low on the priority list, despite the reliance authorities have on it.

With this in mind, it came as a shock to many in the sector when, after years of charities saying they needed extra help, in the 2023 Spring Budget, charities were promised an extra £101.5 million; £70.9 million of which has now been made available to those offering ‘critical’ services, labelled as: food and emergency supplies, emergency shelter, safe spaces, warmth and financial or housing advice.

This came as welcome news, but it severely limits the number of charities who qualify for this funding.

“I don’t know a charity leader who is benefiting, small or large,” states Moulinos. “Funding is tight, but it needs to be more equitably shared across charities by the government. We have a voice in public policy but some adequate funding to make the vision of a fairer society would be nice too.”

A vital resource

But charities filling in these gaps in public service isn’t always a bad thing. Charities provide vital connections to local communities, and 64% of leaders think the government recognises this.

In fact, charities are only second to doctors in research conducted by the Charity Commission, above banks, police and the general public.

The work it does reflects this. According to procurement analysis undertaken for DCMS, VCSEs won 69% of the total value of contracts awarded for homelessness services between April 2016 and March 2020, as well as 66% of the total value of contracts to support victims of domestic violence and sexual abuse.

The problem is that the charity sector should be funded the same way the private sector is, but it’s not, and it also has to deal with public perception.

“A charity which is perceived as an operating arm of a local authority may lose some of the trust it has from its users, while a charity bound tightly by the outcomes prescribed in a public sector procurement contract may lose some of its ability to move nimbly,” explains Sykes.

“As a charity leader, if you receive £100 of funding and you have £150 of cost, the public doesn’t know that,” says Moulinos. “It’s almost as if charity workers are expected to work with funding that doesn’t cover salaries, doesn’t cover the extra work were doing. We’re really working free of charge.”

Securing a government or local authority contract isn’t necessarily the windfall these organisations need. “The government is not willing to pay for what services actually cost in 2023,” the POhWHER CEO says. “There’s maybe a perception that the charity sector can be brought off cheap and provide services cheaper.” But it’s not that charities are providing services cheaper, they are instead supplementing these services with their own fundraising efforts or reserves to make ends meet. If contracts are going out to tender and are aimed to be competitive, then there is no reason charities should have the same procurement rights as private companies – if current trends continue it could be the difference between keeping the doors opened or closed.

“For every charity that says no, that funding isn’t adequate, there’ll be 10 more who will take the funding.” That funding might mean the difference between the organisation’s survival or an essential service staying open in a local community “so there’s no shame,” she adds.

Charities are being funded in 2023 at 2010 levels; there is no recognition of inflation, she stresses. “I wonder if the wider charity sector is expected to be grateful for the opportunity of government funding its received but also to supplement the frail finances of the government.” POhWER has been proactive in asking for more sustainable funding, but 90% of its requests have been denied because the money is deemed to be going somewhere more important.

“We need a resilient, vibrant charity sector, supported by a renewed culture of giving. That is why the UK needs the government to draw up a national strategy for philanthropy and charitable giving to mobilise effort across society and business,” adds the CAF spokesperson.

Unfortunately for the sector, it’s unclear what the future will bring financially. A general election is looming and policy can overnight. But what we do know, however, is that if the government continues to rely on charities to run critical services, then there will always be the question: where is the funding that goes along with it?

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