The scale of the crisis in government funding for charities delivering public services has been laid bare in a new report.
The True Cost of Delivering Public Services, which has been published by the National Council for Voluntary Organisations today, reveals the situation faced by charities in England that run services through contracts with local and central government.
The report, which is based on research conducted with 331 voluntary sector organisations in August and September 2023, reiterates figures published by the NCVO last year that almost nine in 10 charities have to subsidise government grants and contracts, with 40 per cent saying their grants and contracts never covered the true costs.
One in 10 charities that took part in the study said this underfunding had gone on for more than a decade.
The report says almost three-quarters of charities are unable meet the demand for the services they have government funding to deliver, while 83 per cent of respondents said underfunded services had resulted in recruitment difficulties.
Almost four in 10 said they were forced to reduce staff numbers due to underfunding.
The report asks for urgent action from the government to address the situation, including:
- Providing long-term, adequate funding to public bodies to ensure the sustainability of service provision
- Ensuring grants and contracts cover the true cost of service delivery
- Monitoring the state of public service markets to prevent further deterioration
- Working in true partnership with charities and the voluntary sector to boost collaboration and innovation in service delivery.
In November, the NCVO released the initial findings from the study, when it wrote to the Jeremy Hunt, the Chancellor of the Exchequer, before the Autumn Statement calling for an urgent uplift in funding for charities delivering public services.
The letter, which was signed by more than 1,400 voluntary sector organisations, went unanswered until last week, at which point the NCVO said the “stark warning from the charity sector has gone unheard”.
Sarah Vibert, chief executive of the NCVO, said today: “The underfunding of government grants and contracts is unsustainable.
“Back in November 2023, ahead of the Autumn Statement, we were clear that if the issue isn’t addressed, charities will close, vital services will be cut, and communities will be failed. “We’re already seeing the impact that this lack of action is having and are deeply concerned that more charities will cease operating if this is not urgently addressed.
“Charities are shouldering the financial burden of meeting the shortfalls created by underfunding to make sure that vital services continue to reach those who need them most.
“We need to see urgent action from the Chancellor at the Budget to properly fund these grants and contracts so that our public services and our communities can thrive.”
Jacob Lant, chief executive of National Voices, a coalition of health and social care charities in England, said: “It is highly concerning that 87 per cent of health organisation respondents in the NCVO survey said they subsidise grants and contracts from commissioners to be able to deliver the work they are contracted to do.
“In our recent members’ survey, aimed at over 200 health and care charities, over half of those polled listed funding as a key challenge being faced by their organisation.
“This double whammy of reduced funding and increased subsidisation means the vital work that the voluntary, community and social enterprise organisations do in the community is being lost.
“This is especially true for smaller organisations who struggle to access grants and often rely on volunteers, and yet are often the best placed to support underserved communities, or people facing inequalities.
“We risk losing the good work VCSEs are doing in reducing health inequalities, and the trust communities place in them, if we cannot resolve these funding issues.”