'Crisis near' as Scots charities abandon their council contracts

A growing number of charities are withdrawing from local authority contracts in Scotland amid fears that the voluntary social and childcare sector is in meltdown.

The expected loss of lottery funds to the London Olympics, problems with full cost recovery and a decline in European structural support are crippling many organisations in the sector.

Cornerstone Community Care, which runs services for children and adults with learning disabilities, is the latest in a string of charities to end a local government contract because it couldn't achieve full cost recovery on the fees provided.

Turning Point Scotland and the Ark Housing Trust have also withdrawn from contracts in recent months.

Cornerstone, which has a turnover of £26m a year, told Aberdeenshire Council that it will stop delivering a community support service for people with learning disabilities and special needs in the next few months, after the council informed it in January that fees would be slashed.

"We were running a loss of many thousands of pounds on the service," a spokesman for the charity explained. "The council cut the rate in January, which made the situation much worse - it became unsustainable."

Cornerstone is also running several other council services at a deficit, according to the spokesman. "We're in discussion with other local authorities about funding," he said. "Ultimately, local authorities need to understand that, if they want a service, they have to pay a fair price for it. We can't keep sustaining losses at that level."

Many more charities could soon be following suit, according to Gavin Yates, communications and campaigns manager at the Scottish Council for Voluntary Organisations. "It's becoming a bit of a theme," he said.

Yates warned that a crisis was brewing in the Scottish voluntary social and childcare sectors. "It's not just full cost recovery that is concerning us," he said. "At the same time, you've got lots of organisations that were attracting European structural support. Those funds are going to be cut in half over the next six years."

The threat of losing millions of pounds of Big Lottery Fund grants to subsidise the rising costs of the London 2012 Olympics was also a concern, Yates said.

Last month, one of Scotland's biggest childcare charities, One Plus, went into liquidation because it was running some services at a loss (Third Sector, 31 January). Another voluntary sector provider, Smilechildcare, also revealed at the end of last month that it was fighting off the threat of insolvency.

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