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COVID-19: is government funding for charities an adequate response?

Chancellor Rishi Sunak has pledged £750 million of support for charities during the coronavirus pandemic.

The Chancellor commented that some charities are on the front line of fighting the coronavirus and others are providing critical services and support to vulnerable people and communities. It is those charities the government is primarily looking to support by way of its £750 million funding package and it is absolutely right that the government should be supporting those charities during this time; however, what implications may this have for the wider charity sector?

The government has pledged:

  • £370 million of support for small, local charities working with vulnerable people, describing this group as “the unsung heroes looking after the vulnerable and holding together our social fabric”. In England, this support will be provided through organisations like the National Lottery Communities Fund. £60 million of this funding will also be provided through the Barnett formula (the system that sets public spending in Scotland, Wales and Northern Ireland).
  • £360 million will be provided directly to charities supplying what the government deems to be “essential services” such as St John Ambulance, Citizens Advice Bureau and organisations helping vulnerable children and victims of domestic abuse. Up to £200 million of this sum will support hospices.
  • The government will match funds donated by the public to the BBC’s Big Night In charity appeal due to take place on 23 April, with a minimum of £20 million for the National Emergencies Trust appeal.

The funds will come as a lifeline to many charities who are playing a crucial role, to include (to name but a few) Citizens Advice Bureau; which has seen unprecedented traffic to its website, with more than 900,000 people reportedly having signed up for universal credit in the last two weeks of March; Refuge, which runs the National Domestic Abuse helpline and has reported a 25% increase in calls and online requests for help since the lockdown began; Barnardo’s, NSPCC and other children’s charities, who have reported similar increases in demand for their services and advice; and hospices across the country, performing such vital roles in the midst of the current coronavirus crisis.

But what of the many other charities providing crucial services to our society, who will not benefit from the government funding; or who will do so to only a very limited extent?
The Chancellor commented that there are nearly 170,000 charities in this country - all eligible for the Job Retention Scheme - and that the answer for many will be to furlough employees. However, is this too simplistic a statement? The Chancellor himself conceded that the support package being offered by the government will not save all charities from collapse.

The National Council for Voluntary Organisations (NCVO), which represents 14,000 voluntary organisations, calculated that the sector could lose £4.3 billion in income in just 12 weeks.  COVID-19 and the restrictions in place have had, in the words of charities, a “devastating” impact upon their incomes, with the closure of high street charity shops and the cancellation of fundraising events taking a huge toll.

A further significant impact upon charities’ income is a fall in income arising from wills (known as “legacy income”). Charities are hugely reliant upon legacy income for their survival, but income from estates has fallen significantly due to factors such as the stock market decline and slump in the property market. The fact that it is impossible for many homes to be sold during the lockdown also means that, in many cases, there will be a delay in charities receiving vital funds from estates.

Press commentary on the support package for charities echoes this grim outlook:

  • The Guardian refers to warnings on the part of leading cancer charities that a shortfall in donations will set back progress in fighting the disease, with the newspaper quoting Cancer Research UK as stating it expects to lose up to a quarter of its fundraising income (about £120 million) in the next 12 months.
  • Labour MP Stephen Doughty has tweeted that the new funding falls well short of what is needed, pointing out that the cancellation of the London Marathon alone cost the charity sector £66 million.
  • Vicky Browning, chief executive of the Association of Chief Executives of Voluntary Organisations, has commented that only around 30% of charities will be able to take advantage of the government’s Job Retention Scheme (which allows organisations to furlough staff and receive a grant of up to 80% of their wages). She points out: “For many organisations there’s actually far more demand on their services, so it’s not that they have people sitting around doing nothing... They can’t afford to mothball their staff, but they also can’t afford to keep them going, so they’re stuck between a rock and a hard place.”
  • Today’s Civil Society News runs the headline “Charities say Chancellor’s £750 m package leaves many services under threat”; and comments that, whilst charities have welcomed the announcement, the sector has said it will not be enough and has called upon the Treasury to keep the funding under review. The publication also notes that there are questions around eligibility and how the support package funds will be distributed.
  • Civil Society has also published comments from a number of those involved in the charity sector. Karl Wilding, chief executive of NCVO, commented yesterday: “Today’s announcement is an important first step, though it will not be enough to prevent good charities around the country from closing their doors. Even many that survive will look very different in a few months’ time, with a severely reduced capacity to provide the support that people rely on.”

Shoosmiths’ national charities practice is doing what it can to support charities during this difficult period. Angela Bowman, national head of the firm’s charities practice, commends all to remember the starfish story and adds:

“It is vital that the Treasury keeps the issue of funding for the charity sector as a whole under review; and that the government addresses the all-important questions arising out of yesterday’s announcement, surrounding eligibility for the funding and how the £750 million of funds will be distributed. We, the public, must also play our part in ensuring the continued survival of our national charities, who devote so much of their time and resources to caring for us during times of need. We need them and, during this most critical time, they need us - to do what we can to ensure their survival and ability to continue to provide the vital services that our society will be relying on both now and in the future.”

On a firm-wide basis, Simon Boss, chief executive of Shoosmiths LLP, added:

“We are responding to local requests from charities and community organisations across the UK; volunteering time, making equipment and food donations, financially, and offering other ‘in-kind’ contributions. We are reviewing our pro bono work to make sure we reach those who, in these challenging times, would otherwise struggle to access the advice they need.”

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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