Investigating the response of charities to frontline service cuts
Local authorities run many services that charities care deeply about: social care, local parks and amenities, children’s services, services for older people, schools, refuse collection and recycling, planning and public transport. The list goes on. Local authorities have been subjected to a high level of cuts in the last five years, and the outcome of the Autumn 2015 spending review means that there is only more pain to come.
This is an interview-based piece of research to try and look at how charities and communities1 have been responding to those frontline-service funding cuts, both from local and central government.
Is there evidence that charities have been working together to tackle funding cuts? What could domestic charities learn from overseas development charities and the way they have managed to have the overseas aid budget ring-fenced? Have local authorities and central government been able to divide and rule, and in doing so face little co-ordinated resistance or amendment of their plans. We interviewed ten people from various different charity sectors to see if we could work out if any patterns were emerging. We don’t pretend its exhaustive, but some clear themes emerge.
Part 1: The effects of cutting government spending
In this section we try and tease out how government spending cuts have impacted on the organisations we talked to or those they work with.
Frontline services are impacted both by budget cuts and by policy changes
Perhaps the very first point that came out of the interviews is that budget cuts are political. In other words, the cuts that are made are often done in line with the beliefs and policies of the party or parties in power. One example was the reduction in the subsidies for renewable energy. These have been made by the new Government which is uncomfortable with onshore wind farms and inherently more sceptical about climate change than the Labour Party. What this means in practice is that an area of work can be hit with a double whammy: a reduction in subsidies and a more restrictive planning climate in the case of renewable energies. The same could be said of some benefit cuts, and subsidised public transport. There are also areas where the policy imperative and budget cuts work in opposite directions: weekly bin collections is one example cited. Eric Pickles, when Communities secretary, had a fixation on weekly bin collections (as opposed to fortnightly) by local authorities, while at the same time cutting local authority funding. Pickles’ desire for weekly bin collections made it that much more difficult for local authorities to make cost savings.
Changes in commissioning and tendering can be disruptive even without cuts
A number of organisations talked about how their funding framework has changed even if the total level of funding had not. One example was with the introduction of Police and Crime Commissioners, where what had once been a single contract for witness support now became 42 different contracts each with their own specific demands and nuances. So the shift from a single block grant to a range of competitive tenders has placed huge demands on those organisations involved, such as Victim Support. It requires new IT systems,new monitoring systems and for some organisations new management structures and even new management.
The same is typically true of a shift from grants to contracts. Contracts create a different set of pressures on an organisation, both in terms of the skills of the workforce, and the processes and infrastructure that underpins them. The wider move to tendering and rigorous procurement processes often makes it harder for single providers, or even a consortium of small providers to bid successfully. One interviewee talked about a full tender process for £15,000 of services, and how the social value of a bid was more often than not only paid lip-service
Ultimately, even where the total funding may not change, how the funding is allocated may increase costs and have an effect similar to a straight funding cut.
We use the term charities to cover charities, community groups and other not for profits
Capital funding vs. revenue funding
During the lifetime of the coalition the level of capital spending was kept broadly stable, while the funding for revenue activities has been cut. This change has had several implications for non-profits. The most obvious is whether those organisations involved in delivering services are able to use capital expenditure in any way. Capital tends to be more appropriate for infrastructure, building a new facility, which is often less appropriate for many charities and non-profits. The net effect of this is a disproportionate impact on those organisations in need of revenue funding, or those who can’t access or use capital from local or central government.
This bias towards capital is made worse by the fact that a number of new and well-endowed funding sources for charities are for capital not revenue: Big Society Capital, Adventure Capital Fund and the like. For those non-profits that can use capital to create a stream of revenue there remains plenty of funding, though much capital also requires revenue funding for it to be successfully used. For the remaining 90% who just need revenue funding there is less on offer.
Local authorities have to cut something
There was near universal sympathy from interviewees with the difficult situation in which local authorities find themselves. Their budgets have been substantially cut since 2010 and will be cut further over the next five years. The problem of budget cuts is compounded by the fact that social care budgets are also under considerable pressure. The evidence is that more and more people are going to need the support of social care, while less people are now getting social care, those who do need greater support.
Sympathy does not equate to solutions. Local authorities’ budgets are going to be under increasing pressure for the foreseeable future. One product of squeezed local authority budgets is that local authorities bring services back in-house, or in-sourcing as it’s called. For many charities, the question is not how to stop budget cuts altogether, but how charities can reduce the impact of budget cuts on beneficiaries and the charities that support them.
Having funding cut vs. defending the impact of cuts on others
In terms of those charities affected by frontline spending cuts, there are two broad types of impact. Those charities who see their beneficiaries or the activities they care about being reduced in scale or scope. Second, those organisations which see their own income being reduced as part of spending cuts. Many organisations are affected by both.
The strategies for dealing with these two types of impact differ, though both may be needed in the same organisation. The impact on beneficiaries may need to be responded to, by gathering of evidence about how beneficiaries are affected, and making the case for a different approach to budget cuts. In effect, it becomes a research and policy based campaign. For those organisations who see their own budget being cut, then changes to management, systems, employee contracts, salary scales (and probably much more) may be needed.
In practice this probably means that to effectively campaign for beneficiaries and to simultaneously change the way that an organisation works to respond to budget cuts is very difficult. For all but the largest organisations there is a very real choice between campaigning for beneficiaries or against funding cuts, and changing the organisation to be fit for a harsher world of reduced funding.
Small isn’t beautiful
For many charities small isn’t beautiful. As local authorities and central government attempt to reduce their expenditure, they look for a contract that covers a larger geographic area or requires less monitoring. The impact of this is the level of financial stability, or the geographic area that a single contract covers is increased, or the time and energy taken to draft a tender increases. Either way the resources/expertise/co- operation that are needed for small charities to win a tender also increases.
This forces small charities out of the tendering process or makes it impossible for them to even meet the pre- tender criteria. So the larger private and charity suppliers are more likely to win the bids, while the small local charities who may (or may not) understand their local clients far better, find it impossible to compete.
Part 2: Reducing the effect of cuts
This section looks at some of the ways in which the charity sector may be able to reduce the scale and scope of frontline cuts.
Local and central government still make choices
Perhaps the single most important way to reduce the impact of cuts is to be in the 80% of the budget that isn’t cut, rather than the 20% that is. Simple really! The question is how to make sure the funding or services that an organisation cares about are in the 80% not the 20%. The more that an organisation assumes that cuts are inevitable, and acts to accept them as inevitable the more likely they are to be so. The conflict is that active resistance to cuts takes time and energy, and may mean that an organisation fails to make the changes that are necessary to respond to cuts. Resources aside, an organisation needs to prepare for the worst scenario, while arguing for the best scenario from their point of view.
The importance of coordination
One of the ways that government can cut budgets with less adverse reaction even where people care deeply about the services affected is if each cut is done in isolation, and so each response is in isolation. In this way, the cumulative impact of cuts is dissipated or unclear. Wherever people need to start a campaign from scratch at the local level, not only will they lose time but they may not use the most effective arguments, or use facts and figures from the national picture that back up their case. The same is true of trying to get local services to be more effective, or learn from each other.
The most effective campaigns are those where there is a central body which provides advice, insight, materials, research and campaign plans. Without that, each response to cuts is dependent on the energy and experience of those at the local level.
Individual decision-makers still matter
Anybody who thinks that budget decisions are made by a faceless bureaucracy should think again. In the end, it is individuals who make the decisions and interviewees gave us many examples of those who made good and bad decisions in terms of the issues they cared about. What this means is that any campaign to stop or reverse a budget cut needs to identify who is in favour of the decision, who is against and whose views could be changed. Then try and get in front of those people, prepare the arguments in language and terms that will resonate with this audience.
Evidence is critical
Evidence is critical to any attempt to reduce a budget cut. Simply saying ‘these services are critical’ will have little effect. How many people use the services? What will the impact be on them? What are the human stories behind the cuts? What have other local authorities or national governments done instead? Appeal to both the heart and head of decision-makers (all the stats about the numbers of refugees didn’t change theattitudes to the refugee crisis, but a photo of a dead child on a beach did).
The irony is of course that funding cuts or resource over-stretch means that frontline charities have less resources with which to gather this kind of evidence.
Get the organisational positioning right
Many organisations which are competing to deliver services can position themselves in different ways. As an example, a charity like The Conservation Volunteers can be a health charity, a volunteering or an environmental charity to potential bidders. Advice services can position themselves as reducing the cost to the state through early intervention or giving people their rights. A critical part of any attempt by a charity to keep its contracts is how it positions itself with its clients and those with whom it wishes to secure funding from.
Perhaps the more fundamental issue is whether an organisation can simultaneously tender to provide government funded services while campaigning against cuts in services. While the reassurances on freedom to campaign are usually ‘yes of course’, it is a brave organisation that is prepared to take that risk, particularly if it is primarily local or is largely dependent on statutory income.
Think laterally and think like politicians
Any attempt to deal with a funding cut, needs to challenge all the assumptions that an organisation or sector is making. These dearly held beliefs or shibboleths can be at the heart of what stops an organisation developing its services or cutting its costs.
Any effective response to funding cuts need to challenge all assumptions about what the organisation needs to do, and what clients and beneficiaries really need and want. Just arguing for a return to the approach when there was plenty of money is unlikely to cut much ice with decision-makers.
Part 3: Producing an effective response to spending cuts in this government
One of the most depressing commonalities among the interviews for this research was the response that the sector as a whole seems to have made to funding cuts. While some individual organisations and networks have responded vigorously to cuts: any co-ordinated response overall seems to have been minimal.
When we asked interviewees whether there was collaboration between charities, or shared learning and best practice, or new alliances, the answer was usually a lukewarm ‘not much that I’m aware of’ or words to that effect (in the appendix we tried to find resources and information about opposing funding or service cuts and our experience was similar to our interviewees)
So what should the sector do to respond to funding cuts? Here are our thoughts:
Transform cross-sector learning about cuts
One of the biggest gaps in how the sector has responded to funding cuts is in the sharing of knowledge, ideas and best practice on how to respond. We have searched in vain for a conference on the topic, or a website, or even a twitter account. See the appendix for our own staffs’ attempt to find this type of information. Given the pride the sector has in campaigning, this is little short of amazing (and please, please do tell us how wrong we are and give us the resource info). If people can’t find inspiration and ideas about how to campaign, or react to cuts in funding, then the response to cuts will be to reinvent the wheel on each occasion.
Learn from the overseas development sector
One of the mysteries about funding cuts is how the overseas development sector has secured a ring-fenced budget for UK aid around the world, while there is no such ring-fence for many services in the UK. So we need to learn more about how the overseas development charity sector achieved this policy and influencing feat.
Learning from the NHS
The 2015 election campaign showed how politicians vied to spend more on the NHS while happily ignoring the needs of the equally important social care sector. Sometimes it seems that the NHS can do no wrong in terms of funding and that local government can do no right. Interviewees speculated why the NHS was ring-fenced compared to other sectors. The brand of the NHS, people’s universal experience of using the NHS and thesense of it as a national treasure were all suggested. It remains a useful example of how the perception of a service can protect it against cuts.
Create bodies to represent specific sectors
Among the interviewees those organisations which had a sector body representing their specific needs appeared to be better able to campaign against cuts or ameliorate their impact. The Campaign for Better Transport supporting local transport campaigners is a good example. Where there is no representative body, or the representative body is itself weakened by cuts, the ability of a group of organisations to defend themselves is greatly diminished. One of the reasons that frontline services can be cut with such impunity is that the effects are spread across many sectors, many funders and organisations. Compare that to the overseas development sector.
Swim with the current of government policy
It’s easy to rail against funding cuts. It’s easy, but then outright and implacable opposition to cuts is probably what politicians find the easiest to deal with. Charities have been good in areas like legal aid about saying cuts were bad. They have been less good about suggesting alternative cuts (renewing Trident as an exception!). The hardest thing for politicians to deal with is those who position cuts as being against the politicians’ own policies and belief, and who argue intelligently, aiming critique at both the hearts and heads of politicians. To win funding cuts arguments we need to argue in terms that the current government understands.
Better approaches to commissioning and tendering
One of the ways that a level playing field can be created is through a better approach to commissioning and tendering for services and pots of money. Some work is being undertaken by Caroline Slocock and the Early Action Task Force. A set of guidelines which help local authorities understand the implications of the procurement requirements they set would be hugely useful, if enforced.
Use national and regional devolution to maximum benefit
Devolution of powers to Scotland, Wales and Northern Ireland gives great potential for charities to show that there are alternatives to the approach of Westminster or local authorities. More recently the devolution to regions and urban centres within the UK will also create opportunities. Increasingly the different administrations are taking different policy, budgetary and service decisions. Charities can use these to try and show how their approach to funding cuts and service provision has benefits over that of central government.
Get better at campaigning and lobbying
It’s self-evident that being better at campaigning is no bad thing when facing funding cuts. The issue is that there is little evidence of centrally co-ordinated campaigns against funding cuts that bring together multiple organisations and less still evidence that opposition get much more strategic than simply opposing cuts. We need more research to substantiate or repudiate this assertion.
Increase independent income
Another self-evident assertion is that more independent income, from trading or voluntary sources, increase an organisation’s ability to cope with funding cuts. Not only does it provide resource which can pay for better evidence, but it also allows organisations to fund the things they really care most about. The problem is that at the point that a funding cut is announced, it’s really about 3-5 years too late to start building up alternative sources of income.
From our limited base of research we conclude two main things. Firstly, there is much charities can learn from each other to improve their ability to respond to cuts to services or activities they care about. Secondly, the amount of coordinated response and campaigning against funding cuts is limited. We would love to hear that we have missed some really good examples, but we fear we haven’t.
One of our contacts neatly encapsulated in an email, the difficulties that charities face in fighting budgets cuts, and so we will finish with that:
‘There is a fundamental problem with how charities respond to this which I don’t think is quite recognised. Basically, there are three responses you can make, all of which are problematic.
Call for cuts elsewhere – but can annoy other charities and get into whether a museum is more important than a youth project issue. Calling for cuts in Trident is pointless as it’s not going to happen, so it’s only valid as a debating point and strays into the “nirvana fallacy” 2). There are also issues about calling for cuts in capital spending to save resource spending, which again are problematic in terms of actually delivering them.
Oppose cuts generally – but then straying beyond your charitable purpose and getting into CC9 issues with the Charity Commission.
Call for smarter spending – i.e. efficiencies, new approaches. The danger is you sound like you’re accepting that spending is wasteful and that spending cuts are here to stay.
Or hope for the best - do all you can to delay cuts in the hope that something turns up – which might well be the best approach!’
Appendix: Advice and guidance on responding to cuts
Below are a range of resources available to help organisations facing funding cuts or wishing to campaign.
Organisations that can help you campaign against the cuts
Disabled People Against Cuts is a disability rights-based activist campaign group against government cuts to disability services. For more info: http://dpac.uk.net/
False Economy is a campaign group which examines the political rhetoric around cuts. For more info: http://falseeconomy.org.uk/
ACEVO is a charity umbrella body running campaigns against third sector cuts, for example, Big Lottery Fund Nov 2015. For policy/lobbying/public affairs advice see: https://www.acevo.org.uk/
PCS (Public and Commercial Services Union) is one of the largest trade unions in the UK. They make the case against cuts in public spending here: http://www.pcs.org.uk/en/campaigns/campaign-resources/there-is- an-alternative-the-case-against-cuts-in-public-spending.cfm#What_you_can_do
National Association for Voluntary and Community Action (NAVCA)offer a guide for local voluntary organisations and community groups who have received notification of a funding cut. This can be found here:http://www.navca.org.uk/challenging-funding-cuts
Advice on where to find alternative sources of funding
The National Council for Voluntary Organisations (NCVO) is the largest umbrella body for the voluntary and community sector in England. For a range of resources on sustainable funding see:
For resources on funding in times of recession see: https://knowhownonprofit.org/how-to/how-to-fundraise- in-tough-times
The report Income Spectrum: Helping you find the right income mix is Available at: https://www.ncvo.org.uk/practical-support/funding/sustainable-funding
For a quick guide to challenging funding cuts see: http://www.outdoor- learning.org/Portals/0/IOL%20Documents/General/Quick_guide_to_challenging_cuts_0.pdf
For case studies for sustainable funding see: https://www.scribd.com/collections/4366835/Sustainable- funding
Institute of Fundraising is a professional membership body which supports fundraisers. For more info: http://www.institute-of-fundraising.org.uk/home/
NAVCA offer a range of resources which can help you prepare for a funding cut. This can be found here: http://www.navca.org.uk/preparing-for-cuts
Funding Central is a site listing funding opportunities for the voluntary sector. For more info: http://www.fundingcentral.org.uk/default.aspx
ACF (Association of charitable foundations) provides an index of grant-making trusts/foundations at: http://www.acf.org.uk/links/?id=142 ORhttp://www.acf.org.uk/uploadedFiles/Publications_and_resources/Giving%20Trends%20Top%20300%20Foun dation%20Grant-Makers%202015.pdf
NEON (supported by the New Economics Foundation) is a grassroots campaigning organisation. For more info: http://www.neweconomyorganisersnetwork.org/sign_in
Website where organisations with similar experiences can share ideas and insight
Voluntary sector cuts is a new collaborative project which maps intelligence about voluntary groups experiencing reductions in public sector funding. For more info: http://voluntarysectorcuts.org.uk/
CharityComms supports charity communications. For more info: http://www.charitycomms.org.uk/
Guardian voluntary sector network from the Guardian Professional Networks. For more info: http://www.theguardian.com/voluntary-sector-network
IVO provide useful resources on managing and coordinating volunteering. For more info: http://ivo.org/thoughtful-thursdays-from-vmmovement
Conferences, Events and seminars
We have been unable to find any past or future seminars or conference in which cuts to the sector is the main theme or a substantive one. If we have missed yours please let us know.
New Philanthropy Capital (NPC, think tank) sometimes run informative events for charities. For more info: http://www.thinknpc.org/events/
Civil Society often hold useful events about fundraising for charities. For more info: http://www.civilsociety.co.uk/events
General resources/further reading
The Financial Times’ (FT) local cuts checker brings together a comparison of spending between 2010 to 2014 for every local authority in England. For more info: http://www.ft.com/ig/sites/2015/local-cuts- checker/#E08000026ZZE08000026
FT, Charities in crisis as austerity bites: Available at: http://www.ft.com/cms/s/0/be15e318-7c26-11e1- 9100-00144feab49a.html
The Guardian, How economic austerity is affecting children's charities: http://www.theguardian.com/voluntary-sector-network/2012/may/01/economic-austerity-childrens-charities
Homeless Link report Responding to the cuts: a survival guide for frontline services is available at:http://www.hlg.org.uk/images/stories/Resource_downloads/Responding_to_the_cuts_October2011.pdf
Or for new on upcoming fundraising events http://www.fundraising.co.uk/
HW Fisher & Company report How chartered accountants can help charities in the age of austerity: http://www.hwfisher.co.uk/how-chartered-accountants-can-help-charities-in-the-age-of-austerity/
New Philanthropy Capital (NPC) report Preparing for the Cuts, 2010 is available at: http://www.thinknpc.org/wp-content/uploads/2012/09/Preparing-for-cuts.pdf. Though produced in 2010, the report still contains relevant resources.
NCVO report Counting the Cuts: The Impact of spending cuts on the UK voluntary and community sector, 2011 is available at: https://www.ncvo.org.uk/images/documents/practical_support/funding/sustainable- funding/counting_the_cuts_v1_pdf.pdf
Compact Voice report Information about Cuts in Funding to the Voluntary and Community Sector is available at: http://www.compactvoice.org.uk/cutsdata
SCVO report State of our Sector, 2013 is available at: http://www.scvo.org.uk/long-form-posts/state-of-the- sector-2013/
PwC, Charity Finance Group and the Institute of Fundraising report Managing in the new normal: Adapting to Uncertainty report, 2013 is available at: http://www.cfg.org.uk/Policy/have-your- say/surveys/closed- surveys/2013/march/~/media/Files/Policy/Have%20your%20Say/Managing_in_the_new_normal_adapting_to _uncertainty_report2013.ashx The report looks at the charity sector in the wake of the global recession.
Case Study: Mencap 2011-2012
At a time of large public sector cuts Mencap not only survived but flourished. They secured £10 million worth of work and won two awards at The Charity Awards 2011 for their campaigning. This success was due to a number of factors including their partnership with the Co-operative Group that raised £7 million. As part of this, they restructured and were successful in winning grants. It was more difficult to bring in voluntary income so voluntary funded activities were decreased. Some plans had to be put on hold but this allowed them to focus on core services. They temporarily increased spending on fundraising and trading costs in order to raise similar amounts to previous years, taking advantage of social media, allowing them to reach lots of people at low cost. Their 2011-2012 annual review is available at:https://www.mencap.org.uk/sites/default/files/documents/2012%20Annual%20Review_0.pdf
This section was based on our Research Assistants each spending an hour trawling the internet looking for useful information about how an imaginary small charity could respond to funding cuts. We don’t pretend that the resources they found are comprehensive. We apologise if we have missed your resources out and please do let us know so we can update this section.
Methodology and acknowledgements
This is a really preliminary piece of research and, as such, we have only interviewed a limited number of organisations. Our thanks go to them for their time and thoughts on the issues faced by their organisations and sectors. As a number of them preferred to remain anonymous, we have decided it is simpler for everybody to remain anonymous.
Our thanks also to a number of clients, whose experiences with funding cuts, and the impact on their beneficiaries, have prompted us to do this study as part of our social investment programme. We look forward to further discussions about whether we should do further research to improve the breadth and depth of our initial findings. If you have any questions, compliments or complaints please email email@example.com.
nfpSynergy is a research consultancy that aims to provide the ideas, the insights and the information to help non-profits thrive.
We have over a decade of experience working exclusively with charities, helping them develop evidence- based strategies and get the best for their beneficiaries. The organisations we work with represent all sizes and areas of the sector and we have worked with four in five of the top 50 fundraising charities in the UK.
We run cost effective, syndicated tracking surveys of stakeholder attitudes towards charities and non-profit organisations. The audiences we reach include the general public, young people, journalists, politicians and health professionals. We also work with charities on bespoke projects, providing quantitative, qualitative and desk research services.
In addition, we work to benefit the wider sector by creating and distributing regular free reports, presentations and research on the issues that charities face.