Public services charities seeing £1bn funding cut as Government spend increases fail to reach them

The Spring Budget’s funding increases have not reached charity frontline services – leaving them facing a £1 billion a year funding cut in real terms, according to a report. Nearly a third of charities delivering public services are facing significant financial challenges.

The Insight Briefing – Public Sector Funding Cuts 2023 from Charity Excellence updates its initial August assessment paper on the extent of public funding cuts with the results of a recent survey. 

The survey received 266 responses and found that just 6% reported a contract funding increase in line with or above inflation. 94% said grants have been cut, with 39% of these either significantly reduced or not renewed.

Majority of charities worse off

86% of the survey’s respondents reported being worse off, of which nearly a third (32%) face significant financial challenges. A further third (34%) said they have a serious cash flow problem, or have or may have to consider reducing or closing services, redundancies, or merging or closing their charity. Only 5% said they would be able to achieve more.

The main impact of the real-terms budget cut, Charity Excellence suggests, will be on health and social care charities, and to a lesser extent charities working in education, employment and justice. It believes the risk of widespread charity closures is high and that full sector recovery will not be seen until at least 2025. Early this year, Charity Excellence’s data indicated that no significant recovery would be seen until 2024.

Possible responses

The report also suggests a number of ways in which Government and the sector could respond. Greater AI adoption is one, and Charity Excellence says it will be taking forward its strategy to catalyse the widespread adoption of AI within the sector. It also suggests that charity contracts and budgets should be increased at least in line with inflation, and that more collaboration between the Government, the sector and grant makers would also help, while “if Government were to take ambitious and robust action to by transferring high-cost public services into high value charity delivery, this would not only generate real savings but also much larger savings.”

The full briefing can be read here.

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