- In 2014/15 the sector received £15.3bn from government bodies, of which 81% was earned through contracts or fees
- Most of the sector’s income from government comes from relationships with central and local government, with similar amounts from each, £7.3bn and £7.1bn respectively. The remaining £0.9bn came from the EU, international governments and international agencies like the UN
Income from government continued to increase between 2013/14 and 2014/15, although the increase was rather less than the previous year
The data allows us to build a picture of income from government over a number of years, up to the end of the 2010-2015 Conservative and Liberal Democrat coalition government.
- Income from government has increased between 2012/13 and 2014/15, by around £0.65bn. It increased by around £0.5bn to £15.1bn in 2013/14 and then by around £0.15bn to £15.3bn in 2014/15.
- Overall, this trend over the last two years is different from the previous few years. Up to 2009/10, income from government grew (with occasional fluctuations) to a peak of £15.7bn and was a key factor in the growth of the sector over that period. After 2009/10, income from government decreased, following the pattern of the general reduction in government spending, with income from government falling to £14.7bn in 2011/12 and £14.6bn in 2012/13.
- The majority of this increase was in the largest charities, as described below.
Local versus central government
- The patterns of change over time were different for income from central government and income from local government.
- Central government funding to the sector decreased between 2009/10 and 2012/13, from £7.0bn to £6.5bn, with the sharpest fall occurring between 2009/10 and 2010/11, following the change in government and publication of the 2010 spending review. After 2012/13, income from central government increased, back to £7.0bn in 2013/14 and to £7.3bn in 2014/15.
- Income from central government in 2014/15 has therefore recovered to reach a level higher than its previous peak of £7.0bn in 2009/10.
- Local government funding to the sector also decreased between 2009/10 and 2012/13, from £7.9bn to £7.2bn, but most of the decrease occurred a year later than that for central government, between 2010/11 and 2011/12. This was the first full year after the coalition government’s spending review. From 2012/13, however, income from local government remained fairly stable, remaining at £7.2bn in 2013/14 and appearing to decrease further to £7.1bn in 2014/15.
- The 2013/14 data reported in the previous year’s Almanac appeared to show a small increase from 2012/13 (of around £200m) in income from local government, suggesting that it might be following the upward trend in central government funding but to a lesser extent. We can now see, however, that the current trend in local government funding to the sector is not upwards and could possibly be moving downwards.
- Income from local government in 2014/15 therefore remains around £0.8bn less than its peak in 2009/10.
Growth in government income was predominantly seen in the largest organisations
- As with overall income, the growth in government income between 2013/14 and 2014/15 mostly occurred in organisations with an income over £100m, as it also did in the previous year.
- Government income for major and super-major organisations increased by over £100m, accounting for much of the total rise of around £150m in government income across the voluntary sector. Although this appeared to be made up of an increase of around £200m for super-major organisations and decrease of around £90m for major organisations, that was the result of two organisations moving across the £100m income boundary from the major size-band to the super-major organisations.
- Examples of increased government funding from central government included the Save the Children Fund (grant of £120m), the Shaw Trust (£102m, mostly from the Department for Work and Pensions, as in 2013/14) and Change, Grow, Live (formerly Crime Reduction Initiative), which received the largest amount from government (£141m). Government income for organisations in all the other income bands (micro to large) remained the same or increased slightly between 2013/14 and 2014/15.
- Looking at the trend in government funding by size of organisation over the longer period since 2009/10, when the impact of the recession was felt, the differences by size of organisation are clear. The increase in Government funding for super-major organisations, particularly over the last two years, is evident, whereas Government funding for small, medium and large organisations decreased and plateaued. For major organisations there has been more variability from year to year, with a small upward trend over the whole period.
The ratio of government income to the sector from grants and contracts remains relatively stable, after rapid changes in the first decade of the century
- For over a decade, there has been a trend of income from government being provided through contract rather than grants. The switch from grants to contracts began 2003/04, when grants peaked at £6.2bn, over half of all income to the voluntary sector from government. Since that time contracts have grown in importance as grants have become less common.
- In 2014/15 grants made up 19% of income from government (£2.9bn), the same proportion as in 2013/14. Since 2008/09 this proportion has remained fairly stable, with slight fluctuations, at between 17% and 21%.
- Income from both grants and contracts decreased between 2009/10 and 2012/13, with grants having fallen at a faster rate than contracts over that period. Income from both grants and contracts increased slightly between 2012/13 and 2014/15, with both increases occurring mainly in grants and contracts from central government.
The sub-sectors dealing with employment and training and social services continue to have the highest proportion of their funding from government
- Splitting the data into sub-sectors shows that different sectors attract different levels of funding from government. Organisations working in employment and training, and social services continue to receive the highest proportion of their income from government (56% and 49% respectively in 2014/15). Sectors with the next highest proportions of funding from government are those dealing with law and advocacy, and umbrella bodies (both 47%).
- The amount of income from government for these four sub-sectors nevertheless decreased between 2009/10 and 2012/13, in line with the trend in overall government funding. Between 2012/13 and 2014/15, there are indications of small increases in government funding for organisations working in social services and law and advocacy, whereas for organisations dealing with employment and training and for umbrella bodies the trend is not upwards; for them, income from government funding has changed little since 2012/13.
- For organisations in the international sub-sector, income from government increased between 2009/10 and 2011/12 (from £1bn to £1.2bn) and continued increasing from 2012/13, reaching £1.5bn in 2014.15. Government funding now accounts for 31% of the total income of organisations in the international sub-sector income.
The largest organisations continue to receive the highest proportions of their funding from government
- In 2014/15, as in previous years, the proportion of income from Government varied by size of organisation. Major organisations (with incomes of between £10m and £100m) received the largest proportion of Government funding (42%) and small organisations (with incomes of less than £100,000) received the lowest proportion (16%).
- In terms of amounts of funding, over half of total funding from government to the voluntary sector is received by major and super-major organisations (£8.5bn of the overall £15.3bn government funding). Around £4bn comes from central Government, £3.8bn from local Government and £0.7bn from European and international sources.
- There is little variation in the relative proportion of government income coming from local and central government for different sized organisations. Central government funding ranges from 45% to 50% of overall government income across the different income bands, and local government funding ranges from 41% to 50% of overall government income.
Income from government in context
- The £15bn income that the voluntary sector receives from government forms a significant part of its incoming resources, even after the reductions seen in recent years. When viewed in the context of the whole of government, however, grants and contracts with the voluntary sector form a minor part of the government’s finances.
- The Whole of Government Accounts  published by HM Treasury, present a rounded picture of the entirety of government finances. The headline figures report that the government spent £734bn in 2014/15. This suggests that government spending on the voluntary sector accounts for around 2% of total government spending.
- Broken down further, voluntary sector contracts worth £12.4bn account for around 6% of government’s £191.7bn spend on purchasing goods and services, and voluntary sector grants worth £2.9bn account for around 5% of government’s £57.4bn spend on grants and subsidies.
- A further breakdown shows that £5.4bn of voluntary sector income from central government contracts accounts for around 4% of central government’s £115.8bn spend on contracting, and that the £6.7bn of income from local government contracts accounts for around 10% of local government’s £65.2bn spend on contracting.
- These numbers imply that while government is a key part of the voluntary sector funding landscape, the voluntary sector is a minor player in the totality of government funding. However, for individual departments, agencies and local authorities the voluntary sector plays a large role in the delivery of services and as a partner of government.
- Recent rises have not been uniformly spread throughout the sector. Following last year’s rise in government income, the more modest rise this year was again concentrated almost entirely within ‘super-major’ charities that have an income of more than £100m, and primarily those conducting international work (a protected spending area). These organisations will have been the best placed to secure increasingly large-scale contracts offered by central and local government. While small and medium-sized charities maintained a similar level of government income to last year, it remains approximately a third below its pre-recession peak. These organisations have consistently reported problems in bidding for contracts, from the increasing scale of contracts, to reduced focus on quality, and payment-by-results mechanisms that disadvantage smaller providers.
- The proportion of income from government varies by the region that organisations are based in. Organisations based in East Midlands, the North East and the North West receive the largest proportion of their income from the government (39%, 39% and 42% respectively) whilst London-based organisations and those in the East and South West have the lowest proportion of income from government (28%, 26% and 28% respectively).
- However, this pattern is different if funding from the three different government sources are looked at separately. Organisations in the East Midlands have the lowest proportion of income from local government (39%) and the highest proportion of income from central government (58%) whilst organisations in the East have the opposite pattern, having the highest proportion of government funding coming from local government (60%) and the lowest (34%) from central government
- Most regions received a very small proportion of government income from Europe and international sources, with the exception of the South East and London (which received 12%and 9% respectively).