Austerity Watch: 'There's a lot more pain to come'

At the second meeting of Third Sector's Austerity Watch panel, members agreed that the sector was suffering badly, but were divided on how it should react. John Plummer reports

Austerity Watch panel members (l-r) Craig Dearden-Phillips, Dame Mary Marsh, Toby Blume, Cathy Pharoah and Helen Simmons
Austerity Watch panel members (l-r) Craig Dearden-Phillips, Dame Mary Marsh, Toby Blume, Cathy Pharoah and Helen Simmons

The effects of the government's austerity measures and the consequent cuts are proving swift and severe for the voluntary sector, although some charities are doing better than others and individual donations are holding up better than expected.

There was agreement about this general conclusion at last week's meeting of Third Sector's Austerity Watch panel. But there was less agreement on what those charities that are suffering should do about their plight. The question of merger, for example, was hotly contested.

Helen Simmons, finance director, Diocese of LondonHelen Simmons, finance director at the Diocese of London, was adamant that more should merge. "There are too many charities," she said. "There are opportunities for getting together, but they are holding on to their territory - everyone is restructuring their organisations as they shrink, rather than restructuring within a pool of charities."

Others were less sure. "Full merger may not be the answer," said Mary Marsh, director of the Clore Social Leadership Programme, who argued for greater collaborative working. But she feared risk-averse boards were hampering change. "A lot of organisations are hunkering down and thinking things will be all right on the other side in 12 months' time," she said. "And that's not realistic."

Toby Blume, chief executive of the community charity Urban Forum, said the existence of thousands of community groups strengthened an area rather than drained its resources. But he added: "We probably have too many national organisations and organisations that represent others."

Blume reiterated his view from the previous panel meeting at the end of last year - that 2011 would be a "bloodbath". Cathy Pharoah, co-director of the Centre for Charitable Giving and Philanthropy, said the situation was more akin to "killing the frog by slow degrees - dropping it into warm water and gradually raising the temperature until it doesn't even know it's disappeared".

Pharoah described the coalition government's attempts to change the voluntary sector's funding base as "laudable and necessary", but said the speed of change had caused problems and there were signs of rebellion against the dismantling of infrastructure and grants.

She said many charities had resisted change in times of more secure funding, but now had no choice. "Perhaps change was needed, but a lot will go to the wall in the process," she warned.

Statutory funding

Dame Mary Marsh, director, Clore Leadership ProgrammeThe panel shared her concern about the sudden loss of statutory funding and the pressure to switch rapidly from being grant-funded organisations to becoming self-sustaining businesses. Marsh said: "All the risk and cost of redundancy falls back on those organisations that have fewer reserves, so it's a double whammy in the first year."

Craig Dearden-Phillips, a social entrepreneur and Liberal Democrat councillor, said the government was "trying to get too much done in too short a timeframe". This, he said, had spread confusion in Whitehall and led to "creases and contradictions" in the government's approach to the sector.

The uneven impact of cuts was a regular theme. Simmons thought it was crazy that the London borough of Southwark had suffered much deeper council cuts than nearby leafy Richmond. Poor, highly populated areas were worst affected, she said.

Dearden-Phillips predicted it would be at least a year or two before the sector enjoyed a fair wind again. "We have yet to see the benefits because the policy is still working itself out," he said.

Some thought the green shoots would take even longer to appear. "There's still a lot more pain to come," said Blume.

Government policy

The government received more praise for its intentions than for its achievements. Simmons said there were "some good things in the Budget", but thought there was no vision.

Marsh said the coalition needed to think longer-term. "They have got on with things very fast, but five years is the wrong timeframe," she said. "These things are generational in their impact." She was particularly concerned about the loss of support for early intervention projects and the eventual consequences of this.

Craig Dearden-PhillipsDearden-Phillips said that different approaches from different parts of government didn't help charities and that the main interest of ministers in the sector was as a way of opening up public services. He and Marsh both expressed disappointment at the small number of Work Programme contracts awarded to charities recently by the Department for Work and Pensions. "The Work Programme could have been a symbol and given encouragement to the sector," he added.

Pharoah said the Transition Fund was "very important and should have been larger". Overall, she thought the government was trying to make space for services to reconfigure: "We will see society change, but it might not be in the directions the government has got in mind."


Dearden-Phillips said local authorities still had an "unreconstructed" view of the sector, despite central government talk of the big society and service provision by a wider range of organisations. "Very little progress has been made," he said.

The contradictions of localism were discussed at length: Blume highlighted how the government talked about local people determining priorities even as the communities secretary, Eric Pickles, told people how often their bins should be emptied. "It's simply absurd," said Blume. "They need to let go and allow innovation and creativity."


The resilience of individual giving was one of the few bright spots. Marsh said it was "holding up pretty well, so far. People are cautious of talking about it, but by and large it hasn't been as difficult as people feared."

But she added that there was no certainty that this would continue, especially as unemployment continued to rise.

There was continuing concern about the loss of statutory funding, and grants in particular. Pharoah said: "The role of grants is widespread and replacing them is an enormous challenge. The sector simply has not had time, and great organisations have gone to the wall simply because they haven't had time to reorganise themselves."

Most of the panel members felt that philanthropy, which has been subject to widespread government interest, was doing well compared to elsewhere in Europe, and that to compare it to the US made little sense. "Philanthropy has become the new bandwagon everybody is jumping on," said Pharoah.

She was also optimistic that "fortunes earned in the 1980s and 1990s" would boost legacies in future. "But it's not going to land where it's most needed. That's one of the biggest challenges."


There was some scepticism about attempts to increase the range of financial products available to charities. Blume was particularly wary of new products created by "the brightest in the City". He said: "They are the reason we are in this downturn." He added that interest in social impact bonds in the private sector was "nil".

Marsh thought the Big Society Bank was "taking a long time to come" and "won't necessarily help smaller organisations". Pharoah predicted it would be similar to Futurebuilders - the now-closed loan fund to help charities provide public services - and would therefore be aimed at large, service-providing charities.



'The voluntary sector is still a year or two away from turning any corners' - Craig Dearden Phillips, social entrepreneur and Liberal Democrat councillor

'Fundraising has held up. Charities are cautious about saying anything publicly, but quite a number have raised more' - Dame Mary Marsh, director, Clore Social Leadership Programme

'There is a growing dissonance between government rhetoric and the reality' - Toby Blume, chief executive, Urban Forum

'It's not exactly a bloodbath, but we are seeing the beginning of permanent change' - Cathy Pharoah, co-director, Centre for Charitable Giving and Philanthropy

'The government lacks vision. It seems to be making it up as it goes along' - Helen Simmons, finance director, Diocese of London

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