The Coronavirus pandemic has placed challenge at a level never seen before on the UK’s charity sector, and whilst many welcome support measures have been put in place by both Westminster Government and the devolved authorities across the UK, it has to be asked if the package of support being offered to charities is at the level required and the most effective use of public funds to support charities in their work to address this crisis which impacts across public health, economic and social welfare.
A critical sector
Charities are critical to our daily life in the UK. The sector is huge and varied. NCVO calculates that across the UK the sector comprises about 163,000 organisations, with a collective income of £43.8 billion, employing 827,000 people or about 2.7% of the UK workforce. Did you know that nearly half the medical research that take place in this country is undertaken by charities?
These organisations – that keep us well, happy, prosperous and support an equal and fair society – are in trouble. Many fear for their future. Funding is drying up – charity shops are closed, fundraising events are postponed and many donors are re-appraising their priorities. Our NHS is doing an amazing job – and much of the public are, understandably, making donations to sustain the NHS, a public service, at this time. At the end of the day the British public has a finite amount that they can give, so donations to registered charities will inevitably be affected by this philanthropic focus on the NHS.
Operationally, charities are facing unprecedented challenges. Charities are embedded into the frontline response to the pandemic, requiring the delivery of additional services. Most charities have had to make rapid changes to delivery models, all requiring financial investment to ensure social distancing in order to protect staff and service-users. Social distancing is a term that most of us hadn’t ever heard of when the business plans and strategies that these organisations are working to were written. I know of one Welsh based organisation that has had to invest an unanticipated £100,000 in personal protective equipment. This work will continue above service-delivery contracts, most charities will tell you that they have an ethical and moral responsibility to their client groups who, sadly, as the more vulnerable in our society are most affected by this virus. The stories are common: loss of family income causing additional demand on foodbanks; mental health services straining to cope with those who are unable to comprehend and process this strange world; those supporting isolated people who need help to access basic services; or those working with care leavers who have no family network to fall back on for advice, support and re-assurance.
Charities at risk
These services are at risk. The majority of charities you talk to report making immediate cuts in services in order to have some hope of sustaining services in the long-term. CLIC Sargent has confirmed a 20% cut in services at a time when the NHS is telling the charity it is vital that services are kept running; Age UK has furloughed 70% of staff, and Cancer Research Campaign has furloughed 40% of its staff. The House of Commons Digital, Culture, Media and Sport Committee has warned that time is running out, suggesting charities will lose up to a staggering £4bn in income in just three months.
Many charities also fear the ability to deliver ‘business as usual’, in the shadow of the virus. Social distancing will lift eventually and there will be an expectation that charities will be there to deliver services as before. Every charity I know hopes they will be ready but those re-opened shops and postponed fundraising events will take time to start to deliver funds to support operational work at the level we expect.
Supporting the economy
Governments across the UK have been swift to recognise that Coronavirus has economic as well as health challenges and almost immediately offered a range of grants and loans. I don’t envy anyone who has to co-ordinate a response of that scale within days. In addition to the financial packages made available to businesses, on Wednesday 8th April a support package of £750million was made available for frontline charities. £750 million sounds a lot of money and it is. But when we compare it some of the figures above it’s not. Charities need £43.8 billion per annum to deliver at present levels, and a £4 billion loss of income is forecast for just three months.
Charities have been encouraged to take advantage of the other packages that are available to businesses. That’s admirable, but charities are not businesses. As the dust settles on the immediate actions taken to support businesses, and to preserve services, it’s important that we are able to reflect on and refine what was implemented so quickly, in order to ensure that funds used are deployed to maximum effectiveness and societal benefit.
Most charities are not eligible for many of the support packages being offered to businesses linked to business rates, and loan-financing is not something that sits that comfortably in the charity sector. Many charities are, however, furloughing employees. Furlough has made a resurgence business planning after a gap of over 100 years. Formerly used in Victorian times to describe military personnel periods home of leave, it has been re-introduced by the UK Government at part of Job Retention Scheme in March 2020.
Furlough supports those organisations who can not maintain their current workforce because their operations have been severely affected by Coronavirus. Furloughed staff are paid 80% of their salary (plus associated NI and pension costs) by Government on the condition that they do not work for anyone or volunteer for their employer. Huge numbers of employees are being furloughed – the British Chambers of Commerce said that 20% of companies that responded to its survey were planning to furlough all their staff and two-thirds said they would furlough 75-100% of their workforce in the coming week. The Resolution Foundation have estimated that the cost to the public purse of furlough will be £40 billion over three months.
Furlough has many benefits – it’s designed to help employers whose operations have been severely affected by Coronavirus to retain their employees and protect the UK economy. Government guidance already advises against public sector organisations using furlough. The advice states – ‘The Government expects that the scheme will not be used by many public sector organisations, as most public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.’
We need, urgently, to explore the role of furlough in the charity sector. Charities also provide those essential public services that the government recognises the public sector as delivering.
Talking to charities they are, in the main, furloughing employees for two reasons: either an employee’s role cannot be delivered whilst complying to social distancing, or the charity has concerns that they simply cannot afford the role no matter the importance of the service provided. This is the reality of the front line cuts that charities are making.
Surely, furloughing on the grounds of affordability is madness? Charities are not businesses. Regulated by the Charity Commission rather than Companies House, charities have unique essential requirements as part of their governance structure. They have to operate for public benefit, on a not-for-profit basis, and their assets are locked to be used solely for their charitable purpose.
So, if the public sector is advised keep their employees working to provide essential public services surely, we should empower charities to do the same? Frontline charity staff – many with important knowledge about vulnerable people and local environments – are being furloughed. Staff are having to agree not to work or volunteer for their employing charity in return for the public purse meeting the majority of their salary costs. Many charity employees are essential workers in today’s altered world.
Allowing furloughed staff within charities to work for their employing charity would have an immediate positive impact on frontline services. Given the governance structures that charities are regulated by, ensuring the delivery of public benefit, it would be hard to claim this government support created unfair competition.
If 2.7% of the UK’s workforce work in charities, and the cost of furlough is calculated to be £40 billion over three months, it’s fair to assume that it over £1billion of this is towards the salary of furloughed workers from the charity sector. On 17th April the Chancellor extended the end date to which it would financially support furloughed staff by one month. As such it’s fair to assume the total cost of furlough is circa £53 billion over 4 months with £1.3 billion supporting furloughed charity workers. If we were to assume an average annual salary of £30,000 per worker, that’s 125,000 people who could be delivering front line services at this time of need.
So surely, it’s time to talk about furlough in relation to charities?
Note – this article was updated on 17th April 2020 to reflect the UK Government’s extension to the Job Retention Programme.