Matt Whittaker: Charities must get ready to ride out the cost-of-living crisis

If the sector is to support the country as effectively as it did during the pandemic, it must be supported itself

Matt Whittaker

It’s hard to overstate the scale of the cost-of-living crisis facing the country. Household incomes are about to fall at their sharpest rate on record, equating to an average real-terms income squeeze of nearly £500 per person, or close to £2,000 for a family of four.

In practice, some will be hit significantly harder. Benefit payments rose by 3.1 per cent in March, but inflation is projected to top 8 per cent.

It will be higher still for lower-income households because basics such as food and fuel – which are rising especially rapidly – account for a larger share of their total spending.

The Resolution Foundation expects an extra 1.3 million people to be pushed into poverty.

Problem debt is likely to rise, with 4.4 million households using credit to keep up with essential bills even before inflation started to climb.

Many will face the starkest of choices between heating and eating; the worryingly high number of people finding it difficult to keep up with accommodation costs will also grow.

Faced with both the direct financial fallout of this crisis and its effects on physical and mental health, as well as on educational outcomes for children, the social sector will inevitably step up to help.

We can already see this in the rising use of food banks and Citizens Advice bureaux.

But this growth in demand comes on top of charitable activity elevated for two years due to the pandemic.

Merely prolonging the period for which the sector must run hot would be difficult – especially with three in four leaders worrying about staff burnout. Redoubling efforts in the face of a new crisis will be harder still.

Meeting this further rise in demand looks even more challenging when we consider what’s happening to capacity.

Amid surging inflation and plummeting household incomes, Pro Bono Economics is projecting a near-£5bn shortfall in real-terms charity income in 2022.

At the same time, rising costs will eat into already-damaged reserves. Charities will once again be asked to do more with less.

As it was with Covid-19, so it is with the cost-of-living crisis. With one key difference: the second wave is crashing over a social sector still reeling from the effects of the first.

If it is to withstand the latest onslaught and support the country as effectively as it did during the pandemic, it’s vital that past lessons are learned.

To some extent that means doing more of the same.

In the pandemic, charities have adapted rapidly to shifting circumstances: three in four adopted new delivery models, three in five boosted digital skills, two in five collaborated more with other charities, and one in four collaborated more with local government. Further innovation will be required this time.

But it can’t only be for social sector organisations to act. Three in four people (and four in five MPs) think that charities played an important role in meeting the Covid-19 challenge.

If the nation wants it to do the same in the face of today’s crisis, then it must help.

In part, that means funding. Foundations responded well to Covid-19, providing more resources and more flexibility.

They would do well to continue along that path. But there is a role for the public too.

On aggregate, households built up £220bn in “excess” savings over the course of the pandemic thanks to restrictions on travel and leisure. There is money out there: directing at least some of it to charities would help to deal with the distributional fallout of the cost-of-living crisis.

Government – national and local – should also be looking to do more to support the sector.

By providing the infrastructure for charities to collaborate and innovate, and by bringing them inside the conversation about how best to respond to today’s challenges, the government can co-ordinate an approach that can both boost the wellbeing of its citizens and save it money in the medium term.

The scale of the challenge, and the speed with which it has followed on from the last, means optimism is in short supply right now.

Yet we can take comfort in the response of the social sector over the past two years (and in relation to countless other crises).

With proper support, our charities and community groups can once again help us ride out the storm.

Matt Whittaker is chief executive of Pro Bono Economics

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