Karl Wilding, Head of Research, Policy and Foresight, NCVO
This year’s Almanac focuses on the size and scope of the voluntary sector in the United Kingdom. The Almanac uses data from 2010/11 – the latest data available on the finances of the sector. The financial year 2010/11 saw the economy continuing to struggle after the deep recession of 2008/09. GDP saw some growth, but unemployment and inflation both remained high.
While the coalition government elected in May 2010 emphasised the need to reduce the deficit, spending cuts did not start in earnest until after 2010/11. While many of our financial measures for the voluntary sector saw rises in cash terms, the impact of inflation wiped out these increases in real terms. Overall then, the sector was already dealing with difficult economic circumstances in 2010/11 – before the advent of austerity.
The voluntary sector is at the heart of a broad and powerful civil society. The 162,000 charities that make up the voluntary sector undertake an incredibly wide range of activities and benefit people across the whole of the UK and worldwide. While these figures relate to the voluntary sector in particular, we continue to recognise the value of the whole of civil society – which includes charities, social enterprises, co-operatives, trade unions, community groups and voluntary action.
As the UK economy continued to struggle, the voluntary sector still showed some growth in income. In cash terms its income increased by nearly £2 billion to £38.3 billion in 2010/11. Increases in inflation have eroded the value of this income though; adjusted for inflation, the sector’s income was almost the same in 2010/11 as in 2009/10, and real terms income in 2010/11 is lower than that in 2006/07 and 2007/08. The assessment in last year’s Almanac that 2007/08 represented “peak funding” for the sector appears to hold true.
Spending could not keep pace with rising costs, and so fell in real terms. Charities spent £36.8 billion in 2010/11, with 86% of that spending going on charitable activities and grant-making. While spending rose in cash terms by £1.1 billion between 2009/10 and 2010/11, a high inflation rate of 5% meant that this spending could not keep up with growing costs, and represents a real terms fall of £800 million. The increases in spending by the sector seen in the recessionary years of 2008/09 and 2009/10 were not continued into 2010/11, perhaps suggesting that any spare capacity had already been used to meet extra need in hard times.
For income from government, 2010/11 was the year of the calm before the cuts. 2010/11 saw the election of a Conservative/Liberal Democrat coalition with a plan to reduce the deficit. The emergency budget and spending review in 2010 set out the scale of cuts to come, but 2010/11 itself saw only minor in-year adjustments to government spending. Voluntary sector income from government mirrored the pattern for total government spending, with an increase in cash terms of £616 million between 2009/10 and 2010/11 (which translates to a small real terms decrease). The cash terms increase was driven by increases in income from local government (£226m), national government (£283m) and international government (£108m). In the case of both local and central government, the increase was mainly seen in the largest charities.
The proportions of income from government grants and contracts remained steady, after a decade of change. From 2000/01 to 2008/09, we have reported decreases in value of government grants and significant increases in value of government contracts. In 2010/11, the majority (79%) of voluntary sector income from the state was earned from contracts and fees – this percentage has been steady since 2008/9.
Individuals continue to be the sector’s dominant source of income. Income received from individuals increased in cash terms by £945 million between 2009/10 and 2010/11, with this growth coming from individual giving (an increase of £600million) and earned income (£390million), with a small fall in income from legacies. The change in individual giving is consistent with the findings from UK Giving for that year, which showed a small increase in giving.
The number of people working in the sector fell in 2011. According to our analysis of the Labour Force Survey, an estimated 732,000 people were employed in the voluntary sector in the UK during 2011, representing a decrease of 33,000 since the previous year. However, the voluntary sector workforce remains 34% greater than in 2001. The proportion of people volunteering remained stable in 2010/11.
The sector’s asset base rebounded after falling during the 2008/09 recession. For the first time, the sector’s net assets were worth more than £100 billion in cash terms. Investment assets returned to the levels seen in 2007/08 before the financial crisis, reaching £68.9 billion. However, those assets that are freely available – reserves – have not recovered to the same extent. In total, the sector holds reserves equivalent to 16 months of expenditure. As in previous years, these reserves are spread unevenly across the sector – one in five organisations has no reserves at all. While the value of assets saw a rebound, the income generated by these assets has not, as interest rates and corporate profitability remained low. Income from investments was worth £2.3 billion in 2010/11, the same in cash terms as 2009/10.
What happened next
While the Almanac uses data from 2010/11 as this is the latest available from charity accounts, other data sources give an indication of what has happened to the voluntary sector since that time.
The sector faces significant financial challenges in the years after 2010/11. The UK Giving survey by CAF/NCVO indicates a significant fall in individual giving between 2010/11 and 2011/12, with the proportion of adults giving in a typical month falling from 58% to 55%. Meanwhile, public sector spending cuts are predicted to continue until at least 2017/18. With the continuing economic uncertainty, above-target inflation and public spending restraint it appears unlikely that the voluntary sector will be able to return to pre 2008/09 funding levels in the medium term.
A changing workforce. The latest statistics from the Labour Force Survey for the third quarter in 2012 indicate a total of 793,000 paid employees working in the voluntary sector, a rise from the 732,000 employees in 2011. However, they also highlight that the voluntary sector’s paid workforce includes an increasing number of temporary employees, growing numbers of people unable to work the hours they would like, and fewer staff benefiting from on-the-job training.
More volunteers. The number of people volunteering in England appears to have increased significantly. The new Community Life Survey shows 29% volunteered at least once a month in 2012, compared to 25% in 2010/11. The timing of this survey may have had an impact on the results; the survey work was carried out during and after the London 2012 Olympic and Paralympic Games, while volunteering was fresh in the public’s mind.