Corporate foundations have a tendency to be mealy-mouthed, preferring to voice their views behind closed doors rather than being openly critical and run the risk of bringing unwanted attention to themselves and their corporate backers.
The Lloyds Bank Foundation takes a different approach. In recent years, the charitable foundation has gained a reputation - and won respect - for its willingness to speak out on behalf of the small and medium-sized charities it funds. Under the guidance of Paul Streets, its chief executive since 2013, it has become increasingly vocal about the difficulties faced in recent years by voluntary sector organisations with incomes of between £25,000 and £1m.
Its Hardest Hit study, published earlier this year, showed that funding for smaller organisations from local and central government sources had fallen by 44 per cent between 2008/09 and 2012/13. Streets says the scale of the cuts meant it has had little choice but to speak out. "When you start looking at the data, you notice they're really under the cosh," he says. "It seems to me we need to call that out."
Big becoming bigger
Smaller charities have also been affected by the growth of bigger charities: data from the National Council for Voluntary Organisations' UK Civil Society Almanac shows that charities with incomes of more than £100m a year experienced an increase in income of 26 per cent during the period 2008/09 to 2012/13, but charities with incomes of less than £1m saw a fall. Streets, once chief executive of Diabetes UK, says he understands the benefits of larger charities, but believes their growth should not come at the expense of smaller ones.
"What big organisations aren't good at is reaching people with some of the most complex disadvantages," he says. "If you look at the issues we're trying to address through our funding - homelessness, drugs, alcohol and mental health - small local organisations are really good at reaching those who need help because they establish a trusting relationship. Unless these organisations are properly supported, they'll disappear and we'll be poorer for it."
The shift from grants to contracts has hit smaller charities in particular because they struggle to compete with larger players for contracts, says Streets. "In domestic violence, we're seeing specialist services lose out to generic providers of housing," he says. "At first sight domestic violence might seem to be an accommodation issue, but at its root it is do with a lot of other things. We're concerned that we're going to lose a lot of specialist organisations that are good at what they do."
Working for a funder that gives out more than £22m a year, mainly in grants, Streets doesn't understand why grant funding has become so unfashionable. He says the LBF manages to achieve its aims through grants and believes government has got it wrong in thinking that organisations are best supported through contracts.
Sceptical of social investment
Social investment has been widely talked about as an alternative way of funding voluntary sector organisations, but Streets wonders whether it is a viable option for charities with incomes of less than £1m. "Social investment works in places such as Shoreditch, where there's a bohemian bunch of people, and it works in certain markets, such as unemployment," he says. "But is it going to work funding a domestic violence project in Redcar? Where is the 'purchase' going to come from?"
But he says it is important that foundations come up with solutions. The LBF is working with the Cabinet Office and a group of foundations to try to establish a better way of reaching and supporting smaller organisations. To this end, it has started to offer a "grants-plus" model of support to charities, says Streets. This includes offering longer-term funding to cover core costs, providing additional funding for organisational development, and offering non-financial support such as advice from skilled staff at Lloyds Bank.
But he concedes that funders need to start to evolve the way in which they allocate money. "Funders need to give a significant amount of money to a smaller number of organisations, rather than spread it out."