A group of charity bodies including the Charity Finance Group and the Directory of Social Change have launched a campaign against the decline in grant funding, which at the current rate could see grants disappear by 2020.
The Grants for Good campaign, which was launched today, will call on local authorities to offer grants instead of contracts to charities that provide local services.
Campaign organisers, which also include Children England, the local infrastructure body Navca and the Lloyds Bank Foundation for England and Wales, say public sector data shows the level of grant funding from central and local government has declined from £6bn in 2003 to £2.2bn in 2013. They warn that if the trend continues grants will have disappeared by the time of the next general election.
In a statement, the campaigners said they were concerned the grants would be replaced by "short-term, inflexible and bureaucratic contracts".
The campaigners plan to hold a "save our grants" summit on 4 March in central London, and urged voluntary and community sector organisations to attend and share their experiences of grant funding to help make the case for why it should be saved.
Debra Allcock Tyler, chief executive of the DSC, said the group had "grave concerns" about the decline.
"Grants are absolutely essential for charities and community groups because they can put people at the very centre of projects and services, allowing them to solve problems in their communities," she said.
She described councils that decided to give out contracts rather than grants as "shooting themselves in the foot", warning that contracts could cause services provided by charities to deteriorate or collapse, increasing social problems.
"This might seem like a curious time to launch this campaign – when we are staring down the barrel of more cuts and local government in particular is under huge financial pressure," she said.
"But actually grants can be part of the solution. It’s high time to make the counter-argument and start campaigning for Grants for Good".
In a statement, the campaign organisers said they planned to campaign by using their networks to gather examples of effective grant-making and build a case to persuade local authorities.
Kathy Evans, chief executive of Children England, said: "Grants are more than just a sum of money to the charities and community groups that rely on them.
"They’re the lifeblood of thousands of local initiatives that families thrive on, from play schemes to employment support for disabled people.
"Where contracts tend to be short term and impose restrictive conditions on service delivery, grants empower people to deliver what works for their communities – sustainably. We really can’t afford to lose them."