Last week, a group of more than 50 charities wrote to communities secretary Hazel Blears urging her to shelve the proposal that any organisation applying for a share of the £7.5m Empowerment Fund should have a minimum income of £400,000 (17 September, page 1).
Charities can apply to the fund, which is run by Blears's Communities and Local Government department, for money to run community schemes. Consultation on the proposals ends next week.
It's not just the CLG proposal that's causing protest. The policy staff of the Directory of Social Change, the training and publishing organisation, say the problem goes much wider - so wide, in fact, that it claims that small and medium-sized groups are victims of discrimination.
The DSC came to this conclusion after analysing its own website, www.governmentfunding.org.uk, which lists the grants available to charities. It found that more and more grant programmes require applicants to demonstrate that they earn a certain amount of income in order to be eligible to apply for funding.
Jay Kennedy, policy officer at the DSC, called for thresholds for funding programmes to be dropped. So are the thresholds really discriminatory, and why are they there at all?
As part of its research, the DSC spoke to Government officials to find out. "The main reason we were given was that the Government is concerned about organisations becoming too dependent on one source of income," says Kennedy. "They said that if funding was significant and was not renewed, it could put the existence of small organisations at risk."
Kennedy, however, is sceptical about this. "I think the more likely reason is that difficulties with a few organisations that have been jeopardised by funding cuts led to this response," he says.
"The real reasons are likely to be nothing more sophisticated than the Government wanting to limit the number of applications and to cut down on the flak when funding is inevitably cut."
He also maintains that leaning on one particular source of funding is not necessarily a bad thing. "Being dependent on a single source of income is not good, but there is no reason why any particular amount of funding necessarily translates into dependence if the organisation manages it properly and has a good exit strategy in place," he says. "That is what an informed, engaged funder should look for."
The Government says it wants to offer a variety of funding options to the sector. "Funding for the sector is at an all-time high," says a spokesman for the Cabinet Office. "The wide range of options reflect the needs of different organisations at different stages in their development." The £130m Grassroots Grants fund, he says, is designed specifically for small groups.
So what do smaller charities think? Paul Tolley, chief executive of Warwickshire Community and Voluntary Action, says small organisations are being squeezed out. He fears that many charities are too small to find out about grants specifically designed for them.
"Across Warwickshire, we have areas where the voluntary and community sector is made up mainly of community groups," he says. "This stuff will be going completely over the heads of a lot of these groups because they are so focused on working at a local level. So they will miss out."
Tolley says a balance of funding must be available for organisations of all sizes. "The issue is whether there are equal levels of support at each end of the scale and a sensible correlation between the two," he says. "I don't think that's the case."
Toby Blume, chief executive of the Urban Forum, an umbrella group for third sector organisations that are interested in regeneration, says minimum income requirements are a bad idea. "Financial thresholds that restrict who can apply for funding without regard to the overall contribution that organisations might be able to make are wholly problematic," he says.
"Our concern is about the potential for local government and the public sector to adopt similar practices that would cripple the community sector overnight."
The shift to commissioning away from grants must also be addressed, says Blume, and grants should not become the poor relation of commissioning.
"You do not have to look much further than the Government's own evidence in the Third Sector Review, which showed that small and medium-sized organisations were feeling the squeeze from the move towards commissioning," he says.