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 ( 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.

Charities in need

Blog post by Charlotte Ravenscroft, Policy Manager at NCVO

As tonight’s Children in Need appeal kicks off, millions of us will be reaching for the phone to give what we can to this fantastic cause. But while high-profile appeals like Children in Need still achieve strong public support, many charities around the country are finding themselves in greater need than ever before.

This week, new research showed that public donations to charity had dropped by 20% in the last year, as fewer people gave and those who did made smaller donations. For charities and the people they help, this news could not come at a worse time. Many have already been hit by a double-whammy of government cuts and rising costs, at the very time that more people are coming through their doors in need of help.

This is an understandable result of the tough economic times we live in. Fewer of us feel we can spare the money we used to for good causes.

Volunteers can pick up some of the slack, but not all of it. Most charities need donations to pay staff and do their vital – in some cases life-saving – work. Whether it’s pioneering medical research, preventing child abuse, supporting soldiers’ families, or protecting our national heritage – Britain’s charities do an enormous amount of good work at home and abroad.

Our views about who should help people in need have changed over time. In the Victorian era industrialists like Cadbury who built houses for their workers were lauded. Wealthy businessmen like the Scottish steel magnate Andrew Carnegie gave millions to support education, building lavish libraries and universities. The 20th Century saw the introduction of the welfare state, intended as a safety net for everyone provided by the government. Now, the latest research shows that despite a decade of Labour government there is less public appetite than ever for governments to ‘redistribute’ money from rich to poor.

But you don’t have to be wealthy to be a philanthropist – it’s a word that can and should apply to any of us. I believe that altruism is hard-wired into us as humans. The term philanthropist comes from Greek, and means ‘the love of humanity’.  When we see a problem most of us have an instinctive desire to help. Of course, when times are tough, it’s harder to spare money for the causes we care about. But there is still much that those of us of more modest means can do. With all the bad news about the economy, living standards and the risk that our own children’s prospects may be worse in the future than they are today, I believe we must not lose sight of the difference we can all make by giving to others – and giving to charities and good causes when we can.

The most effective way to give to charity is to sign up to give regularly, no matter how little the amount. This helps charities plan for the future by knowing how much income they will have. It’s also important to use Gift Aid, the government scheme that tops up your donation by giving the charity the amount of income tax you would have paid on the amount you donated – this can add 25% to your donation.

But philanthropy needn’t be just about giving money. The love of humanity can be expressed in other ways. We all undertake altruistic acts of some kind every day – from giving up a seat on the bus to giving blood – because they help create the sort of society we want to live in.

Volunteering, giving your time, can be just as valuable to many charities as giving your money and sometimes more so. Charities near where you live will be grateful for your help, and volunteering can be immensely rewarding.

Donating unwanted goods, such as clothes or furniture, to charity shops who can sell them to raise funds for their services, or to charities who can distribute them to people who need them, remains a valuable way of giving.

Some argue that ‘consumer activism’ – buying products from companies which you believe act with integrity and avoiding companies whose actions you don’t approve of, is a new form of philanthropy.

Crucially though, whatever you think about different types of philanthropy – it comes down to a personal choice. It is our free will to decide whether we will donate – whether money, time, or unwanted items – and to which charities or causes

I hope that Children in Need is a terrific success this evening and that people will take the time to think again about giving and what part they can play. Charities right up and down the country are struggling and we risk losing their services at our peril. So if you can give, please give generously to a cause that is close to your heart.   There are lots of ways that you can give more and support the charities and causes that you’re passionate about. Here are a few suggestions of ways for you to give more, no matter how much or how little you might have.

Donations to charity fall by 20% as fewer people give – new report finds

Donations to charity fell by 20% in real terms during 2011/12. The public gave £1.7bn less to charity than the previous year, according to the longest-running and most authoritative annual study of giving across the United Kingdom.

The number of people giving to charity has declined and the amounts they gave also fell, according to a major new report, compiled by the Charities Aid Foundation (CAF) and the National Council for Voluntary Organisations (NCVO).

Today (Tuesday November 13) CAF and NCVO launch a campaign to Back Britain’s Charities, aimed at ensuring that the vital work of charities is not damaged by this worrying fall in giving.

The report, based on a survey of more than 3,000 people by the Office for National Statistics, found the total amount given to charities by people across the UK fell from £11bn to £9.3bn during 2011/12 – a cash fall of £1.7bn, and the largest in the survey’s eight year history. Adjusted for inflation, this fall in donations represents £2.3bn.

The average (median) amount people gave each month fell from £11 to £10 last year and was down from an average of £12 a month in 2009/10.

Key findings include:

  • Total donations fell by 15% in cash terms and 20% in real terms (i.e. adjusted for inflation) between 2010/11 and 2011/12.
  • Estimated total donations to charity were £9.3bn, down £1.7bn on 2010/11 in cash terms and £2.3bn in real terms (i.e. adjusted for inflation).
  • The proportion of people donating to charitable causes in a typical month fell from 58% to 55% in the past year.
  • The average (median) amount  given per donor in a typical month fell from £11 in 2010/11 to £10 in 2011/2012.
  • 28.4 million people gave to charity, more than half of all UK adults.
  • Medical research, hospitals and hospices, and children and young people are the most popular causes among donors, but religious causes received the largest average donations.
  • Women continue to be more likely to give to charity than men, with 58% of women giving to charity in a typical month compared with 52% of men.
  • Cash is the most common form of giving (over 50%) in 2011/2012.  Direct debit accounts for  31% of the total amount donated, an increase of 6% from 2010/2011.

Sir Stuart Etherington, Chief Executive of the National Council for Voluntary Organisations, said:

“I am very worried that fewer people are giving to charity.  Charities are already being squeezed by greater needs, cuts in funding and rising costs.

“I know people want to help when they can and I know that they can make a difference. If I could ask one thing, I’d ask people to commit to regular donations through direct debit, and give using Gift Aid, so charities can plan properly. We cannot afford to lose the services charities provide.”

John Low, Chief Executive of the Charities Aid Foundation, said:

“The drop in giving shown by our survey is deeply worrying for those charities which rely on donations to provide vital frontline services. Combined with public spending cuts this represents a potentially severe blow for many charities.

“We hope the fall in giving shown in our survey is a temporary decline and not the start of a damaging trend. If donations continue to fall, many charities will face profound difficulties carrying on their work and the people and communities they serve will suffer.

“Britain remains one of the world’s most generous nations. But cash is tight for everyone and people are finding it harder and harder to find money to give to charity. It is vital that Government, businesses and the public Back Britain’s Charities so they survive and carry on their work in these tough times.”

Charities provide a range of vital services across the country, supporting many of the most vulnerable people and making a real difference to people’s lives.  The report says that these remain difficult times for many charities, particularly small and medium sized organisations who we suspect may be disproportionately affected by reductions in giving.

Many charities are not in the fortunate position of holding reserves. Faced with falling donations and public spending cutbacks, those that do are having to dip into them to keep meeting the needs of their beneficiaries.  The report says that some are having to close front-line services, some are having to make redundancies and some face closure. It argues that the drop in donations is a concern for everyone in our society, not just charities.

CAF and NCVO are calling for:

  • People to support charities through regular giving, regardless of how much time or money  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.

Peter Lewis, Chief Executive of the Institute of Fundraising commented

“This report shows how important it is for charities to fundraise effectively to support their vital causes. Campaigns like this are important to help raise awareness, and hopefully more money, for causes across the UK.”

UK Giving 2012: why I think we are right… but hope we are wrong

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

It’s one of the truisms of social research that there are no ‘new’ findings. And that if you do find something new, or surprising, the answer is almost certainly that it’s wrong. So, the news that we’re estimating a 15% fall in the total value of donations – 20% if we add a dash of inflation – has made me and a number of colleagues reach for the fine-tooth comb in order to be sure – really sure – that we haven’t made any mistakes. So, why do I think we are right in what we are reporting?

  1. It’s properly done. The survey uses a random probability sample, selected from a population of all British adults. It’s not a quota sample (used in most surveys these days). The survey uses face to face interviews. It’s not one of those cheap and cheerful web surveys. And it’s over three different fieldwork periods over the year – not a one off. Our numbers have confidence intervals. And this is undertaken by Britain’s Office for National Statistics. And you can find – and replicate – the methodology.
  2. We haven’t changed the methodology. I’ve been involved in this work for more years than I care to remember and on any number of occasions we have been accused of being wrong. Most frequently the suggestions have been that the survey over-estimates how much people give. My argument is that if we are wrong – we are consistently wrong – the implication being that the trend is correct.
  3. The economic environment in 2011/12 was poor: and any number of measures of consumer confidence were dipping. The particularly important statistic here is Net National Income per Head (NNI) – considered to be the best guide to real living standards. This held up in the early stages of the recession but has continued to drop as a result of the squeeze on family budgets from rising prices. NNI per head fell by 13.2% between the first three months of 2008 – when the economy peaked – and the second quarter of 2012. Over the same period, GDP per head fell by 7%.). It’s also worth noting that studies such as Donations Foresight and The State of Donation have used econometric analysis to demonstrate a link between economic indicators such as house prices and unemployment and giving to charity. I’ll leave you to guess the correlation and direction of causation.
  4. Were donors in 2010/11 intending to give less in the future? There’s evidence that suggests charitable giving is a lagging indicator: that is, there is a delayed reaction to economic duress, donors wishing to carry on being generous for as long as they can. This pollfor Charity Insight, in September 2011, found that two thirds of respondents planned to give at the same level in future – but that over a quarter planned to give less.
  5. UK Giving – a survey of donors – has generally tracked what charities report. A criticism surveys of on what donors say that they give is that they lie: and instead its far better to report what the recipients actually receive (as NCVO does, in its Civil Society Almanac). Our experience is both measures are useful and that trends are important: but they’ll never match up exactly, as I explained in this briefing a few years ago.
  6. Even some of the big charities are reporting falls in giving. We all know – I hope – that fundraising works. There is irrefutable evidence that the charities that spend more on fundraising get people to give more. So I’d be amazed if we get many of the big fundraising charities telling us that in cash terms donations have fallen 15% (charity accounts don’t adjust for inflation). But some – albeit not many – are beginning to report falls. I’ve spoken to a number of fundraisers prior to publication, all off record. Every one of them is telling me it is getting harder than ever.

Graph cartoon

I hope I’m wrong. I hope the fall in donations isn’t as bad as our evidence suggests. And it is possible we are wrong: these are, after all, estimates. I’d like to end on an optimistic note. This is one set of estimates, a point on a line. And just as one swallow doesn’t make a summer, so one data point doesn’t make a trend. And, finally, evidence from past recessions has been that giving recovers. Fundraisers are innovative. And a trend is a trend is a trend. Until it bends.


Get every new post delivered to your Inbox.

Join 353 other followers