Debra Allcock Tyler: Government is sending us the way the banks went

It is wrong to encourage charities to build up debt, says our columnist

Debra Allcock Tyler
Debra Allcock Tyler

There are many things in the world that baffle me. For example, I don't understand how my car engine works, I don't know why Robbie and Ola got voted off Strictly Come Dancing and it's a complete mystery to me why wearing shoes with six-inch stiletto heels always hurts your feet.

However, I can live with my confusion because I don't really need to know - my daily life carries on perfectly well without this knowledge (except for the heels, that is). The bafflement caused by some things, however, stops me in my tracks.

This government says (in my opinion, with some merit) that the country has got into too much debt and needs to learn to live within its means. I understand this as a principle, even if I'm not entirely convinced that the way they're going about it is going to work.

So what I don't understand is why they are dead set on pushing the most economically stable, debt-free sector in the entire economy, indeed the world - the voluntary sector - into the red.

They're taking away grants (which are a gift and therefore don't have to be paid back) and asking us to bid for payment-by-results contracts, which mean we have to find the cash up front ourselves in order to deliver our life-saving services (and getting us into debt). They're bringing in Big Society Capital, the social investment bank (who decided we needed another bank? Don't we own most of them already?), which won't give grants but will take money from commercial banks, to lend on to charities with interest (again, getting us into debt). They're encouraging us to set up social enterprises to fund our work sustainably, for which we have to borrow capital in order to get them off the ground and 'scale up' (once more, getting us into debt).

Now, I don't consider myself an overly stupid person. I know there are many more nuances and angles and caveats to the different examples I've cited. But isn't there something rather paradoxical about a government on the one hand criticising banks for taking unacceptable financial risks, yet on the other exhorting charities to do the same?

In my opinion, the social investment programme of this government is deeply flawed and unsustainable for the vast majority of charities. In fact, recent history appears to indicate that those charities that have relied on allegedly unsustainable grants and donations are less financially vulnerable than those that have taken government contracts. The fact is that we have been running ourselves sustainably for centuries with financial gifts - which we don't have to give back and don't have to pay interest on.

This economic climate will not last forever - don't panic and take out loans that could cripple you. I love my six-inch stiletto shoes and understand that I will need to put up with the pain to walk tall. Consider putting up with the pain of having less money in the short term so that you don't end up debt-ridden in the long term - and can walk tall too.

Debra Allcock Tyler is chief executive of the Directory of Social Change

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