Charities at risk as donations from public lag behind state funding

Charities at risk as donations from public lag behind state funding

• Report warns of sapped vitality of voluntary sector
• Groups berated for cost of top salaries and publicity

Alison Benjamin
The Guardian

State funding for charities has outstripped donations from the general public, putting the independence of the voluntary sector at risk, according to a report from the Centre for Policy Studies.

While donations from the general public grew by just 7% in three years (up to 2004), government funding over the same period rose 38%. State funding now accounts for 38% of charities’ total annual income of £26.3bn, compared with 27% from donations, says the report.

The authors of the report, Richard Smith, founder of the Martha Trust Hereford, and Philip Whittington, a member of the Tory party’s social justice policy group, say that as the charitable sector becomes more dependent on the state there is ‘a danger that the vitality and voluntary nature of the sector could be irretrievably undermined’.

The report also berates large charities for paying average top salaries of £83,000 to their most senior executives and criticises them for increased expenditure on fundraising and publicity. The quoted figures suggest it costs large charities nearly £2 to raise an extra £1, the report says. It also claims that some charities, including the National Trust, had such large pension shortfalls in 2004 – some of more than 25% – that they might have to cut money spent on beneficiaries to bail out their pensions funds.

However, yesterday Sir Laurie Magnus, deputy chairman of the National Trust, said: ‘We are not in a pensions crisis, not even close to one. We are very confident that we will meet our pension liabilities.’

The report’s authors suggest that the increasingly corporate style of large charities is undermining the public’s trust and confidence in the sector. A Mori poll asking for a response to the view outlined as, ‘when I give money to charity, I feel confident that most of it will go directly to the cause’, found that only 10% of the respondents agreed with that statement.

The report – entitled Charity: the spectre for overregulation and state dependency – calls for large charities to reveal their fundraising costs and present their accounts in such a way that the public can see which charities are spending their donations most effectively. For those charities that deliver public services, it recommends the direct financial link between the state and charity is broken so that the beneficiaries can control the choice of charity for a particular service.

The authors also call on the Charity Commission to take a lighter approach to smaller charities and to relinquish its advisory role.

The National Council for Voluntary Organisations dismissed some of the figures quoted in the report. It pointed out that money spent on fundraising by charities was an investment and that the true value could not be measured in one year. The council also said the public’s contribution to charities had only decreased as a proportion of the sector’s income – and not in absolute terms – since government funding had increased.

The NCVO’s chief executive, Stuart Etherington, said: ‘Voluntary organisations do not, and should not, give up their independence in return for government funding. Public donations are an important source of income for the voluntary sector; they enable voluntary organisations to carry our work that matters to their donors. But government funding also has its part to play.’

Richard Kramer, director of policy at the charity Turning Point, which receives 96% of its £55.3m annual income from statutory agencies, said: ‘If Turning Point’s funding from local authorities and primary care trusts was arbitrarily stopped the effect would be felt by the 130,000 clients we support, leading to the closure of our treatment services for drug and alcohol misusers, [and] withdrawal of our support for people with severe mental health problems and learning disabilities.’

Meanwhile, 70 top charities with a combined £2.25bn turnover have joined the Impact Coalition, a project to examine ways by which charities can reduce their costs and maximise income.