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28% of charities working with local councils predict funding falls over next 12 months

Melanie May | 29 February 2024 | News

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With local councils struggling financially across England, a new report highlights the impact on the charities they work with.

28% of charities that work with local councils predict their funding from them will fall over the next 12 months, according to Tethered fortunes: The threat to charities from trouble in local government’ by Pro Bono Economics (PBE) and Nottingham Trent University’s VCSE Data and Insights National Observatory.

‘Unprecedented rates’ of councils struggling

Local government currently provides 13p in every £1 of charity income. However, the Local Government Association is warning that one in five council leaders expect to need to issue a section 114 in 2024 or 2025. The report notes that these rates are ‘unprecedented’, and emphasises the risk for charities as councils struggle to stabilise budgets. Some have already cut funding, such as Suffolk County Council, which announced a complete cut to arts funding in January.

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Pro Bono Economics has calculated that council funding of charities already reduced by 23% between 2009-10 and 2020-21, which lead to an estimated £13.2 billion reduction in council funds to charities over the decade since 2010.

Further impact for charities

The report also warns of the risk of charities being evicted from their premises by councils selling off property, and of council failure to maintain buildings’ roofs and floors leading to difficulty for charities delivering services. 13% of the charities that responded to the survey were tenants of local authorities.

Charities that receive no income from local government and are not tenants also reported serious concerns, such as fears that demand for charity services will increase as council services are withdrawn.

Nine in 10 charities that work with local councils state that the relationship is ‘important’, and four in 10 say it is ‘critical’. Overall, 53% of charities that work with local government suggest that the financial situation in local authorities is a moderate to high risk for them.

The report warns that, while charities are seeking alternative sources of funding to make up for council cuts, public donations have been depressed by the cost of living crisis. The research suggests further cuts to service can be expected and closures announced by charities in the coming months.

Dr Jansev Jemal, Director of Research and Policy at Pro Bono Economics, said:

“The fates of councils and many charities are entwined, and when one partner goes into difficulty, the other struggles too. Charities have already seen significant withdrawal of support from local government over the past decade, and the current difficulties in local government finances mean that the loss of will continue to grow. These cuts are being announced at pace, and charities across the country are anticipating further escalation in the months ahead.

 

“The hidden impacts of the council funding crisis matter too. Charities are being evicted from their council premises, or forced to reside in unsuitable buildings, where roofs are falling in and floors are deemed unsafe. This will generate extra costs and disruption to charities at a time they can ill afford it, and hit the people who rely upon them the most.”

Prof Daniel King, Director of the National VCSE Data and Insights Observatory, commented:

“As local authorities across the nation are facing escalating financial challenges, a growing number are compelled to issue Section 114 notices or cut non-statutory services just to break even. On one hand, as these critical services such as adult social care and support for low-income households are reduced, charities are stepping in to the bridge to help people in greatest need. On the other hand, our survey reveals a worrying trend: 28% of charities anticipate a decline in funding from local authorities over the next year. In some places this is particularly challenging, for instance in Nottingham, the City Council has proposed to entirely eliminate grants for local charities.

 

“While this reflects a concerning financial reality for these organisations, it also highlights a deeper societal issue — the growing reliance on charities to provide essential services, particularly as they face their own financial constraints.”

The report draws on data from the VCSE Sector Barometer and employs the most recent charity income data available from the NCVO’s UK Civil Society Almanac, adjusted for inflation, to produce an estimate of charity income from local government. 

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