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Underfunding of public services has forced charities to crisis point: NCVO

Melanie May | 14 November 2023 | News

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Charities in the UK have been forced into crisis by the underfunding of public services with most now subsidising delivery with other income, NCVO is warning.

Recent research by the NCVO of 331 charity and voluntary organisations found 73% saying they cannot meet the current demand for the public services they deliver with the funding they receive.

The government’s reliance on charities to deliver services saw £16.8 billion spent through grants and contracts with charities in 2020/21. However, charities are dealing with increasing demand and higher operating costs, combined with no contract uplifts in line with inflation.


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Grants & contracts failing to cover costs

40% say their grants or contracts never covered the true costs of delivery, while 44% say their costs have not been covered since at least 2020. And, since April 2021, less than one in five (17%) charities have received uplifts to their grants/contracts and almost half (44%) have not received any uplifts at all.

87% of charities say they are subsidising delivery of public service contracts and grants with other charitable income, including public donations (67%), charity shop income (25%), and their own financial reserves (11%).

For those charities that have had an uplift, the average increase from 2022 to 2023 was 2.7%, compared to the annual CPI inflation rate reported in April 2023 of 8.7%.

Charities stepping away from delivering public services

As a result of the underfunding, 31% of charities say they have decided not to bid for a new grant or contract, or are considering not bidding. 26% have decided not to retender for services they currently deliver, or are considering not retendering. In addition, 12% have handed back a grant or contract before it finished, or are considering doing so.

Open letter to chancellor

NCVO is calling on the chancellor to commit to properly funding public services delivered by charities in this year’s autumn statement. It has published an open letter to the chancellor, which it is inviting charities across the country to co-sign.

In it, NCVO says:

“The knock-on effect of this underfunding has forced charities into crisis. The options are bleak – charities will either stop operating completely, cease delivering much needed services or use charitable funds, including already stretched reserves and donations, to subsidise public services.

“This is unsustainable. Many are stepping away from delivering public services altogether because they can no longer afford to do so. This means people and communities are not getting the support they need.”

Sarah Vibert, CEO of NCVO, commented:

“Charities and voluntary organisations are the foundations of public service delivery, providing vital support to people and communities. Many services, like homelessness interventions and support for victims of domestic violence or sexual abuse, wouldn’t currently exist without charities.


“For too long, the goodwill of charities has been taken for granted. Commissioners know charities will do everything possible, including subsidising public services with charitable funds, to prevent closing their door to someone. But this can’t continue. Charities are at crisis point and without increased funding public services are increasingly likely to cease, putting potentially millions of people at risk of not having their needs met.”

The release of this latest research follows the recent launch of NCVO’s Cost of Giving Crisis campaign, which aims to create awareness of, and calls for action to support, struggling charities this winter.