Archived page

This page is from UK Civil Society Almanac 2012. A more up-to-date version is available.

34

How are public sector spending cuts affecting the voluntary sector?

What cuts have happened so far?34a

There is no one comprehensive source of information about the cuts so far. The Voluntary Sector Cuts website,34b a collaboration between 25 voluntary sector infrastructure organisations is one way for voluntary organisations to share their experience of cuts. Launched in January 2011, by January 2012, 509 cuts had been reported, with a value of over £77 million. Roughly two thirds of cuts reported identified local government as a source of their funding.

Regional surveys indicate that spending cuts are impacting on the level of services provided by voluntary organisations although, due to the sample size and methodology of the surveys, these need to be interpreted with caution. In London, one survey estimated that 51% of organisations had had to close or reduce the level of services they provide.34c A survey of organisations in the North East indicated that 73% of organisations had seen a decrease in funding over the previous six months.34d

£77 MILLION
Value of cuts reported to the Voluntary Sector Cuts website during 2011.34b
Embed

Cut and paste this code into your page to embed.

What do we estimate the reduction in government spending on the voluntary sector will be?

The formation of the coalition between the Conservatives and Liberal Democrats in May 2010 produced a deficit reduction plan with an ambitious target (the “structural” deficit34e eliminated by 2015) and a reliance on spending cuts to achieve this. Public expenditure is forecast to fall by roughly £30 billion in real terms between 2009/10 and 2015/16, a fall of 4%.

Local government spending is estimated to fall by 11.4% between 2010/11 and 2015/16. If these cuts are passed on to local charities this would suggest a fall in local government income to charities of around £800 million per year by the end of the period. The equivalent figures for central government suggest a fall of around £450 million. The UK voluntary sector is therefore estimated to lose around £1.2 billion in public funding a year by 2015/16, a fall of 9.4%. Cumulatively, the sector stands to lose £3.3 billion over the spending review period (2010/11-2015/16). All these figures depend on voluntary sector income from government falling at the same rate as total government spending.

Estimated change in government spending on the voluntary sector, 2010/11 – 2015/16 (£ millions, 2010/11 prices)

A bar chart showing that the level of cuts to the voluntary sector will accelerate until 2015/16
Embed

Cut and paste this code into your page to embed.

Source: NCVO estimates based on Office for Budget Responsibility (2011) Economic and fiscal outlook supplementary tables

The central government figures can be broken down further by looking at spending by individual departments. By combining departmental spending figures with the amount spent by each department on the voluntary sector (and assuming that the proportion spent on the voluntary sector stays the same), we estimate the change in pounds spent between 2010/11 and 2014/15 for each department. The figures suggest some departments will see increases in funding for the voluntary sector – notably the Department for International Development. Some, however, see large falls – the Department for Communities and Local Government, the Home Office, BIS and the Department for Culture, Media and Sport.

The real impact on the sector is likely to be significantly greater than the figures in this report suggests. Our analysis assumes that cuts will be applied evenly and proportionately to the sector but we are aware of many cases where significantly disproportionate cuts are being applied to the sector.

A fall in the size of grants provided from central government to local government, alongside a freeze in council tax, means that local government is a key area for cuts to spending. Percentage cuts varied by local authority, with reductions capped at 8.9% in the first year. The emerging picture shows that local authority areas with higher deprivation scores are facing larger cuts in their own funding. As voluntary organisations in these areas are more likely to be funded by statutory bodies they may well be more at risk of having their funding reduced or ended. They are also more likely to be working with marginalised groups.

Predicted change in spending on the voluntary sector by central government departments between 2010/11 and 2014/15 (£ millions, 2010/11 prices)

A horizontal bar chart showing the level of cuts to the voluntary sector by central government department. Communities and Local Government is the department with the highest level of cuts, while spending at the Department for International Development will increase.
Embed

Cut and paste this code into your page to embed.

Source: NCVO estimates based on HM Treasury (2010) Spending Review

What are some of the possible impacts of public service cuts?

There is significant variance in the way that different parts of government and local authorities implement cuts. Many local authorities are making long-term, strategic decisions in partnership with their local voluntary sector but some are not and this is causing real damage.

A freedom of information request to local authorities by Compact Voice highlighted that over 50% of local areas stated that they have made cuts to the voluntary sector disproportionately to (i.e. greater than) the changes in their settlement. Around one-third indicated that they had made no changes to their funding provided to the voluntary sector.

Given that the majority of state funding is in the form of contract payments for service delivery, spending cuts and a diminished capacity for the voluntary sector will be felt across the country. The voluntary sector plays an essential role in preventative services, so what appear to be cash savings now may be storing up considerable challenges for the future.

Cuts will be felt unevenly across the sector, and some parts of the sector will be hit harder. Some organisations are able to absorb the impact of reduced spending, but due to low levels of financial resilience across the sector, many cannot. When organisations are forced to close, as many already have, they cannot simply be re-created if a tendering process happens at some point in the future. Their unique skills, connections with people and their relationships with the people they serve will disappear forever.

£3.3 BILLION
The estimated reduction in public sector funding to the voluntary sector over the spending review period (2010/11 – 2015/16).34f
Embed

Cut and paste this code into your page to embed.

References

34aThe contents of this page include updated figures from those originally published in NCVO’s Counting the Cuts report. The updated figures include the latest data from the Office for Budget Responsibility, and voluntary sector data from 2009/10.
34bVoluntary Sector Cuts
34cLVSC (2011) The big squeeze 2011
34dVONNE (2011) Surviving or thriving
34eDefined by the Financial Times as “A budget deficit that results from a fundamental imbalance in government receipts and expenditures, as opposed to one based on one-off or short-term factors.”
34fNCVO estimates based on Office for Budget Responsibility (2011) Economic and Fiscal Outlook Supplementary Tables November 2011

Comments are closed.