They’ve got it all..

In the world of football, the big clubs are easy to identify. The sheer size and turnover of Premiership clubs dwarf lower league clubs. Even within the Premiership there is a clear band of leaders, not just in financial terms but in the popularity stakes as well. The same can now be said of the voluntary sector. As the big charities march on, the smaller organisations are left to cope in an increasingly competitive environment.

The sporting parallel doesn’t end there. Like European football’s original band of clubs that formed G14, there is a small group of 14 powerful organisations that dominate the voluntary sector (see “The Super-rich”). Research from the National Council for Voluntary Organisations has revealed that these super-charities, most of which are household names, generate 10 per cent of the sector’s income.1 Each has an annual income of more than £100m, whereas 87 per cent of the sector’s organisations have incomes of less than £100,000 a year. In the sector as a  hole, more than half of the organisations have an even lower annual income of less than £10,000.

Part of the reason for the super-charities’ success is that they have become dab hands at securing public donations and winning government contracts to deliver public services (the voluntary sector now derives 38 per cent of its £26.3bn income from statutory sources). But this in itself creates inequality within the sector: how can small organisations with a skeleton staff and shoestring budget ever compete with the sophisticated communication and fund-raising teams of bigger charities to win public support? Similarly, is it realistic for small organisations to challenge the giants of the field over lucrative government contracts?

According to the British Association of Settlements and Social Action Centres (see A world of contradictions), it is the government’s drive towards a contract culture that has had such a detrimental effect on many community-based organisations. Particular blame can be laid at the hands of the Home Office’s target to increase the voluntary sector’s involvement in public services by 5 per cent. A survey in December found that the number of grants used to support community-led activities had been reduced in the previous three years and that in more than half of cases they had been  replaced Nigel Buchanan by contracts and service level agreements. A staggering 73 per cent of organisations said the situation was making it more difficult for them to secure the funding  they needed to survive long term.

Given the finite public money available, it stands to reason that as the rich charities get richer, those at the other end of the scale will find times becoming increasingly tough. As the situation intensifies, the sector could see mergers between smaller charities as well as takeovers by larger organisations along the lines of the recent absorption of ChildLine into the NSPCC. Part of the problem is that small charities are not in a position to deliver the services that the government seeks and so miss out on fruitful opportunities. Karl Wilding, head of research at the NCVO, says it is important to recognise that it is not just by chance that some charities have grown so big – more over, they have proved themselves capable of delivering services, and that is why more government contracts are heading their way.

Wilding says: “The government, in its hurry to commission public services, is awarding contracts only to those who have the capacity to deliver.”

But this is a narrow-minded perspective, he says. “If the government wants to grow a market of suppliers it needs strategies which enable small and medium-sized organisations to enter and stay in the market. In the short term, it’s not a problem for government because it will be delivering more and better services. However, in the long term there could be a problem for government if it focuses on a small number of very big suppliers as it won’t have the contestability.”

Also, participation in government-funded programmes has not been encouraged by the government’s procedures and attitudes towards the voluntary sector. A report by MPs published in February found that government departments “lacked expertise, experience and understanding” of the voluntary sector.2 As organisations often received their funding late, they had to use other resources to finance services.

This caused difficulties for smaller organisations, particularly in terms of being in a position to start new services. Yet there is a concern that, as the bigger charities continue to grow, they will start to emulate the unwieldy, bureaucratic public sector providers that they are being commissioned to replace.

There is also the risk that, as they grow, charities will turn their backs on those clients who are hardest to reach – a group the voluntary sector has traditionally been so successful in engaging – in favour of satisfying the majority.

Wilding says: “It will be like in the private sector where M&S and Tesco focus on the mass market and so you have to go to the local high street delicatessen to find the particular type of Parma ham you want.”

But if the delis – and local community projects – are priced out of the market there will be nowhere to turn, and clients will miss out on the support they need.

Retired community worker and now activist Bob Holman says: “Locally run groups are the ones that are nearest to people and which are run by local people who know what the local needs are. Despite Labour’s rhetoric they are the ones being cut out. Central government has always favoured the big boys.”

He says leaders at the top of larger charities spare little thought for those  struggling with small community groups. And although there may be a moral responsibility on bigger charities to bail
their younger siblings out, from Holman’s experience there is a “fat chance” of any financial assistance coming their way.

“I once approached some big charities for £20k a year,” he says. “For us it meant a salary, for them it was small change that falls off the table. It was turned down flat.”

He also takes issue with grant-giving bodies awarding funding to the larger organisations. “The interest big charities are getting on their reserves is enough to run their projects. Big grant-giving bodies should be reluctant to give money to the big boys.”

Yet some charities would argue that they need to have healthy reserves so that if they lose a government contract they still have the means to provide a particular service in the absence of government funding.

How much a charity should rely on government funding in the first place remains a contentious issue. Some charities receive most – in some cases as much as 90 per cent – of their income from statutory funding, while others prefer to keep the percentage lower. Compared with other children’s charities, only 20 per cent of the NSPCC’s income is gained through contracted
work. The other 80 per cent comes from donors.

Wes Cuell, director of services for children and young people, says, by raising the money itself, the charity can choose how to spend it. “We want to determine the services and with contracted services the contractor specifies. It’s important to us that we can retain control.”

A recent review of its services, however, has suggested that a 60 per cent donor to 40 per cent statutory funding ratio would be preferable – a level that the charity would like to reach by 2010. Raising sums in the region of £80m each year is a tall order, particularly given competing demands from natural disasters. Clearly, there is always a chance that the required sum is  unachievable.

Cuell says: “It makes sense to spread the risk through contracted income but we always want to be more than 50 per cent donor-funded as a matter of principle to maintain our independence.”

He adds it is wrong to assume that all the bigger charities are cash-rich. “A budget of £100m spread over the whole of the UK is not a vast sum. It is spread thinly. We are a big charity but our
budget is smaller than the average local authority social services department.”

That’s as may be, but cold comfort for the thousands of smaller charities which do not know where their next funding cheque will come from – if one ever arrives at all.

1 The UK Voluntary Sector Almanac 2006: The State of the Sector, National
Council for Voluntary Organisations, 2006
2 House of Commons Public Accounts Committee, Working with the Voluntary
Sector: Thirty-second Report of Session 2005-6, 2006