Too many charities are still banking on a return to 'business as usual' rather than accepting that the voluntary sector has changed permanently, according to Third Sector's Austerity Watch panel.
The panel, which meets to discuss the impact of the economic downturn on the voluntary sector, gathered for a third time a fortnight ago. All five members were concerned that too many charities were carrying on as before in the misguided hope that funding would eventually recover.
"There are still people who think the problems will go away and they can get back to normal," said Dame Mary Marsh, director of the Clore Social Leadership Programme. "That's not going to happen."
Toby Blume, chief executive of the community charity Urban Forum, said that for many charities normality was the problem, and they had to realise they could not continue as before.
Uday Thakkar, managing director of the social enterprise consultancy Red Ochre, agreed. "People haven't grasped the nettle," he said. "They haven't changed."
Helen Simmons, finance director at the Diocese of London, said one problem was that some charities had suffered mission drift by chasing statutory funding, which had left them vulnerable.
Cuts to statutory funding had dominated the two previous panel debates. This time, there was growing concern that the voluntary sector was becoming increasingly squeezed by wider economic forces, such as the eurozone crisis and weak economic growth, and that this was creating a sense of panic and impotence.
Nobody could see an end to the economic woes, although Thakkar said recent years hadn't been as bad as many people had predicted. "The worst is yet to come," he said. "The stark reality will kick in in April."
He also feared the government's localism agenda could backfire on charities because councils on tight budgets would prefer to award fewer, bigger contracts than to devolve power. He said he worried that councils would spin out more services, which would end up competing with charities for funding.
Cathy Pharoah, professor of charity funding at Cass Business School, said the sector was guilty of navel-gazing because it was waiting to see what happened next when they should be, for example, grasping the localism agenda.
She said she was surprised she hadn't heard any charity voices complaining about the distribution of wealth as powerfully as the St Paul's Cathedral protesters (pictured).
Simmons said too many organisations had "put up sandbags" in the hope that they could block out their troubles when they should have been dipping into any reserves they had accrued. Blume said the situation was "absolutely terrible" now for the vast majority of voluntary organisations. He said that large contracts were replacing the small grants charities needed, and he questioned the wisdom of the government urging the sector to collaborate on bids, because few organisations stood a realistic chance of winning large contracts.
Giving and philanthropy
There was widespread criticism of the Office for Civil Society's Giving White Paper, which called for greater philanthropy.
Blume described the paper as "one of the least impressive things to emerge from Whitehall in the past 20 years". He said it was about "fighting in different ways for the same money".
Pharoah agreed, citing measures in the paper that promoted technology as a way of increasing giving. "There is no evidence that changes in technology make people give more," she said. "It just makes them give in different ways."
Marsh said next year's Give More campaign, which was proposed by the Philanthropy Review, provided "good mood music" and some solid ideas. "But if we are going to change the culture of giving, it will be a generational change," she said.
Simmons said she feared the negative impact of the economic downturn would outweigh any benefits from giving campaigns.
There was scepticism about the suitability of new ways of funding the sector, such as social impact bonds and loans - and also about how prepared charities were for them.
Blume said social finance products were being sold as a panacea. It had, he said, "become difficult for local charities to critically appraise whether the products are right for them". One Urban Forum member, he said, had inquired about investing in social impact bonds, but it was impossible to know whether they would provide a good return.
Pharoah said social investment was not getting off the ground, partly because of charities' risk-averse attitudes. She said the Office for Civil Society's £107m Transition Fund, which helped service-providing charities adapt to new forms of funding, should have yielded a wealth of evidence on how charities can switch from grants to loans. Blume said that the fund had done little more than plug a hole for charities that were running out of money.
Marsh said many charities struggled to access social investment funds because they weren't investment-ready. Thakkar agreed, saying he would be ashamed to pass on to social investors the details of some organisations that wanted to apply for funds.
He added: "Everybody thinks social enterprise is going to solve everything, but it isn't. It will help organisations of a certain size." Blume said organisations should "aspire to entrepreneurialism with a social purpose".
There was debate over how much influence Nick Hurd, the Minister for Civil Society, has within government and on the sector.
Pharoah said: "People still want him to be the big daddy figure some of the sector's previous champions were, but he's in a difficult position because he's saying that we should not be looking to him or the government for answers - and the sector is not listening." Hurd was, she said, "trying to provide leadership for no leadership".
Marsh said his messages could be tougher. "Some people have not recognised how significant and rapid the changes have been," she said. "Perhaps he doesn't want to generate panic."
Thakkar said Hurd's message had been consistent: there's no money left.
Simmons wondered about the Liberal Democrats' influence on the coalition government's sector thinking. She said some people thought they would be a force for good, but they appeared to offer little.
The panel felt Labour had yet to provide a coherent sector vision. Blume said it was up to the leader, Ed Miliband, to articulate one soon. "Ed has allowed the Tories to seize traditional Labour territory, such as cooperatives," he said. Blume also called for Miliband to give a more prominent role to Stella Creasy (pictured), a former charity worker who is now the MP for Walthamstow in north-east London. "The old guard is discredited," he said. "They need fresh thinking."
What should charities be doing?
Simmons said charities had to be clearer about their purpose.
"Too many can't express clearly what they are about," she said. "Their mission has drifted because of statutory funding. They need to identify one or two things they do, then be clear about describing them and do them well."
She also questioned the merit of having so many homelessness charities. "There has to be a better way," she said.
Pharoah urged charities to strengthen their local connections in order to benefit from localism. She suggested the sector could develop a new form of local infrastructure by creating alliances with non-sector bodies. "Maybe we should stop talking about the big society and concentrate on local society," said Pharoah.
Marsh recommended a long-term, strategic focus. Blume said charities should follow Gandhi's example by asking what they had done to help a poor person each day.
How should the sector deal with the hard times ahead? Members of the Third Sector Austerity Watch panel put forward their three key points here.