The charity sector must prepare for “an all-hands-on-deck crisis” as inflation bites, experts said today.
Economists at the charity think tank Pro Bono Economics issued the warning after official figures showed inflation rose to its highest rate for 40 years.
Jane Ide, chief executive of Acevo, told Third Sector that rising costs had charities “over a barrel”, while Rebecca Young from the National Council for Voluntary Organisations said the government should consider “comprehensive support” for the sector.
Inflation in the UK is 10.1 per cent, according to the Office for National Statistics, the highest rate since February 1982. The Bank of England said it could rise as high as 13 per cent this winter.
Charities and individuals will also be hit by higher fuel bills as the cap on energy bills is raised.
Jamie O’Halloran, economist at PBE, said: “The charity sector is braced for a swell in demand for its support from those most in need. But the sector itself is feeling the relentless squeeze of this crisis on its own finances.
“Charity incomes are expected to fall, as inflation means the cost of giving is higher, while costs rise.”
O’Halloran said spending on wages to ensure they kept pace with costs was “simply out of reach” for the charity sector.
“This is an all-hands-on-deck crisis, with food banks, baby banks and debt charities experiencing the immediate impacts most intensely,” he said.
PBE has previously forecast that the “double wave” of Covid-19 and inflation would cost the charity sector nearly £8bn over the next four years.
Ide said Acevo members were already reporting “300 to 500 per cent increases” in their latest energy bills.
She said: “There doesn’t seem to be any easy way out of that. If you have got a building, and you rely on that to provide your services, obviously you have got to provide the energy to run it. You are over a barrel. There is nowhere really you can go with that.”
Ide said some funders “are talking about what they can do in order to recognise these increases in cost of living”, but stressed that members have “much wider, much deeper, much more profound” concerns about the underlying causes of the inflation crisis.
She said charities “will move heaven and earth to manage this” so that services continue, including drawing on reserves, but said: “Reserves are there for a rainy day. You do have to wonder how many more rainy days the sector is going to be able to handle.”
Young, lead policy and influencing manager at the NCVO, said: “We know from our research that nine out of 10 charities are worried about their energy costs in the months ahead.
“Rising costs make it more expensive for charities to deliver their work, and this is exacerbated by falling donations and rising demand.
“Charities will be essential to getting people through this crisis, but charities won’t be able to meet rising demand without funding to cover their costs.
“This isn’t just about supporting charities offering cost of living support. We can’t afford to lose charities of all types and sizes as they are essential for strong communities and economic growth.
“We need the government to provide comprehensive support to ensure charities can pay their bills, including reducing the VAT that charities pay on energy to 0 per cent, uplift grants and contracts in line with inflation, and consider wider action to help organisations pay their bills this winter.”