Missed the debate about how charities are coping with cuts?

If you couldn’t make our cuts debate on Friday, have a look at the short video below, where four of our speakers sum up their thoughts from the morning. The debate was held at the Guardian’s offices in London. Speakers included Dan Corry, chief executive of NPC; Geraldine Blake, chief executive of Community Links; Jane Stacey, UK director for children’s services at Barnardo’s; and Steve Bullock, the directly elected Mayor of Lewisham. The event was chaired by Patrick Butler, editor of Society, Health and Education policy for the Guardian.

You can read more about the discussion at the event in Iona Joy’s blog. To find out about what’s coming up in NPC’s events programme, visit our website.

Penny wise pound foolish

And so it came to pass. NPC predicted that last autumn’s comprehensive spending review would result in reductions in valuable prevention services generally paid for by local authorities. Our cuts paper tried to quantify the risk and guide funders on how to help. But what the local authority budget pressures mean in practice was brought home to me forcefully as I chatted to a charity last week. I’m not going to name the charity as it has valuable relationships with its local authority funders and I don’t want to spoil these relationships by my interpretation of what is going on.

Refuse collection contracts with local authorities are worth billions of pounds. The contracts generally run over many years—Brighton has published its contract (full marks for transparency) and its worth a billion quid for 25 years. You can be sure such contracts are negotiated very carefully by the private company’s legal team – heaven help the local authority which tries to break one of these contracts.

I’m not knocking refuse collection, recycling etc. It’s a necessary local service. But if a local council wanted to reduce specifications in order to trim 5% off a billion-pound contract costing £40m a year, thereby saving £2m a year, it wouldn’t have a legal case to do so. With time it might be able to embark on some protracted negotiations with the contractor, but the pace of the cuts don’t allow for this. So the local authority is forced to terminate a few contracts with charities offering, say, youth services, instead. These would have been provided by charities on annual contracts, without input from sophisticated legal teams, so can be terminated without legal difficulty.

So the charity I chatted to explained it was shutting some youth services. What will the young people do now, I asked? Where will they go to for counselling for family problems, homework clubs, after schools sports and music clubs, job-seeking support, drugs and alcohol advice, and so forth? Will they feel abandoned? Very probably. Will the drug dealers be pleased? Almost certainly.

‘Penny wise and pound foolish’ is how the charity described the shut-down to me. The charity predicted a rise in the usual criminal justice, mental health, and worklessness problems which plagued the area before it developed services to address these issues. This future expense will of course be shouldered by tax-payers. Some activities will be transferred to a service in a neighbouring ward—but my contact noted wrily that several members would have difficulty attending as this involved a sprint through rival gang territory.

The charity also talked movingly of the vulnerability of now-redundant employees. The youth workers employed by the service aren’t middle-class graduates with plenty of self-confidence and employment options. These are vulnerable young people born into great disadvantage, nurtured through the services’ programmes, and then given an opportunity to shine in their communities. They are employed role models helping others. And now they are let down. One young man is so ashamed he doesn’t leave his house. His employment options are limited to casual labour on local building sites—an option, but hardly playing to his considerable people skills. Its as if his light has been snuffed out—even though his redundancy is no reflection on his abilities.  The whole community is feeling the loss—the overall sense that the community doesn’t matter to anyone is palpable. So much for Big Society.

I honestly don’t think this is what the Coalition Government had in mind when it began its mission to reduce the budget deficit whilst promoting a mixed economy. It probably imagined that refuse collection could be sensibly trimmed back a bit, and that cost-effective services offered by charities and other small organisations would be retained because of the social problems solved. But in reality its got something different. The negotiating muscle of big private companies eclipses the social benefit of charities’ activities when it comes to disinvestment decisions. So the mixed economy envisaged by the Coalition Government will end up skewed towards the private sector…… while Big Society shrinks.

Standing out from the crowd

First used by cattle farmers, made popular by Labour politicians, ringfences are now out of favour. Where once a dozen different ‘ringfenced’ (ie, protected) funding streams supported young people, soon there will be a single ‘Early Intervention Grant’ to be spent at the local authority’s discretion. It will cover everything form children’s centres and short breaks to services for teen pregnancy and youth unemployment.

Take away the ringfences and you suddenly have a very crowded market where it’s difficult to separate sheep from goats. Charities will now need to make the case for their area of work (not just for their intervention) among a much wider range of competing needs. So far, the main victim seems to be youth services, which as the Children’s Minister admitted last week, are ‘bearing the brunt of the cuts’.

Is there anything that charities working with young people can do to make their case in this environment?

In his speech a couple of weeks ago, the Children’s Minister set out his vision for the future of the sector. It was a little short on detail, but reading between the lines, I think there are three main things that charities working with young people will need to do:

• Target the most vulnerable young people. In a world with less money, there is unlikely to be funding for universal youth services. Charities will need to be provide strong evidence of how they target and support the most vulnerable young people and be pro-active in educating commissioners about why they should address a particular need.
• Show willingness to collaborate. This includes involving young people in the design of services; drawing in support from volunteers and businesses in the community; and proving that you are pooling resources to reduce costs. Small charities with niche expertise and low costs may need to team up with larger organisations that can deal with commissioning processes.
• Focus on outcomes. Funding looks like it will be directed to interventions that can secure clear results, particularly where this involves a saving to government. Early indications (eg, ‘reinvestment grants’ in the youth offending sector) suggest that government is looking to commission consortia to test ‘payment by results’. As the name suggests, the Early Intervention Grant is likely to favour approaches that can demonstrate that they prevent bigger problems downstream.

Adjusting to changes in funding structures is tough, and it is difficult to separate rhetoric from reality in ministerial speeches. But charities that can adapt to new priorities will be best placed to stand out from the crowd.

This is the third in a series of blogs looking at changes affecting charities in the youth sector. Previous blogs were on the need for evidence and the value of long-term support.

A sporting chance

Sport is a national obsession. For many, it is source of inspiration and an integral part of life.

Anecdotally, we also know that sport can be a powerful tool for tackling youth crime—it can get young people off the streets, out of trouble, engaged in education, and back on track. However, hard evidence is lacking, and without more detailed analysis, it is difficult to make a convincing case for investment.

NPC’s new report, Teenage kicks, shows that when sport is used as part of a wider programme of education and support, it can be highly effective at tackling youth crime, and provide excellent value for money. Given that youth crime costs society around £11bn every year, there is a compelling case for government and other funders to support such projects.

Boxing clever

For example, one of the projects featured in the report is the Boxing Academy in north London. It works with young people who have struggled in mainstream schools, many of whom are known offenders and have been excluded from school. The Academy combines boxing training with other sports and regular lessons, such as English and maths.

The results are impressive: young people who attend the Academy are more likely to achieve qualifications than their peers in Pupil Referral Units, and are less likely to re-offend. This means that the Academy is highly cost-effective: for every £1 invested, it creates £3 of value for the young people it works with and for society.

Numbers up

Economic analysis only tells part of the story—the report also includes case studies of young people whose lives have been transformed by sports projects, and a review of the evidence around effective sports interventions. But economic analysis is a powerful way of valuing and articulating social impact.

Measuring outcomes and comparing the costs of problems and solutions can provide valuable insights into what is effective, and speaks in a language that funders understand. But for analysis to be meaningful, charities need to measure their results, funders need to dedicate more money to research, and government needs to open its data sources. Only then can we really understand the full benefits of sport in tackling a range of problems.

Who’s to blame for charity cuts?

The cuts to violence against women charities have grown so severe that one chief executive, Denise Marshall of Eaves, has decided to hand back her OBE. Having been given this honour for her services to vulnerable women, she feels she cannot keep it if she cannot still provide a good service to these women. Eaves runs England’s main service for trafficked women, women who’ve been forced to work in prostitution, and the Home Office has asked her to provide the service with 75% less funding.

What’s happening to Eaves is just one example of what’s happening across the country with the cuts to charities. And it’s brought attention to the fact that some charities have become very dependent on the state. Not necessarily because they wanted to get all their funding from the state, but because no one else would fund them. While Labour poured funding into charities, increasing it from £5bn to £13bn, the public didn’t step up with a similar increase in donations. Private donations to charities–you and me putting money in a tin– has not risen as a share of income since Margaret Thatcher was Prime Minister. And in fact, the charity sector is relying on a smaller pool of donors who are giving more. Some sectors are harder to fundraise for than others. Violence against women is a topic people don’t really want to think about, and often that translates into them not supporting those charities that help the victims. But the charity sector as a whole also hasn’t really thought about new ways to engage people to encourage them to give more.

Which means we have situations like Eaves’ trafficking service, a valuable service for incredibly vulnerable women which is pretty much entirely paid for by statutory funds. If this service now goes, you can and should blame the government. But the blame also lies much more widely than that with a public whose generosity to charities is falling. And the leadership of the charitable sector which never paid attention to their long-term problems in fundraising.

Why don’t charities sing their own praises?

Over the past few days my friends have been forwarding me articles about Devon County Council’s proposed 100% funding cut to ADVA, the domestic violence service in Devon. This is because people know that I’m interested in domestic violence and I worry about the funding for the sector.

But so far, the articles about ADVA have only irritated me. They’ve talked about how awful it will be for victims of domestic violence without ADVA, but without mentioning how effective ADVA is, or what it actually achieves. Having researched the domestic violence sector for NPC’s report on the issue, Hard knock life, I know there’s a wide spectrum of effectiveness for those charities helping victims of domestic violence (as there is in most charitable sectors). So, to make up my mind about whether or not I cared about ADVA’s funding crisis I spent a few minutes googling.

ADVA has been lauded by the Audit Commission for its work—it helps victims go through the court process so that overall prosecution and conviction rates for domestic violence have increased. Last year 90% of prosecutions brought in one of the specialist domestic violence courts in Devon were successful. Victims supported by ADVA’s independent advisors are less likely to suffer repeated violence than the average for the South West or England. There are also testimonials on ADVA’s website from experts in the sector such as Diana Barran of CAADA (one of NPC’s examples of effectiveness). I think we can be confident that if ADVA goes it will be a loss to the domestic violence sector as well as to victims of domestic violence in Devon.

But annoyingly this evidence of effectiveness is not presented in news articles about the cuts. Instead they present anecdotes  rather than proper evidence of the good work that ADVA does day in and day out. Even the Guardian Cuts Blog says that the Audit Commission viewed it as effective, but then goes on to talk about claims that the consequences of losing this funding will be that ‘Children learn abusive behaviour so consequently can become abusers of the future’, something which is possibly true, but a few steps removed and pretty hard to prove. ADVA itself doesn’t seem to do a very good job of showing off about its work and getting the news out there about what it achieves.

The cuts are coming. Today we’ve had the warning from charities that 250 Sure Start centres could close within a year.  We need to make sure that good services are protected. Services like ADVA who have evidence of effectiveness need to be talking about the real difference they make, and the difference that its users will see if they’re not around.

Cuts threaten even the best charities

The merger of Fairbridge and The Prince’s Trust shows that even the best charities are at risk from the cuts.

Fairbridge is a charity that NPC knows well and rates very highly. It works with some of the hardest to reach young people in the country, those who fall through the cracks and become NEET (not in education, employment or training). Many of its beneficiaries have multiple needs—they may be homeless, have problems with substance abuse, or a history of offending. Getting them back into work or education is complicated, but Fairbridge has developed an impressive personalised approach to supporting them.

Although there may be some strategic logic in the merger, with over 40% of its income from statutory sources, Fairbridge was exposed to government spending cuts. The long-term support that it provides is indeed more expensive than other approaches, but the evidence shows that this is exactly what vulnerable young people need to get back on track. Over the past year, Fairbridge reports that 85% of the young people it has worked with have gone on to get a job, start a college course, or go back to school, or else have stayed with the charity to continue working on their development. Fairbridge’s approach works.

So cutting funding to a charity like Fairbridge makes government statements about connecting funding to results look a bit hollow. The sad thing is that while there is no mechanism that makes this connection, good charities doing excellent work will continue to be at risk, especially if their approach costs more in the short term than other less successful ones. Britain is now perilously close to having nearly a million young people out of work, and Fairbridge can expect to see demand for its services increase. It is just the kind of charity the government needs to be investing in to help offset the effects of the recession on young people.

The good news is that Fairbridge has found a merger partner to keep it going and that services will continue to be provided through its 15 centres across the country. However, it is difficult to judge whether it will be able to retain its unique approach given the pressures on youth service funding. Ultimately, the success of the merger should be judged on the outcomes achieved for young people.

£100m transition fund for charities: tight deadline!

I didn’t mean to start 2011 with a moan, but I will.

When the Government’s Transition fund for charities was announced in November, I thought that this could soften the blow for many smaller charities facing statutory funding cuts. I saw it helping them onto a new path. The original Cabinet Office press release talked about the fund being available over the ‘next 13 months’. Ah good, I thought, that gives charities plenty of time to find out where they stand with commissioners, do some strategic planning, run scenarios, and come up with decent funding propositions. I imagined the fund being open well into 2011, to accommodate the vagaries of commissioning decisions, with applications being processed as they came in. I wondered whether the fund would be run on a ‘first come first served basis’ or whether there might be some rationing process over time to allow latecomers a chance. In my Preparing for cuts paper, I talked about how it will be hard for charities to finalise their business plans in the short term: they may need to be quite fluid as the implications of the government cuts packages filter through, and funders will need to accommodate charities’ facing moving goal posts over the coming months.

So I was very disappointed to see that the closing date for the fund is 21st January 2011. Under any scenario, a 7 ½ week application window is tight, let alone the fact that it runs over a busy family holiday period. Few charities will be able to meet this deadline, as they have only the haziest notion of which local statutory funders are going to cut them and how badly. As one charity said to me ‘we expect to be opening post from funders telling us they are cutting back until at least April. We get more news each day, but we won’t have a complete picture for months.’ For many charities their conversations with commissioners remain frustratingly vague: a clear picture by the deadline a mirage. So they can only work up the sketchiest of business plans. And the conditions state: ‘You must have evidence, or have substantial reason to believe, that between April 2011 and March 2012, your organisation will experience a reduction of at least 30% of the taxpayer-funded income you receive for the delivery of front line public services in England.’ Most charities will be in the ‘substantial reason to believe’ category and may struggle to compute the >30% figure.

I’m trying to unpick the reason for this funding scramble. If the fund is available for 13 months since November 2010, what is the timetable until December 2011? Funding decisions will apparently take until March for most, some for May, with all disbursements made by July 2011. Surely decisions could have be phased over a longer period? But all funds have to be spent by grantees by March 2012. It seems the dreaded ‘annuality’ challenge is haunting this fund as it now haunts Communitybuilders. Annuality is where the Treasury says you can’t sit on any cash beyond the fiscal year end. (I could whine about this too – this policy is a great way to waste money). As transition funding is typically needed over a period of months, even years, this could lead to poor spending practice.

£100m is a drop in the ocean as compared to the >£3bn cuts to statutorily funded charities predicted by NPC. So there will no doubt be plenty of early birds to mop up the £100m. But that’s not the point. I don’t see how some of the most deserving charities will get a fair crack of the whip. And I can’t help thinking of all those ruined Christmases endured by chief executives trying to write their papers on time.

Show charities (the route to) the money

Over the weekend the chair of the Charity Commission (the lead regulator of charities in the UK), Dame Suzi Leather, gave an interview in which she referred to the funding threat faced by charities. You can see some of the interview here.

The Guardian coverage of the story included reference to NPC’s report on how funders should respond to cuts, which was published last week. It is my understanding that NPC’s report was the basis for Dame Suzi’s mention of cuts possibly being as high as £5bn. This is nice for NPC as it shows we are actively contributing to debate about the work of charities.

As our report notes (and the Guardian quotes), it is not realistic to expect private funding to step in and compensate for the scale of cuts. Some of the rhetoric around funding cuts for charities does seem to assume that this will happen. It has certainly been the tone of private comments from Culture Secretary, Jeremy Hunt, about funding for the arts, as reported in the Financial Times. It can also be found in comments from the Education Secretary, Michael Gove, over the weekend, when he said that charities should “do more by harnessing the enthusiasm of civil society and the generosity of individuals.”

It is understandable the government ministers want to encourage charities to be less dependent on the state at a time of cuts in public spending. It is important though that the role of charities in helping build the Big Society is appreciated. Arguably it is, but arguably also the need for solid funding to ensure this happens is not.

Private giving is not likely to step in automatically. Despite some hype around charitable giving, it is not buoyant. Moreover, as I have repeatedly said (for example, here in the Evening Standard), there are adverse trends in terms of the numbers of people giving; barely more than 50% of the population gave to charity according to the most recent authoritative figures, down from close to 70% a little over a decade ago. The “generosity of individuals” to which Michael Gove refers is, well, sadly not as great as one might like.

Cuts in public funding may lead individuals to increase their giving, but there is no evidence donations will take up the slack fully, and lots of indications to the contrary.

Meanwhile, good and effective charities are already facing swingeing cuts in funding. Excellent charities are being forced to cut vital services. Charities that have pioneered help for some of the most disadvantaged of our society are having to slim down.

The government announced as part of the Comprehensive Spending Review a £100m transition fund to help charities (as part of an “extra”, and so far largely unspecified, £470m for the sector). This is welcome, but it is not enough. Besides emergency financial support, the government also needs a greater understanding of the reality faced by charities, both in terms of their funding mix and the difficulties many already face. A sensible and comprehensive plan to try to boost private giving is also needed. This last point in particular is a missing piece of the jigsaw.

Building the Big Society requires more private money but so far government has been silent on how it will help charities generate this. Merely saying it must happen does not take us very far.

Growing your charity in the face of cuts

McDonalds. Volunteer numbers. Military enlistment. What do they have in common? They all grew during the recession. But could we add charities to this list too?

At NPC’s latest breakfast event, Scaling up for the Big Society, we heard from three speakers, all with hands-on experience of scaling up. We learnt from two charities that have successfully expanded their services despite the tough economic climate. We also heard about Impetus Trust a funder that takes a venture philanthropy approach and works with charities and social enterprises to scale up their work.

One of the charities, Contact a Family, has scaled up by partnering with the global corporate, Serco, to help local authorities across the UK provide short breaks for families with disabled children.

The other, Family Nurse Partnership (based on the successful maternal and early childhood health programme in the States), scaled up its work by working with government and licensing its model. It now reaches 60,000 vulnerable families, providing intensive support to young mothers and their babies to try to prevent future problems linked to social exclusion.

Both of these approaches are ones highlighted in NPC’s report, Scaling up for the Big Society. Partnership was one of the suggestions put forward in NPC’s recent report Preparing for cuts as a way for charities to increase their chances of survival and build a more attractive case for commissioners. This report looks to highlight the opportunities on offer to charities as a result of the Big Society and new funding environment, as well as the challenges.

Srabani Sen, chief executive of Contact a Family agrees. ‘There is a massive opportunity in the current environment for charities and corporates to put aside their prejudices of each other and work together to solve social problems.’

We hope the events encourage charities to believe that while times may be tough, it doesn’t all have to be doom and gloom. 

• Today’s seminar is the second in a series of Big Society events put together by NPC. It follows an earlier seminar on how charities can communicate their impact (to be repeated on 6th December) and precedes one on how charities can engage communities in the Big Society on 18th November. (There are still a few places left if you’d like to take part.) 

What’s in store for the charity sector?: Digging into the details of the Spending Review

Wednesday we gave our reaction to the Spending Review announcement. Today we dig into more detail about what the cuts and changes will mean for charities.

John Copps on how education charities might be hit

The schools budget and support for early years are among the few areas of government to benefit from Wednesday’s announcements, albeit very modestly.

There will be a 0.1% increase every year for schools, and more money for pre-school children. But this includes a ‘pupil premium’ for disadvantaged children – which looks like it is simply a reallocation from existing programmes. Elsewhere, there are overall savings of 12 per cent over the next four years in the non-schools budget.

Charities will find have to react fast to these changes. The organisations that will be most resilient will be those that sell directly to schools, chiefly because the heavy cuts to local authorities. To do this requires a good marketing strategy and an in-depth knowledge of how schools work. A trustee board and staff including teachers will be valuable.

I also fear that the ‘nice-to-have’ services won’t survive, as education budgets pick up some of the slack from elsewhere. For example, charities’ work with the most disadvantaged young people may be forced to become shorter and sharper as local authorities refuse to pay for longer-term work.

Angela Kail on the impact on charities working in the community sector

It’s hard to tell what will happen to charities working in the community sector, because one of the main themes of the CSR is further localism. There will be big variances in the services commissioned nationwide. Charities will have to fight their corner with their local authority—without being able to rely on a umbrella body to make their case to central government. With 7% cuts to local authorities’ budgets, areas that might be considered ‘discretionary’ will be cut. We can expect this of community development, financial exclusion, and parenting work. Even older people who have done relatively well out of the CSR, may find some services that older people charities provide, such as befriending, may be considered discretionary spending by local authorities.

Charities who help people through the court process, especially asylum seekers, will be badly hurt by the legal aid reforms. The National Association of Probation Officers have said: “The severe cuts to legal aid…will mean some individuals will have minimal or no representation in court.”

The changes to housing benefit will have charities in the homelessness field worried. While some people might think it reasonable that single people under 35 on housing benefit can’t get a flat on their own, it’s difficult for vulnerable people, such as domestic violence victims, to share houses, and takes a lot of work to make sure the other people in the house are suitable. The homelessness sector will need to think about how it can provide more support to vulnerable people.

The large cuts to the justice budget mean fewer people going into prison, but also less funding for the probation service. We can only hope that local authorities and the probation service provide more help to stop ex-offenders re-offending rather than retrenching.

Sure Start, the education system for pre-school children, is facing cuts of 9% and a refocus on the most disadvantaged children. Charities which deliver these services will have to cut back and make sure they are targeting the poorest.

Iona Joy on the impact on health and social care

On the surface it looks as if health has had a lucky escape. There will be a real increase in spending, a £200m fund for cancer, and expanding access to psychological therapies for people with mental health problems.

So do health and social charities have anything to worry about? In a word, yes. The switch from service commissioning from Primary Care Trusts to GP consortia will be no small headache. And the beneficiaries of health and social care charities – the long term sick, disabled and elderly – will have plenty to worry about.

£2bn extra for social care sounds generous (NB £1bn coming from the NHS). But most social care is funded by local authorities, which are facing a 7% reduction year on year – cumulatively 28%. So some local authorities may still reduce services or put pressure on service providers to lower their prices, not least in the expectation that the £2bn might plug a gap. I worry that it won’t, and so does Mencap.

Disabled people and older people will be affected by the substantial cuts to the welfare budget. Scope for instance is incandescent about changes to the mobility allowance for disabled people. The CSR claims that it will protect the most disabled people’s allowances, but who will be the judge of eligibility?

Employment is one of the issues that bother disabled people and people with mental health problems the most. Many want to work, and it’s frequently charities that help them to do so. But the news for charities running employment schemes is sparse. There is mention of a Work Programme to help the long term unemployed and disabled people, and how charities might be used to deliver this, but no mention of how this will be funded. With local authority budgets being cut and plans for the Work Programme somewhat vague, I’m concerned that some services will be lost.

John Copps once again on how the cuts will affect local authorities

Local authorities have taken a huge hit in the spending review. 7.1% cut per year for four years. Easy to overlook but undoubtedly the biggest blow to charities – around 80% of government income in the sector is from local sources.

All organisations reliant on local authorities will suffer. Following the Chancellors announcement, KPMG issued a stark warning to the private and charitable sector saying that “several financial collapses of companies and organisations within the local government supply chain will result over the near term.” I agree.

Also significant is the decision to un-ring-fence budgets. This new freedom has been widely praised by councils themselves but the ramifications for some charities may be devastating. For example, the failure to protect social care is already causing ire.

In the coming years, I anticipate local government will retreat from ‘discretionary’ services and be forced to focus more or crisis than prevention, as we have already argued.

In a wider context, local government will face terrible decisions, such as whether to cut grants to libraries or victims of domestic violence. Or whether to invest in reducing homelessness or collecting the bins.

And Iona again talking about changes to the sector’s capacity

There is £470m allocated for capacity building in the voluntary and community sector, including a £100m transition fund. This sounds promising – the sector is going to need it. In all honesty the sums won’t make up for what is being cut.

Also the Office of Civil Society is slashing its list of strategic partners, which will erode much of the sector’s infrastructure. NPC is also worried about local infrastructure vanishing – for instance local authorities will be tempted to cease funding CVSs, and the demise of the Regional Development Authorities are also having an effect.

But in the meantime I just hope the £470m capacity building pot is going to be run really well. So here are some pleas to whoever gets to run the fund:

-         Learn from the funds’ predecessors – Capacitybuilders, Targeted Support Fund. NPC evaluated an emergency recession fund recently (to be published in due course) for small charities and found that you can do a lot with modest sums.

-         Provide appropriate funding for the different segments of the charity market. The needs of a £20m 90% statutory funded service charity will be different to a £100,000 community organisation.

-         Allocate some funds to help charities evaluate and evidence their impact. We know that in the medium term government will be looking for evidence of results. But charities constantly tell us that they can’t get anyone to fund evaluations, data collection, measurement systems and so forth. To allocate scarce resources well, we need to know what works, but it costs money to find this out!

-         Do make the application process as painless as possible.

It will be a fascinating – and difficult – to parcel out these sums. I predict that demand will outstrip supply so selection will be important. NPC believes a spot of charity analysis on the large funding requests might help here: to determine the relative merits of candidates and also understand what aspect of the organisation needs strengthening.

Warning to charities providing ‘discretionary’ services – NPC’s reaction to the Spending Review

The media gather for the Chancellor's speech on College Green outside the Houses of Parliament in Wesminster, 12 noon.

Today is the most important day for the UK charitable sector in 13 years. As I type, the Chancellor George Osborne has just finished his announcement to the House of Commons on cuts to the UK budget.

Like many, I’ve been glued to the TV set. Given that government funding makes up 38% of the UK charitable sector’s income, and 13% of charities get over half their income from government, it is difficult to underestimate the significance of the speech.

This is a summary of the main points for charities:

• Local councils will get a 7.1% a year reduction to their budgets every year for the next four years. The Chancellor pledged to remove ring-fences from council budgets from next year, with the exception of the schools and public health budget.
• The voluntary and community sector will benefit from a new £100m one-year transition fund to help cope with the changes
• Whitehall departments will lose £6bn, with the Home Office, Ministry of Justice, the welfare bill and capital spending on social housing and prisons hit hardest. Each department will publish a business plan next month identifying the source of cuts.
• Spending on the NHS and schools budget will both rise and there is an additional £2bn commitment for social care over four years.
• As anticipated, the Chancellor confirmed changes to structures of government services – GPs will take charge of health commissioning and personal budgets will be expanded for children with special educational needs and adults with long-term care needs.
• The ‘Big Society’ was mentioned only once at the start of the speech, although Osborne reiterated the point that we ‘are all in this together’ several times.
• Also… there will be an estimated 490,000 fewer public sector job in four years time, more quangos will be axed, there is money promised for mental health therapies and dementia, Train to Gain is to be axed, there will be more than 75,000 new adult apprenticeships, and programmes for pre-school children receive a cash boost.

So what does all this mean for charities? There are two things I want to pick out from between the announcements.

First, although the Chancellor pledged to support charities, the scale of cuts means that organisations that provide what could be labelled by government commissioners as ‘discretionary’ services should brace themselves. By that, I mean services that government is not, strictly-speaking, obliged to provide. Youth work, short breaks for the families of disabled children and crime prevention projects, for example, all potentially fall into this category.

Second, and related, are we going to see the end of many preventative services? A feature shared by many discretionary spending items is that they aim to act now to stop problems occurring in the future. An example of this is domestic violence advice for women that prevents a cycle of abuse from escalating, or work with young people on the verge of exclusion from school.

But as money becomes tight, we know from past experience that budget holders tend to focus on crisis not prevention. Perhaps the biggest challenge to policy makers is not to fall prey to the disease of short-termism which so often seems to be to a trait of our political system.

If government stops funding preventative work it won’t just be a shame, it will be a disaster. It’d be yet another burden to pass on to the next generation who already have enough problems not of their making. Remember the adage: if you think prevention is expensive, try paying for the cure.

After two years of fear and speculation, today we have had some real clues to the future shape of the charitable sector. It is clear that no stone will be unturned in the search for savings. We’ll learn more in the coming weeks and months, for example when the Scottish Budget is announced in March and when many public contracts are up for renewal in the spring. This is just the start.

For more commentary from NPC on the cuts and the impact of the economic downturn, read our cuts paper published on Monday or previous blog entries.

Add some value

As we all wait to hear what the Comprehensive Spending Review says next week, one thing I’m certain of is that there will be more calls for value for money within public funding. And as charities negotiate funding over the next few years or so, there will be more questions about whether or not they can prove their value. Obviously at NPC, we think being able to prove your value is a good thing—it shows you’re measuring results and know what your charity achieves.  And there are many charities who can already do this, as we discuss in our recent publication Proving your worth to Whitehall.

But the responsibility to do this cannot lie entirely with charities. If statutory funders feel that they’ve got a responsibility to spend money on things wisely, then haven’t they also got a responsibility to spend money on the measurement that lies behind that?

I was speaking last week to a charity that wanted to do an Social Return on Investment (SROI). ‘Great news’ said his funder from local authority, ‘and if it can just also measure the value you add in so-and-so, then that would really help us when we’re comparing the different options.’ Yet the local authority wasn’t willing to fund the SROI. But since the local authority is the body with the responsibility to the tax-payer to prove value for money, shouldn’t it be funding the research that discovers which options offer the most value? If local authorities find there’s no information on what charitable interventions offer the best value when they need it, they don’t have to go far to find someone to blame.

The Social Impact Bond: A win-win-win solution

Last Friday saw the official launch of the Social Impact Bond, a new scheme aimed at driving significant non-government investment into addressing the causes of deep-rooted social problems. NPC have been big fans of the scheme for a while, highlighting it in our Manifesto for Social Impact back in March, and we hope that the overwhelmingly positive response to the first Bond signifies a golden future for the scheme.

Amongst all the talk of public sector spending cuts, the Social Impact Bond is being heralded as the answer to the Government’s woes – no government investment needed upfront with charitable funders providing the capital, and a ‘payment-by results’ repayment plan. The first Bond issued will see £5million of private investment directed towards tackling short-term reoffending, which according to the National Audit Office costs society up to £10 billion per year. The pilot scheme, focussing on 3000 inmates in Peterborough prison, will pay a dividend to investors provided reoffending falls by at least 7.5%.

To spare repeating what’s already been written, we’d just like to point our readers in the direction of two links. The first is a guest blog from Social Finance’s Toby Eccles, written back in March, explaining the development of the Social Impact Bond:

‘One question that we get asked regularly is ‘This looks like a really good idea, why hasn’t it been done before?’ Social Finance has certainly been aided by the financial crisis and the expectation of budgetary pressure. This has led to a greater willingness to do things differently and take risks that might not have been contemplated in easier times.’ Read the full post >

The second is a longer piece from the June issue of our quarterly magazine, Giving Insights, where we heard how government and charities can benefit from working together in such schemes.

Read about The First Social Impact Bond in NPC’s magazine >

The Social Impact Bond seems like a ‘win-win-win’ solution for charities, funders, and government. And society stands to benefit from reduced rates of reoffending, thereby saving taxpayers’ money. We’ll be reading about the progress of the first Social Impact Bond with interest, and keeping an eye out for the issue of the next!

NHS White paper – all change for health charities

The plans for the NHS in the White Paper from the UK’s new Secretary of State for  Health, Andrew Lansley, are courting some pretty unfavourable remarks from a range of commentators.

The White Paper is scary: scrapping top-down commissioners like Strategic Health Authorities and Primary Care Trusts (PCTs) and replacing them with Consortia of GPs. PCTs have become specialists in commissioning health services and currently hold the vast NHS budgets, while GPs are doctors who traditionally refer people to services but have not held big budgets to buy or commission them. So steep learning curves all round. I can understand the ideology, and the plans are nothing if not imaginative, but I’m instinctively twitchy about undertaking such a huge and risky revolution without first having amassed a decent evidence base around whether it works and how to implement the change. I don’t count the Tories 1990s foray into GP fundholding. I’d prefer some fully evaluated local pilots between now and 2012.

But, regardless of Lansley’s detractors, charities will have to adapt. Many of our charity friends have fostered close relationships with PCTs. They might have direct contractual relationships with them to deliver services such as Core Arts’ musical and artistic activities for people with mental health problems, or the Brandon Centre’s therapies for young people. Or, charities might have been working with PCTs to improve services. Macmillan Cancer Support’s work to improve care pathways for people with cancer (and reduce costs for the NHS) is a case in point. But with no Primary Care Trusts, charities will need new tactics.

Although interacting with GPs will be new territory for many charities, I think there are opportunities. The Gold Standards Framework (‘GSF’) story holds inspirational lessons. GSF helps GPs to plan and manage the last year (roughly) of a person’s life: by planning ahead symptoms are controlled better and unnecessary hospital admissions avoided. GSF was initiated by a GP, Dr Keri Thomas, and between 1998-2001 was incubated and evaluated by Macmillan. It was rapidly returned to the NHS—so not strictly-speaking a charity—but Dr Thomas is a classic social entrepreneur that a charity chief executive could emulate. Once evaluated, GSF was rolled out through a cascading GP training programme, and has become mainstream practice within the NHS. And through the GSF After Death Analysis Tool—NB funded by a private donor via NPC—it is collecting some super data about whether GSF works and how it can be improved.

So it is possible to win over the GP audience to your cause: but offering solutions, getting evidence-based endorsement for them, and coming up with a mechanism for roll out, eg, training, will all be needed. More practically, though, my hunch is that a lot of the PCT personnel will resurface as practice managers in the new GP consortia, so don’t abandon your personal relationships…..