Voluntary sector: Care charities at risk from public sector cuts

UK social care charities could face a drastic drop in income on the back of future public spending cuts, according to figures released yesterday by the National Council for Voluntary Organisations.

NCVO’s Civil Society Almanac 2009 found income earned by charities through service contracts and sales of goods rose by 5% to a record £17bn in 2006-07, accounting for 51% of the sector’s total revenue. Conversely, the proportion of income from voluntary donations and grants has shrunk to 41% of total revenue.

Social services charities – which include organisations providing care services for disabled, older people and children as well as income support, and domestic emergency and relief services – received £4.3bn from central or local government sources, more than half their total income. Of this, 77.6% came from contracts and 22.4% was provided by grants.

In all, social services charities accounted for 42% of the sector’s government contracts, suggesting that charitable social care services would be particularly vulnerable to future public sector cutbacks.

Public sector slowdown

The growth in public expenditure is due to slow from 2.1% a year from 2008-11 to 1.2% a year from 2011-14, in real terms, denying services an estimated £37bn over the three-year period.

NCVO said the trend towards contracts was a direct result of government policies that encouraged charities to become increasingly involved in service provision. But it warned that many charities do not have enough free reserves to cope with a downturn in income.

However overall, the almanac painted a relatively healthy picture of charity income, which saw an increase of 3.3% to £33.2bn in 2006-07. Social care charities’ total income was £8.3bn, distributed between more than 40,000 organisations.

However, as NCVO’s analysis covers the 2006-07 financial year it is not known yet how badly the sector has been hit by the recession.

Drop in confidence

NCVO has found in recent surveys that financial confidence among charity directors and trustees is dramatically falling away. The “confidence index” – the percentage of those responding that the general situation of their charity will worsen subtracted from the percentage who respond that their situation will improve – fell from 23% in the third quarter last year to -9% in the fourth quarter.

Speaking at NCVO’s annual conference yesterday, Liberal Democrat shadow chancellor Vince Cable also warned that a rapid surge in unemployment and an increase in financial exclusion would place enormous pressure on the voluntary sector.

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