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Charities need security to serve

What do we want from charities?

The demands and pressures have intensified as the space in which they operate has grown. Expected to fill in where other services do not reach, the sector has swollen in recent years as the public sector has contracted.

This is most notable in the simple relationship between cuts to the UK's benefits bill and the proliferation of food banks. But it also applies in sectors such as health and care, youth groups and housing.

Many charities are expecting to take on more work. But their financial position is concerning, according to a report from charity advisers BDO LLP.

As the BDO report points out, Scottish charities report growth lagging well behind inflation and most have insufficient reserves to last more than a few months. Many face increases in costs as part of a plan to address pension deficits.

Charities have responded to a changing funding climate by being leaner and more efficient, not least in order to compete for public contracts.

In fact several have already been squeezed until the pips squeak. Some of the bigger charities in particular have been through multiple restructurings, often stripping out layers of management.

This is a response to the fact that demands on charities have increased while budgets have become tighter.

Such financial instability has a cost. There is a danger that without security, charities become weak in key areas such as creativity and innovation.

There are added pressures in England, where leading charities have been criticised for helping deliver policies in partnership with the UK Government that they would previously have rejected. Meanwhile UK Government ministers, including Justice Secretary Chris Grayling, accuse charities of "political bias" if they speak out.

In Scotland the relationship with government has been more harmonious. But there are still questions to be asked about the "third sectorisation" of public services.

Too many charity staff are paid at relatively low levels with a level of job security few of us would put up with. They cannot be seen as a way for public bodies to squeeze budgets at arm's length.

The biggest problem relates to the short-term funding culture that plagues the sector. Many charities rely on a complex blend of donations, contracts and grants from individuals and institutions, none of which are guaranteed for more than a few years. Effort is constantly diverted by seeking more funding.

BDO is right to raise questions about the need for charities to become more business-like. The best already are. But this approach can become crude. For instance, it is questionable how useful it is to compare a charity's turnover per employee with that in the private sector.

There are wider questions about the increasingly important role charities play in society. Financial security is vital. But the surest way to undermine the sector is to treat it as a way to get public services on the cheap.

Contextual targeting label: 
Charity

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