Craig Dearden-Phillips: the Lib Dems won't save charities from inevitable spending cuts

The party is in broad agreement with the Tories, writes our columnist

Craig Dearden-Phillips
Craig Dearden-Phillips

What might the governing coalition between the Tories and the Liberal Democrats mean for the third sector? The truth, in my view, is that it won't be that different from the situation had the Tories won outright.

Why? First, the minister is a Tory - the moderate Nick Hurd. Second, there is significant convergence between the Lib Dems and the Tories on many sector issues. Both parties seek a smaller state and an enlarged role for local, citizen-based organisations. Both worry about the co-option of larger charities by the state. Both are keen to decentralise power. And both are serious about a diversity of supply, enabling both charities and businesses to operate in spaces left by the nuclear bomb about to be dropped on the public sector.

But the third and principal reason the Tory-Lib Dem deal won't be that different is the economy. The immediate problem for government is that one in four pounds of public spending is now funded through debt. Without a solid promise to control the deficit, the people lending cheap money to the UK will shortly stop doing so. And there is a reason to grip the deficit now rather than later if we're to avoid Greek-style pain.

So what will happen in the third sector? If there is an emergency budget, watch out for all sorts of government contracts being called in. Most are on a month's notice and entirely discretionary. The Compact will be as much use as a catapult against a Trident missile.

Many organisations will become insolvent overnight, and will seek mergers or be wound up. Sure, there will be opportunities later on, once plans to cut 500,000 public sector jobs are implemented. But for many charities and social enterprises this will be too late.

The charities that don't rely on public contracts will not escape either. Taxes are about to jump dramatically. The Institute of Fiscal Studies says that it will cost each family £3,000 a year to pay down the deficit. Quite how much people will have spare for their favourite charities remains to be seen.

So we'll all be in the mire - very soon. What is the right response? The main thing is to act. Reduce your costs. Deal with your dead wood. Raise your productivity. Focus only on what you do best. Find a bigger partner - particularly if you are a hand-to-mouth charity. Don't wait for things to get better - they won't.

And lastly, don't blame the Tories and Lib Dems. It wasn't they who brought us here.

Contact Craig at www.craigdeardenphillips.com.

Craig Dearden-Phillips is a social entrepreneur specialising in public service reform

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