Charity finance policy Financial sustainability

Sector bodies issue joint proposal for Chancellor ahead of March's Budget

Charity sector infrastructure bodies including ACEVO, CFG, Children England, Locality, Local Trust, Lloyds Bank Foundation and NCVO, who together represent thousands of charities across the UK, have joined together to put forward four key proposals to the Chancellor ahead of the Budget on 11 March.

Dear Chancellor,

Civil Society and the Budget

As voluntary sector representatives, we are writing to you ahead of the Budget on 11 March to put forward four proposals on which there is consensus among our organisations. The Government’s Civil Society Strategy recognises the extraordinary contribution that charities bring to creating thriving communities and tackling some of society’s biggest challenges. Yet charities are working in an increasingly tough environment, not least the severe pressures on local authority-funding hitting the people and places facing disadvantage the hardest. The ability of the sector to continue to help unlock the potential of all parts of the UK depends on providing them with the resources, and structures, to make it happen.

Civil society can have an invaluable role in making sure the government’s ambition to level-up the country is achieved. It will be important that any new investment and funding for economic development is locally led. Building long-term prosperity in places that have long been left out of the benefits of economic growth means investing in the social and economic infrastructure that supports communities to thrive. And lessons from previous economic regeneration programmes show that it also requires putting the mechanisms for driving local change into community hands.

Communities need to be in control of their future, and should have the power, support and resources to drive change in their own areas. This core principle runs throughout our proposals.

Summary of key proposals

  • To help reduce the significant financial strain that many public services are facing, government should increase funding for local authorities, and reevaluate their longer-term financial sustainability as it prepares for this year’s spending review. It is important that this additional funding takes the form of core government funding, rather than solely providing additional mechanisms for local authorities to raise revenue themselves.

  • More details are urgently needed about the UK Shared Prosperity Fund (UKSPF), including the time period over which the £500m earmarked for disadvantaged people is spread, and the consultation on how the programme will be designed and delivered. It is important that the funding provided is at least commensurate to the levels of funding the UK would have received from the 2021-27 EU spending round, to ensure the most disadvantaged do not lose out. There should also be assurances that other smaller funds outside of ESIF and ERDF are appropriately replaced.

  • A community wealth fund should be established using money from the next wave of dormant assets to create a long-term endowment for deprived communities that have not benefited from economic prosperity. This would put local people in control of independent community services and valuable community spaces.

  • Government should work with charities to implement the recommendations of the independent Charity Tax Commission. This would enable charities to increase support for communities and environmental causes.

Funding for Local Government

The National Audit Office has calculated that local authorities have seen government funding reduced in real terms by almost half since 2010-11, and that 1 in 10 councils are now using their reserves at a rate which is not sustainable for more than three years (1). The £2.9bn increase in Local Government Core Spending Power alongside an additional £1bn for grants for adult and children’s social care announced at last year’s Spending Round were welcome, but this will not reverse the significant cuts which councils have endured since 2010.

Research from Lloyds Bank Foundation has shown that while councils have tried to reduce the effect of cuts on people that are most disadvantaged, their impact has fallen on marginalised and underrepresented groups in society. This has coincided with a marked increase in demand for services, particularly amongst communities that see the least financial investment by central government. This has seen councils being forced to spend on crisis need rather than preventative services.(2)

Where services have been withdrawn by local authorities, the voluntary sector has often stepped in to deal with the consequences. This has inevitably put significant pressure on the finances of many charities, and has led to a reduction of their reserves during the same period.(3) Therefore it can only be a temporary solution: the charities we represent have made clear that it is not sustainable in the longterm, with many expressing concerns about their financial sustainability.

The announcement of increased funding for local authorities over the next year was welcome, as it will help reduce the significant financial strain that many public services are facing. But the longer-term financial sustainability of local authorities will be a key issue for government to consider as it prepares for the spending review later this year. It is important that this additional funding takes the form of core government funding, rather than solely providing additional mechanisms for local authorities to raise revenue themselves. It is in the poorest communities that local authorities will struggle most to raise the local revenue needed to fund the services that families rely on. Leaving areas reliant on council tax and business rates would further exacerbate inequality.

Ensuring the UK achieves its post-Brexit potential

In addition to changes to taxes and public sector expenditure, many charities are urgently awaiting more details of the UK Shared Prosperity Fund (UKSPF). We welcome the government’s commitment to match, at a minimum, the size of EU Structural Funds in each nation, but more clarity is urgently needed around what time period the £500m figure would be spread over. ESF funding - which this part of the UKSPF will replace - is currently worth around £500m a year to the UK. This figure should be the starting point for any replacement fund calculations; given EU funding for the UK would have increased by over 20 percent for the 2021-27 EU spending round, as many areas of the UK are now falling behind the EU average in terms of regional prosperity(4). There should also be assurances that other smaller funds outside of ESIF and ERDF are replaced to ensure disadvantaged people receive the support they need post-Brexit.

Communities and charities that represent them must be at the heart of the UKSPF, including the delivery and design of the programme, with significant devolved funding and community control. A more localised approach would harness local assets, and provide investment for growing the capacity of communities and local organisations to lead change in their neighbourhoods. It would unlock opportunities for areas which have often been overlooked, and for people facing barriers to and in the workplace. It would also enable community-led activity and community businesses to flourish.

With the UKSPF scheduled to begin in April 2021(5), the consultation on the UKSPF - which has been repeatedly delayed since 2017 - must be a key priority for the government to help avoid gaps in funding and therefore the loss of vital support for communities across the country.

Community Wealth Fund

By establishing a Community Wealth Fund using money from the next wave of dormant assets, government would create a national endowment for the most deprived communities that have not benefited from Britain’s wider economic prosperity. Funding decisions should be devolved directly to residents within these neighbourhoods, in order to build the confidence and capacity of local residents, whilst providing them with the support to deliver sustainable change for their area. This would put local people in control of independent community services and community spaces, and provide them with the capabilities to achieve their aspirations for their areas. Developing new approaches in areas that have not benefited from growth will be key to addressing both the UK’s low productivity, and in ‘levelling up’ all our communities in the coming years.

Independent Charity Tax Commission recommendations

Tax reliefs provide vital support for charities, allowing them to amplify the public benefit they deliver. The independent Charity Tax Commission identified a suite of common-sense reforms

that would make the current system more effective and efficient – both for the exchequer and charities – enabling charities to direct more time and resources to supporting good causes. By working with the voluntary sector to implement the recommendations of the Commission, government would boost support for communities and environmental causes.

These proposals have been developed in wide consultation with civil society organisations, and have the support of the main representative bodies because they would make a difference to communities across the UK and would enable civil society organisations to thrive.

Yours sincerely,

Tony Armstrong, Chief Executive, Locality

Margaret Bolton, Director of Policy, Local Trust

Caron Bradshaw, Chief Executive, Charity Finance Group

Vicky Browning, Chief Executive, ACEVO

Kathy Evans, Chief Executive, Children England

Paul Streets OBE, Chief Executive, Lloyds Bank Foundation

Karl Wilding, Chief Executive, NCVO







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