Austerity bites: two thirds of charities are subsidising public sector contracts

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2 June, 2017
A race to the bottom to deliver public sector contracts for less is causing a crisis in the relationship between charities and the state. A recent report by New Philanthropy Capital (NPC) found that two-thirds of charities have used money from charitable donations to subsidise key services they provide on behalf of the public sector.
Patrick Murray, NPC’s Head of Policy and External Affairs and the report’s co-author, cited the damaging effects of austerity in driving local authorities and the NHS to seek the lowest prices for health and social services. There is concern that in some cases, public sector contracts are being awarded on the basis that charities will prop up some of the budget with public donations.
Over half the charities surveyed by NPS had turned down a public sector contract, fearing a knock on effect on safety and quality, caused by dramatically reduced budgets. 
There was also a recognition that valuable expertise - developed by the voluntary sector before they received public sector funding - was being ‘bought’ at a cut price by the public sector, leaving VCSE providers struggling to fund the services they had been contracted to provide. This occurred primarily in the fields of drugs and addiction; homelessness; social care; children and young people; and employment.
Patrick Murray highlighted the risk of charities diverting from their mission due to pressures created by chasing shrinking funding pots. He recommended working more collaboratively in order to meet targets and make a bigger impact. 
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