Environmental, social, governance (ESG) Accounting and reporting

Cuts to BLF could have big financial consequences for charity sector

You’ve probably read or seen the alarming reports over the weekend that the government may change the distribution of National Lottery Funds to divert money away from charities to the arts and sport in order to compensate for government cuts in funding. Now CFG represents over 1,300 charities including many arts, sports and heritage organisations – so I don’t have any objections to more funding for these organisations.

However, I do not believe that this should come at the expense of other charitable causes. Big Lottery Fund (BLF) is the largest single grant making body for the charity sector, with over 95% of its funding going to voluntary and community organisations. It is also particularly important for small and medium sized charities. CFG supports the work of NCVO, DSC, ACEVO and others to get the government to reconsider this ill-advised proposal. However we also need to consider the critical role that BLF has in supporting the financial sustainability of the charity sector.

Grant funding has become a precious resource for charities. To a great extent, this has been driven by a reduction in government grant funding over many years - falling from a peak of £6bn in 2003/04 to just over £2bn in 2012/13 – with greater emphasis put instead on contracts or risker forms of financing such as Payment by Results. I don’t object to new sources of funding, but we need to have the right balance of funding for charities.

Grants are a key part of the ‘funding mix’ for charities and underpin the financial sustainability of many organisations. They are used by charities to cover core costs and improve their long term financial health through building reserves and investing in their internal capacity.

BLF grant programmes such as Reaching Communities and Awards for All are important forms of funding for many charities. Whilst a cut in BLF funding may not seem large in terms of the government’s overall budget it could have significant damage on the sector’s wider ecosystem. The government depends on charities to deliver services across our communities and so far the sector has had to cope with a fall in government income of over £1.7bn since 2009/10. Reducing funding to strategically important BLF programmes would reduce innovation in the sector, stop new projects and services from continuing as well as fuelling more competition for fewer grant streams, threatening the sustainability of many charities.

Charities are operating in a tough financial environment. The repeated stories over the summer of charities closing are a testament to this. We are already trying to absorb the pressure from government cuts and we are going to see even more announced in the Spending Review. Reduction in BLF grants would be another massive blow to the sector’s finances at a strategically important source. In the midst of so many proposed cuts, Ministers might be tempted to underestimate the impact of this change to Lottery fund redistribution. However, not every pound is worth the same to charities. A pound of grant funding is worth a lot more than other forms during the current time. The government must not ignore the financial sustainability of the sector when making this decision; otherwise, they may come to regret it.

This post was last reviewed on 27 February 2019 at 15:31
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