Charities ‘prop up’ state services by £2.4bn a year, says NPC report
Melanie May | 19 February 2024 | News
Shortfalls in funding mean 62% of charities are having to cross-subsidise public service contracts with other sources of funding, such as money from fundraising, according to New Philanthropy Capital’s (NPC) State of the Sector 2024 report.
NPC found that the median amount a charity receives from government for its service is 65% of the value of the contract, leaving it to find the rest to successfully deliver it. This means the average charity is contributing 35% of the value of a contract.
In addition, 44% of the charity leaders asked said they had to use other sources of income most of the time, and almost a quarter (23%) said it was every time. Only 27% had had contracts uplifted with inflation.
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As a result, NPC estimates that the sector is subsidising government services by £2.4bn every year.
The State of the Sector 2024 report also found that 44% of charities have turned down contracts due to the operational risk being too high, although this is 10% lower than in 2020.
The report says:
“There are many reasons why charities do this. Our previous research shows that some organisations can afford to do this, doing so intentionally to improve the quality of a service. Others do this without realising, or because the needs they see leave them with no choice.”
It adds:
“This represents an ongoing and likely unsustainable risk to vital public services which people rely on. Some organisations may reach crisis point and have to close services or even the whole organisation. At this point, people who rely on these services will go without support and some may have to resort to already stretched emergency services instead.”
It recommends that the government works with charities to identify potential risks in public service delivery, including cross-subsidisation of contracts, and that it co-develops a new approach to delivery which “recognises the wider value that charities bring in communities and makes use of charities’ unique advantages as a partner in service delivery to tackle needs around the country”.
The public view
NPC also found that while 83% of charity leaders think that they work in the geographic areas where need is greatest ‘most’ or ‘all of the time’, only 41% of the public think this is the case. 54% in the public survey said they want the government to give more support to charities to work in poorer areas. 59% of the public also want government to work in partnership with charities more.
NPC surveyed 298 charity leaders for the report, and also conducted a survey of 2,062 representative members of the public, including 893 people who have used charity services in the last 12 months.
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About Melanie May
Melanie May is a journalist and copywriter specialising in writing both for and about the charity and marketing services sectors since 2001. She can be reached via thepurplepim.com.