The rich take a larger slice of the cake

The NCVO's UK Voluntary Sector Almanac 2007 shows that charities are becoming more polarised, with larger organisations winning a greater share of the income and smaller ones struggling. Mathew Little looks at the trends.

The small community group and the large national charity are drifting further apart, according to the latest snapshot of the sector by the NCVO. The umbrella body's UK Voluntary Sector Almanac 2007, the seventh annual edition of the publication, paints a picture in which an elite of 300 charities thrives while the rest of the sector struggles with financial decline.

The figures from 2004/05 show that the sector's overall income grew by 2.8 per cent over the previous year to £27.7bn, but that prosperity was concentrated at the top. If the 317 organisations with incomes above £10m are discounted, the sector's income actually dropped by £678m.

Revenue in the £10m-plus income bracket grew by 13.6 per cent. At the very top, 18 organisations received one-eighth of the sector's entire income. But average income for the rest of the sector fell. The smallest charities - those with incomes under £10,000 - suffered most acutely, registering a 10.7 per cent decline. Those in the £10,000 to £100,000 bracket scarcely fared any better; their income fell by 9.7 per cent. The £1m to £10m income bracket experienced a much smaller dip of 0.1 per cent. Average spending is also falling across all income bands. The NCVO warns that if these trends are not checked they "could lead to a dangerous narrowing of charitable activities".

Although the rich are getting richer, a charity doesn't have to be a well-known, national brand to be successful. According to the almanac, the incomes of two out of five charities are still rising. The average income for charities in the £1m to £10m bracket is falling, but 51 per cent of them are still getting richer. Only among charities with incomes less than £100,000 are most organisations having to deal with shrinking resources.

Influx of public sector bodies

The sector's income has also been boosted by an influx of former public sector bodies. For example, the 'charitisation' of the public sector meant seven leisure trusts, with a combined income of £53m, gained charitable status in 2004/05. The largest, Wigan Leisure & Culture Trust, has an income of more than £26m. The charitable nature of these organisations has been called into question, but they have been permitted to join the register of charities after a change of heart by the Charity Commission in 2004.

As well as becoming polarised, the charity sector's income is also becoming increasingly volatile. Between 2003/04 and 2004/05, 10.3 per cent of sector organisations moved into different income bands. Those figures include some spectacular falls from grace and some rags-to-riches stories: seven charities saw their incomes leap from less than £10,000 to more than £10m, while six went in the other direction; 43 charities grew from income bases of less than £10,000 to somewhere between £1 and £10m; 118 made the same journey in reverse.

In the case of some charities, this apparent game of snakes and ladders may be deceptive. Large organisations might join the register at the end of the financial year, thus recording small incomes that increase rapidly in the following year. As the NCVO researchers point out, however, the level of volatility is too high for such cosmetic analysis to explain it all.

Compared with the public or private sectors, the voluntary sector has always had to tolerate high levels of income volatility because of, for example, unpredictable legacy inflows and disaster appeals. Short-term grants and contracts, often lasting for only a year, also contribute to volatility. The bane of many a charity's existence, they are likely to account for many of the peaks and troughs in the sector's income.

Expanding role of the state

Many of those grants and contracts come from the state. The state became the largest single source of voluntary sector income in 2003/04 and retains that position in 2004/05, making up 38.5 per cent of the total. Within that public sector income, contracts are eclipsing grants. Back in 2000/01, charities received more voluntary income - in other words, grants from the state - than they did earned income. Now that situation has been reversed: 23.9 per cent of the sector's income is earned from the public sector and only 14.7 per cent comes as grants.

Although the state is the dominant source of the sector's revenues, the suffocating grip anticipated by some in the light of government rhetoric on public services has yet to materialise. The state's share of charities' incomes has stuttered rather than shot upwards, from 37 per cent in 2000/01 to 38.5 per cent in 2004/05.

The sector might be feeling the strain financially, but it is becoming more efficient. According to the almanac, charities have managed to increase their spending on charitable activities while reducing the cost of back-office functions, fundraising and publicity. The proportion of spending given over to charitable activities is 70.6 per cent; that's up from 67 per cent in 2003/04. Fundraising and publicity costs have fallen by 10 per cent to £246m and make up less than 7 per cent of expenditure. Management and administration costs have fallen from 7 per cent to 6 per cent. Charities may be spending less, but they seem to be spending more wisely.

Facts and figures

The voluntary sector workforce continues to grow strongly and stands at more than 610,000, or 2.2 per cent of the overall paid UK workforce. Almost a third of them are based in London and the south east, where charities also receive the lion's share of income. Meanwhile, larger charities' share of income has grown from 25 to 43 per cent in the 14 years to 2005, and earned income is rising while voluntary income falls.

Voluntary sector workforce and pay

Numbers employed (000s)

Full-time

1996: 302; 2000: 326; 2005: 375

Part-time

1996: 176; 2000: 206; 2005: 236

Total

1996: 478; 2000: 532; 2005: 611

Average annual earnings in the sector

Chief executive: £65,623
Director: £57,995
Senior function head: £46,103
Function head: £38,792
Department manager: £33,137
Specialist/professional: £26,933
Administrative supervisor: £20,344
Administrative officer: £17,336
Administrative assistant: £14,871
Junior/trainee staff: £13,199

Source: Remuneration Economics (2006).

 

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