Cuts in public funding hit smallest charities hardest, says Lloyds Foundation research

Reports published by the foundation show that the smallest charities have experienced large cuts to local and central government funding, while the very biggest have seen their income from these sources grow

The two reports and the LBFEW's round-up of the findings

Small and medium-sized charities have been the hardest hit by cuts in public funding since the 2008 financial downturn, new research shows.

Two reports published today by the Lloyds Bank Foundation for England and Wales show that charities with annual incomes of between £25,000 and £1m have been the worst affected by reductions in local and central government funding in recent years.

The research shows that between 2008/09 and 2012/13, charities with annual incomes of between £100,000 and £500,000 have lost 44 per cent of their income from local government, while those with incomes of between £500,000 and £1m have lost 40 per cent of that income.

Charities with incomes of between £100,000 and £500,000 have lost 26 per cent of their central government funding, with those in the £500,000 to £1m bracket losing 32 per cent of those funds.

By contrast the figures, which were produced for the foundation by the National Council for Voluntary Organisations, show that charities with incomes of between £10m and £100m lost only 2 per cent of their local government income and 7 per cent of their central government income over the same period.

Charities with incomes of more than £100m a year experienced a 49 per cent increase in their central government funding and a 22 per cent increase in local government funding over the same period.

Researchers found that more than 23,000 charities stopped operating in that time, most of which were organisations with annual incomes of less than £500,000.

The foundation commissioned two reports, one from the NCVO, which looked at how small and medium-sized charities have been affected by the changing financial landscape since 2008, and one from the think tank IPPR North, which looked at how smaller charities are adapting to change, their strengths and weaknesses and the social and economic value they provide.

The foundation said that the fall in public funding for small and medium-sized charities was not offset by corresponding increases in income from individuals and left those organisations more vulnerable.

Smaller organisations were also more likely to have experienced significant fluctuations in income, either positive or negative, over the same period, researchers found.

The foundation said that government funding had shifted towards more competitive commissioning and contracting models that have allowed larger charities and organisations to "dominate the market to the detriment of small and medium-sized charities and the individuals they reach".

The charity said the research showed that small and medium-sized charities played a part in tackling disadvantage that the bigger charities, business and the public sector could not. "Evidence for the distinct contribution made by small and medium-sized charities suggests they play a critical but often unseen role, including being flexible and responsive to need, embedded in the community and offering a holistic service to those facing the greatest disadvantage," it said.

Paul Streets, chief executive of the Lloyds Bank Foundation for England and Wales, called on the government to reform how it funds and commissions "otherwise we will all wake up one day and be shocked at what we have lost".

He said: "Small and medium-sized charities are the lifeblood but too often unsung heroes of our communities; reaching, engaging and helping disadvantaged people in a way that larger organisations often cannot.

"Despite this and despite valiant efforts to raise new income, many small and medium-sized charities have been hit hard by cuts to funding from central and local government and the move to large-scale commissioning and contracting."

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