BBC interview: Funding shortfall could force some UK charities to shut

Hannah Terrey

Hannah Terrey, CAF’s head of policy and campaigns, explains to BBC News why so many charities are in a difficult financial situation and why Back Britain’s Charities campaign is so important.

You might also want to read the press release behind the news story: One in six charities fear closure as crisis hits, say charity chiefs


One in six charities fear closure as crisis hits, say charity chiefs

One in six charities believe they may face closure in the coming year amid public spending cutbacks and falling donations from the public, according to a new poll of charities.

Nearly half of charities say they are being forced to dip into reserves to maintain their work, while nearly one in three say they fear being forced to cut services or jobs, according to the survey, commissioned by the Charities Aid Foundation (CAF).

More than eight out of 10 charities believe the charity sector is facing a crisis, with two in five (40%) worrying that their charity may be forced to close if the economic situation does not improve.

Eight out of 10 believe that the economic situation is the greatest threat to UK charities, while nearly three quarters (73%) believe that charities are unable to fulfil their goals due to a reduction in donations or Government funding.

Research specialists Research Now surveyed 252 senior workers in charities of all sizes.

The survey found:

  • 17% said it was likely that their charity may face closure in the next 12 months
  • 40% worry that their charity may have to close if the economic situation does not improve
  • 49% say they have had to use reserves to cover income shortfalls over the last year
  • 26% say they had cut front-line services
  • 25% say they had made staff cuts
  • 90% believe generating more income is going to be their greatest challenge
  • 85% believe that “given the current economic situation I am concerned for the future of UK charities”
  • 81% believe that the current economic climate is causing the charity sector to be in crisis
  • 80% believe that the economic situation is the biggest current threat to the future of UK charities and their own charity
  • 73% believe that charities are unable to fulfil their full philanthropic goals, due to reduction in government funding and/or donations
  • 68% believe that the economic downturn has affected the services their charity provides
  • 45% believe that their charity will have to scale back its work over the next 12 months
  • 35% say that they can see the economic situation improving in the next 12 months

The survey showed the effects the downturn has already had on many charities. Nearly half of the executives surveyed (49%) said they were using reserves to cover income shortfalls in the past 12 months. More than a quarter (26%) said they had cut front-line services and one in four (25%) said they had made staff cuts. Earlier this month, research by CAF revealed that small and medium sized charities are facing spiralling losses, with reported deficits of more than £300m in 2011 –  compared with an overall surplus of £325m in 2007. Last month, CAF launched a new campaign called Back Britain’s Charities (http://backbritainscharities.org.uk/) with the National Council for Voluntary Organisations (NCVO) which calls on the Government, businesses and people to get behind the nation’s charitable organisations.

CAF and the NCVO are calling for:

  • People to support charities through regular giving, regardless of how much time or money they can give.
  • The Government to modernise and promote Gift Aid and Payroll Giving so donations go further.
  • The Government to ensure that public bodies do not cut funding for charities disproportionately when making spending reductions.
  • Business to support charities either through donations, or through practical means.
  • Charities to work together with the Government to modernise and improve fundraising and enhance their impact, so that every pound given goes further towards helping beneficiaries.

John Low, Chief Executive of the Charities Aid Foundation, said:
“Times are tough and people have less money to donate to charities.  This combined with significant public spending cuts and increased demand for charity services, is having a shocking effect on many charities, calling into question their very viability.

“Many organisations are having to dip into their reserves, cut vital frontline services and some are even concerned about whether they can survive in these toughest of times.

“Charities of all sizes play an essential role in our society, providing social care and education as well as helping some of the most vulnerable people in our communities.  We all need to act now to support Britain’s charities so they can continue their vital work.”

The fieldwork for the survey was conducted by Research Now between 18 September 2012 and 1 November 2012. An online survey was completed by 252 senior level charity workers, who have direct and significant input into the financial, operational, or fundraising strategy of the charity.

Contact: Charities Aid Foundation press office: 03000 123 275/03000 123 212 Out of hours contact Lou Garrett 07827 938122/07981 562341


Back Britain’s Charities welcomes Gift Aid review

The Government has backed calls from the Charities Aid Foundation for reform of the Gift Aid system to make it fit for the 21st century.

The Autumn Statement document published today says: “The Government will examine whether the administration of Gift Aid can be improved to reflect new ways of giving money to charity, in particular digital giving.”

John Low, Chief Executive of the Charities Aid Foundation, which promotes charitable giving and provides financial services and social finance to not-for-profit organisations, said:

“It’s good news that the Government has responded to our call to modernise the Gift Aid system and has made a clear pledge to make it fit for the digital age.

“We need Ministers to act quickly to make Gift Aid fit for the 21st Century so people can give more easily online and using mobile technology.

“But we need the Government to go further, make it easier for people to give through the payroll and ensure charities do not face disproportionate cuts.

“Falling donations and the public spending squeeze mean many charities are facing increasing deficits and are having to dip into reserves to maintain services. Charities also contribute significantly to the UK economy and employ 765,000 people. Now is the time to back Britain’s charities so they can continue their vital work.”


Small donations bill – clears final hurdle in House of Commons

Blog post by Charlotte Ravenscroft, Policy Manager at NCVO

Last night, the Small Donations Bill passed its final reading in the House of Commons. Thanks to everyone who has backed this campaign, we were able to secure Government amendments that will make the scheme significantly more accessible to charities. At least 16,000 charities will be better off as a result of these amendments. See our joint press release on the NCVO website for more details.

While not all of our concerns have been addressed, we are glad that the Government has listened to voices from across the sector and responded. As the Scheme gets up and running, we will continue to apply pressure to ensure it reaches as many charities as possible.


Small donations bill – update

Blog post by Karl Wilding, Head of Policy, Research and Foresight at NCVO

It’s good news from the government this morning as we find out what changes they will make to the Small Charitable Donations Bill following our campaigning. The bill sets up a scheme which will allow charities to claim gift aid-style payments on cash donations in collecting tins without the need to get gift aid declarations from donors. As Charlotte set out there were a number of problems with the bill that meant small charities in particular would have struggled to benefit from the scheme.

Under the original proposals, charities would only have been able to claim two times as much small donations aid as they did traditional gift aid. Now the government is proposing that charities be able to claim up to ten times as much small donations aid as they do traditional gift aid. While we’d still like to see the limit on the amount of small donations aid based on how much gift aid is claimed scrapped entirely, this is a significant improvement to the bill and should mean small charities can benefit to a much greater extent.

The government has also listened to us on eligibility for the scheme. Rather than needing a track record of making a gift aid claim for three years before they were able to make a small donations aid claim, charities will now only need to have made a gift aid claim for two years before they are eligible to claim small donations aid. Again, we would rather there were no such requirement, but this is a move in the right direction.

The government has also made provision for the restrictions in the scheme to be altered without the need for further legislation. We hope that once this scheme is established and shown to be working well the restrictions can be further relaxed.

These are very helpful changes to the bill, but they don’t go as far as we would like. It’s very important that the small donations scheme is as simple as possible for even the smallest charities to use. In particular there are some really knotty rules about ‘community buildings’ which most people we speak to simply don’t understand. If you have a moment, please write to or tweet your MP to tell them how much small donations aid could mean to you and direct them to our detailed briefing on the bill. There is more information on taking action here.


Small Donations Bill: Will your charity be able to benefit?

Blog post by Charlotte Ravenscroft, Policy Manager at NCVO

The new Small Donations scheme is supposed to be good news for charities. When it was originally launched by the Chancellor, he said that it would deliver “Gift Aid on the contents of the collecting tin and the street bucket”.

In practice, the Bill does not do quite what it says on the tin. Due to restrictions in the Bill, we are concerned that fewer charities will be able to benefit from the Scheme than the Chancellor originally intended.

Given that the maximum limit per charity is £1,250 (on £5,000 of small donations), we had particularly expected that the Scheme would be of benefit to smaller charities – often those who rely most on collecting tins and street bucket collections. But as it stands, we think these are the charities that will be most likely to lose out.

We have just five days to make a difference – please read on.

So, will your charity be able to benefit from the Small Donations Scheme?

As the Bill stands, there are a number of eligibility restrictions. To use the Scheme, charities will have to:

  • Be registered with HMRC for Gift Aid;
  • Have a three year track-record of using Gift Aid;
  • Claim at least £1 in regular Gift Aid for every £2 they seek to claim through the new Scheme (we’re referring to this as the ‘matching requirement’).

If the charity has a group structure, there are further restrictions. Local groups of a parent charity will only be able to claim if:

  • They operate out of a ‘community building';
  • Donations are made during the course of their charitable activities within the building, by a group member;
  • While at least 10 people are present, at least six times a year.

While NCVO and other sector bodies recognise HMRC’s priorities to prevent fraud and manage the costs of the Scheme, we feel that many of these restrictions are disproportionate. They will limit the relevance of the Scheme for many of the charities who had hoped to benefit from it.

What can you do?

There are only five days left to take action – the final reading will be in parliament on Monday 26th November.

You can make a difference by contacting your MP today, by email or twitter, and drawing these issues to their attention.

When you contact them, we would suggest that you:

  • Tell them if your charity could be affected by these restrictions;
  • Ask them to back amendments that will make the Scheme more accessible for charities;
  • Send them this parliamentary briefing paper (PDF, 431 KB) that NCVO, CAF, IoF and CFG have published today.

You can use our list to find and contact your MP on Twitter.


Watch our campaign video today

Back Britain’s Charities from KnowHow NonProfit on Vimeo.


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