I’ve had a read through and drawn out what I think are some of the key findings for people interested in charity finance.
Income from government continues to fall
In real terms income from government has fallen by £1.9bn since it was at its peak in 2009/10. Preliminary estimates for 2013/14 suggest that this trend has continued. This reduction in funding has not been felt evenly across the country. For example, charities in the North West receive the largest proportion of their income (43%) from government. These same charities have witnessed the largest proportional falls in government income between 2011/12 and 2012/13. In contrast, charities based in the South East and South West have the lowest proportion of income from government, each receiving less than 31% of their income from government sources. These both saw a small rise in the aggregate income from government. Cuts in government funding are also unevenly distributed across sub-sectors -- organisations working in social services have seen the largest fall in funding, from £5.1 billion in 2010/11 to £4.7 billion in 2012/13. This echoes previous research that raised concerns that voluntary organisations serving social causes and disadvantaged people in the most deprived areas (where we might expect there to be more people in need of support) would be especially heavily impacted by the cuts in government funding.
Overall income and spending have stagnated
Provisional data for income in 2013/14 suggests that overall income (£40.7 billion) has stagnated. Similarly, having peaked at £40.1bn in 2009/10, the sector’s spending has remained consistent since 2012/13. It is interesting to see that whilst income and spending have levelled off, the number of people employed by the sector is growing. It is not clear from the Almanac data why this is. It could be down to the prevalence of funding in the form of contracts which may require charities to recruit extra staff over the contract period. Or perhaps efficiency savings elsewhere enable charities to take on more staff to deliver public benefit.
The majority of charities do not claim Gift Aid
Given this decrease in Government funding and stagnation of income, Gift Aid is becoming an ever more important source of income to the sector. Despite this, the Almanac shows that Gift Aid continues to be under-claimed by the voluntary sector. NCVO counted 160,045 charities this year, but according to HMRC only 65,000 charities are claiming Gift Aid. The HMRC’s definition of charities goes beyond the registered charities in England and Wales that NCVO uses, so it is possible that fewer than 41% of charities are claiming Gift Aid. Given the challenging funding environment for the sector as a whole, it is vital that charities maximise individual donations. The Gift Aid Small Donations Scheme (GASDS) has the potential to help charities capitalise on cash donations, the primary form of giving for the public. However, for small charities – who receive the largest proportion of their income from individual donations – the scheme is proving to be too complicated. CFG called for the coalition government to bring forward the proposed review of GASDS and will be writing to the Chancellor ahead of July’s budget to state the same.
How much weight should be given to social investment?
The Almanac shows that loans make up roughly a quarter of the sector’s total liabilities with £3.5 billion outstanding. Given that social investment has raised just over £200 million for the sector, it is important for the Government to recognise that social investment is a relatively small contributor to the sector’s capital. My colleague Andrew O’Brien has written previously about the need to restart the conversation on social investment.
The pension deficit has increased
The pension deficit has not recovered to pre-financial crisis levels - when the value of many pension scheme assets was wiped out - and has increased from £1.6 billion to £1.7 billion. Many of the sector’s liabilities are related to multi-employer defined benefit schemes. CFG outlined its recommendations for the reform of section 75 in our consultation response to the DWP’s call for evidence. The data mentioned above, and much more, can be viewed online at http://data.ncvo.org.uk.
« Back to all blog posts