Charities are increasingly being financed by the Government in return for providing contracted public services. If the donors knew, they’d perhaps stop giving say a series of charity and public sector experts, but they probably don’t have a clue.
“There’s been a huge growth in investment and funding to charities from the state,” intones Jay Kennedy from the Directory of Social Change, a third sector advisory group. “The lion’s share has been in return for services to the state.”
The facts back it up. According to the National Council of Voluntary Organisations (NCVO), Government was responsible for 28 per cent of the third sector’s total income in 1995: by 2005 it was providing 38.5 per cent. While government grants have remained frozen in the past five years, contracts increased from 48 per cent in 2002 to 62 per cent of government funding three years later.
A Conservative party green paper released in June 2008 made big deal of the fact that donations from individuals are funding charities less and less in the face of statutory income.
Mr Kennedy argues that charities “find it quite difficult to fundraise independently,” if they’re taking on services under contract that were previously delivered by government bodies. He says donors want to give to charity because they see it as independent: they already pay taxes for public service provision so there's no reason to give more. However, he does add that often donors don’t really know how much government funding charities get.
“There probably is potential for [statutory funding] to be a negative thing if you asked a lot of people. There’s definitely the potential, as for the evidence…”
International poverty relief charity Action Aid drew a line of independence against the Government when it declined to get involved in an initiative supporting its Millenium Development Goals.
“Part of our role is about holding the government to account” asserts Policy officer Tom Sharman. He says Action Aid rely mostly on voluntary income because they want to maintain a critical distance so that they can reprimand the Government if they feel they’re getting things wrong.
Third sector columnist Nick Seddon would approve. In his 2007 book Who Cares? How state funding and political activism change charity, argues that voluntary organisations receiving more than 70 per cent of their income from the state are de facto state agencies and should lose their charitable status.
“Would it change your perception as a giver if you knew [the UK’s largest social care charity] Turning Point got 99 per cent of it’s funding from the state? I feel that it must be the case that people would give less,” Mr Seddon asserts today.
“Is that the reason we’re giving less as a society? I don’t know. If you did a massive awareness poll, people know very little about it.”
Alison Wolf, professor of public sector management at King’s College London, recently led a Radio Four debate on the issue where Seddon was a guest. She believes that a society existing on nothing but the government and private companies is a “pretty odd idea in itself”.
“In the past if you didn’t give to people who were poor then it wasn’t going to happen. Now we’re aware of this vast welfare state and so psychologically we feel oh well, the government does everything let's leave it to do that as well.”
Professor Wolf thinks donors could be made to feel the value of their gifts is worth less. “If you knew that a charity is basically getting a vast amount of money from government, you think yours will be a drop in the ocean.”
Although the office of the Third Sector Minister Phil Hope said they would be happy to comment, they were not able to respond in the three weeks before this story went to press.
The growth in contracts has mostly benefited large charities with incomes of over £10m.
NCVO head of research Karl Wilding discloses there are “well known problems” about the length of contracts (they're too short), the time frame for renewal of those contracts and about being clear when grants are more appropriate.
He adds: “We are in the long term shifting from funding the sector through grants and donations to financing the sector. We’re thinking more about types of resources such as loan finance.”
“People fund the issues they’re interested in or governments fund whatever the political priorities of the day are and that doesn’t always coincide with the areas where funding is most required.”
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