£4.5 billion hit to charities funding

Chancellor of the Exchequer George Osborne announced the Liberal Democrat Coalition’s austerity plans.

It wasn’t all bad news and civil society actors were grateful for the concessions the government made but they unanimously expressed concern for Britain’s most vulnerable and the long term sustainability of the sector.  

“Today is the day that Britain steps back from the brink,” said Osborne, adding that “it is a hard road but it leads to a better future.”

In total £81 will be cut from public spending over the next year. To achieve these savings 490,00 public sector jobs will be cut; the retirement age will be raised from 65 to 66 by 2020; welfare benefits will shrink by £7 billion; local council budgets will decrease by 7.1 per cent; and child benefits to higher-rate taxpayers will be scrapped.  

“Charities face major challenges in the months ahead,” says Stephen Bubb, CEO of ACEVO, a network of British non profit organisations. He estimates “as much as a £4.5 billion hit to [civil society’s] funding.”  

Third sector experts say that their delivery of social services will suffer because of the cuts.

Big Society is asking social enterprises to take on a bigger role in public service provision. Actors in the sector worry that cuts to the budgets of the local councils will make it harder for them to compete with the private sector for government contracts to provide health and social care services.

In response to the spending review Peter Holbrook said, social enterprises “could lose out on future contracts because of the hurried decisions that some local councils will take under pressure to make cuts.”

“A number of social enterprises delivering public services have told us that they feel no option but to revert back to traditional charity fundraising methods in order to survive. This for many is a step backwards, and an unsustainable option in the long term,” he added.

There was a faint silver lining in all of this for the third sector. Stephen Bubb applauded the government for its “recognition that these are tough times for [the] sector and that the sector needs more help.”

The government announced a £100 million transition fund to support medium and large sized charities, providing public services, and on the green front pledged £200 million to support low-carbon technologies and the creation of a green investment bank – to help green industries get off the ground.

Bubb said his network “welcomed” the new transition fund and Friends of the Earth’s Executive Director Andy Atkins said the later was “good news” but qualified his enthusiasm, stating that the bank “will need significantly more than the £1 billion allocated to be effective.”