Smaller charities risk closure as council budgets tighten, NPC warns

13 Nov 15

Local government funding cuts could be a ‘silent killer’ for small charities and leave them unable to compete with national organisations, think-tank New Philanthropy Capital has warned.

Just over a week before Chancellor George Osborne’s Spending Review is due and a week after the closure of domestic violence charity Eaves, the NPC has said smaller, specialist charities that often have strong links in the communities they serve will be at a serious disadvantage in local authority commissioning rounds due to budget cuts.

George Hoare, a consultant at NPC, said: “The Spending Review is certain to deliver more cuts to national and local budgets. Even after an extremely tough few years, charities will be confronted with even tighter public funding in the years ahead.”

The Department for Communities and Local Government has already committed to a minimum 30% cut in spending in the next five years.

Recently closed domestic violence charity Eaves blamed its demise in part on bigger charities taking over contracts usually run by smaller organisations.

Even those charities working in sectors that are supposedly ring-fenced or protected, like health and education, should not assume they are immune, the think-tank cautioned.

It said mental health charities and those involved in non-core schools work are likely to face cuts.

Others, such as arts, careers, and youth service charities working within schools, should also be alert to cuts as schools come under pressure to retain teacher numbers by reducing non-core funding.

The issue may be exacerbated by the potential postponement of tax credit changes, which may result in deeper cuts to budgets for other services or welfare benefits, NPC added.

Its report, The Chancellors Choice: Preparing the charity sector for the Autumn Spending Review, released today, warns many small charities could face a perilous future and Hoare said they should be thinking about what happens next.

“Boards and staff will need a strategic response, whether this means doing more in collaboration with others or cosying up to local politicians who will make the key decisions on where the money goes,” he said.

The report recommends that small charities think bigger in terms of contracts by “merging and building consortia” to compete against national organisations.

It also highlights the need for charities to share data on the effectiveness of their work in order to strengthen the whole voluntary sector as it uses outcomes to compete for contracts.

“The challenges ahead are not insurmountable. But charities need to prepare for the choices ahead, some of which will be very difficult indeed,” Hoare warned.

A Department for Communities and Local Government spokeswoman said: “This report is factually inaccurate and speculative. Every bit of the public sector must play their part in reducing the deficit and our department is leading from the front by reducing our running costs.

“No decisions have been announced about local government funding beyond the financial year 2015/16.”

DCLG said it there is no excuse for any council to target the voluntary sector disproportionately and that in March this year the government published updated guidance on how councils should work with the voluntary sector when facing funding difficulties.

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