Small changes from government could make a big difference to charities

Friday, 4 September 2015 - 8:21am

New survey of small and medium sized charities recommends changes that Government could make to commissioning processes to bring greater financial security to these organisations.

Since the Chancellor’s emergency budget in July we’ve had some indication of where the £12bn of welfare cuts will fall. While the rate of these cuts looks to be slower than we first imagined, the scale still gives us real reason to worry, particularly given reports that we’re already hearing from charities. Small and medium sized charities are already experiencing an increase in demand for their services – both in terms of absolute numbers and complexity of need.

We heard this loud and clear in our survey of 800 Lloyds Bank Foundation grantees, the results of which are now available in our Expert Yet Undervalued and on the Frontline report.  These are organisations working in social welfare including some of the 32 homelessness charities we invested £1.747 million in over the last year.

We can attribute this increase in demand to a number of factors, such as:

  • decreasing availability of services elsewhere, particularly in terms of statutory provision
  • welfare reform
  • people becoming poorer and less resilient.

But it is not the changing and increasing demand in itself that is most concerning – it’s the fact that this is coupled with renewed funding and income challenges, which make it increasingly difficult for charities to balance demand against income. Eight out of ten charities rank fundraising as the greatest challenge they face while nine out of ten are experiencing a change in demand.

As one grantee told us: “The increased demand for services may not be supported with additional resources or funding so the sector may be asked to do more for less.” Another said: “While the need increases, our ability to attract funding is increasingly difficult.”

Of course, charities across the country are responding to these challenges in innovative and resolute ways but, as we all know, this comes at a cost. It’s a cost that many charities can’t afford: “All this is very dependent on very scarce trustee and volunteer resources.”

Meanwhile for many, some different income streams simply are not viable: “We cannot charge clients. We deal only with the poorest and most vulnerable who are already in financial difficulties. They cannot pay for services.”

There is a way that we can help though. Charities inevitably need more support and our report explores what we can do to help secure their sustainability. Core, long term funding is central to this, in addition to supporting them to build their capacity and capabilities. But even with this support, charities’ futures will never be secure if we don’t do something to improve the environment in which they’re operating, addressing the factors that are threatening small and medium sized charities, and in doing so threatening the people they support.

Evidence from the report points towards the commissioning process as a key area to target. It underlines the ways in which smaller charities are placed at a disadvantage in the commissioning process because the system:

  • favours scale
  • places a higher value on cost than quality
  • is secretive and complex.

Together, these factors have led many smaller charities to be excluded from commissioning, despite their proven ability to deliver effective services to the people who need them most.

But changing the commissioning process could be as relatively simple as adjusting policy and practice to bring significant benefits to smaller charities and, in doing so, to the people they help.

This is just one of the things that we call on government to do in Expert Yet Undervalued and on the Frontline. Government needs to recognise the valuable role that small and medium sized charities play in society, not least because of their understanding of local needs. In doing so, it needs to pay for services in a way which does not exclude these organisations from service delivery.

As an independent funder, we have a role to play too, both in terms of working with government and making sure the voices of smaller charities are heard.

To bring about real change, we need a concerted effort from all stakeholders, driven by the common goal of ensuring effective services reach the people who need them. 

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Caroline Howe

Policy and National Programmes Manager at Lloyds Bank Foundation

Caroline is Policy and National Programmes Manager at Lloyds Bank Foundation for England and Wales, which provides financial and practical support to charities that help people facing multiple disadvantage to move forward with their lives.