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Adam Rothwell
- Tuesday, December 2, 2008
Charities are so scared of the recession they can hardly stop talking about it. Barely a day goes by without some commentator or other predicting a hard time ahead for the sector. But the really scary thing is that nobody really knows how bad things are going to get.Against that sombre backdrop, the good news is that charities have been quick to react to the predicted dip in donations. According to a report out today, over 60 per cent of charities surveyed said they would ramp up their fundraising efforts to make up for lost funds, and almost half said they would take pre-emptive administrative action to cater for otherwise unexpected fluctuations in income. A third also said they’d cut back on big capital projects so they could spend more on helping people directly.
But the report also makes a rather more worrying point. Compared to the last recession in the early 1990s, charities today depend to a far greater degree on two potentially flakey sources of funding: the National Lottery, and government.
The Lottery dishes out over £600m a year to good causes. The government awards charities billions more in the form of direct grants or contracts. Both of these sources of income will likely decrease as the recessionary screws turn.
What to make of this depressing landscape? The answer is straightforward: individuals need to give more. If you’re a donor and think you’re doing your bit simply by maintaining your direct debit to your favourite cause, the harsh news is that you’re not doing enough.
As charities’ funding decreases, demand for their services will go up. If you want to stop charities from cutting back, you – and donors like you – will have to fill the gap.
Two points: first the amount of money the sector gets from the Big Lottery etc. has already decreased dramatically in recent years because of the large amounts being siphoned off for the Olympics. And as correspondants above have said, people actually spend MORE on lottery tickets when they are poor. Which shows what a depressing sort of tax it is anyway. So perhaps the lottery is not an issue currently.
Secondly, most of the Government money now given to the third sector is via contracts through Local Strategic Partnerships/Local Area Agreements, and other commissioning. Both the Government and the opposition believe that contracting local services through the voluntary sector is a good idea. Mainly because it's cheaper, but also because of policies of neighbourhood involvement, and the democratic failure of local Government. (See last week's Third Sector article about Simon Jenkins' speech on this issue to NCVO - or my blog if you prefer). So it is unlikely there will be a shortage of funds in these areas either.
This may affect how large charities operate, however, in the new reality what they may realise they need is more contract-winners and perhaps less fundraisers - two different skills. I foresee fundraisers getting more and more desperate and more and more stories being leaked out of the sector that there is a need for MORE fundraising to cover the gaps left by..er.. fundraisers.
On the other hand I would imagine that in general as Trusts' money is limited by the success or otherwise of their investments there will be a decrease of money available in that area. No doubt, the charities most affected by that (as with cuts to lottery funding, and local government in the 90s) are small local ones, who will become more and more focussed on becoming local service deliverers on behalf of local partnerships, and less focussed on local communities/communities of interest. Which is a shame.
Not so much a chunk, with the olympics, many other charities will be losing out by a vast sum unless the lottery fund goes up a huge amount.
http://www.scvo.org.uk/scvo/TFNPR/ViewTFNPR.aspx?pr=8191&from=PRHome&al=t&page=
Compared to the jackpot a year or so ago, the Lottery has already increased.
Though of course a chunk will get nicked for the Olympics. Which will be repaid to the Lottery from the sale of the buildings afterwards (£1 anyone?). Yeah, right.
Seriously, as the screws of recession tighten, I expect a lot of individual donors to cut donations.
Choice between providing for family or providing for a charity, no matter how well loved, I'd expect family will tend to win.
Still, gives charities an opportunity to become a lot more efficient. And get rid of some of the inefficient ones.....
Sadly, if anything I'd except it to do better. Lots of people figuring that the only way to avoid losing their home is to win the lottery.
Adam - your link to the PF story suggests we are predicting what will happen to the sector in a recession. We are not. We are highlighting what evidence exists, whether from previous recessions or overseas. We dont claim any special insight. Our evidence is at www.3s4.org.uk
It's worth highlighting why its so difficult to say what might happen: different parts of the sector have very different drivers and funding streams. So if corporate giving (for example) falls, it will disproportionately hit a relatively small number of organsiations (eg arts organisations sponsored by financial services). Conversely, there is evidence from overseas and previous recessions that giving to some organisations will increase. Many do not experience any change in resource levels.
Some will suffer - as such, a difficult message for the sector is that a recession might not see a large change in total resources coming into the sector, but it might lead to a more significant redistribution of resources within the sector. Examples of resource stress tend to come to the fore more than success.
I think its worth thinking about some of the sums mentioned in the blog and overall scale of the sector. A tight definition of charities (excluding private schools or govt bodies with charitable status) indicates a total income of £31 billion, of which £11 billion comes from government. So whilst a hit to lottery funding is bad for those organisations that rely on it, we need to be careful about translating that into a sector-wide impact.
Some charities might be in for a tough time; but equally some may not. This isn't a prediction, rather an observation of what happens in other sectors, where external shocks tend to reinforce trends that were already evident.
Karl