Charities are having to cut services, let staff go and reduce their opening hours as analysts warn parts of the sector are now “broken” as a result of the cost of living crisis.
Soaring bills and other costs are weighing heavily on organisations within the sector, with some being forced to switch off the lights and work in the dark in a bid to save money on electricity.
Research carried out by the think tank Pro Bono Economics found that around half of charities in the UK are now using their reserves to meet operating costs, a situation it described as “unsustainable”.
In a report about the state of the charity sector due to be published next week, titled Breaking the Dam, Pro Bono Economics concludes that organisations are having to scale back the help they can offer.
Nicole Sykes, director of policy at the think tank, which was founded by former chief economist at the Bank of England Andy Haldane in conjunction with Nottingham Trent University, said the charity sector had expanded in the wake of austerity but was now under threat.
“We’ve talked a lot about the charity sector being at breaking point, and I think there are now bits of the sector that are broken, ultimately,” she told The Independent.
“People are going without help. We’ve said for a very long time that the safety net that charities provide is fraying. There are now holes that people are falling through.
“There are charities who give hardship grants to people who’ve fallen on hard times. And they’ve had to restrict and restrict those grants. So, whereas your criteria for ‘falling on hard times’ might have been much higher, now it’s those really facing destitution.
“So there are people who are on the edge, who haven’t quite fallen into that really bad state, who don’t get support. But that then has consequences for [their] mental health and all the rest. It’s that kind of thing where charities just have to retreat.
“Because of rising costs overall, we are hearing particularly small charities saying that they are having to let staff go. They just can’t meet the demand that is out there.”
Ms Sykes added that the 2008 financial crisis and the austerity that followed saw the sector expand: “So we now have a country where we are relying on charities so much more, they provide so much more to the most vulnerable, and we’ve not tested its resilience in quite the way we are testing it now.”
Charities are struggling with a surge in demand fuelled by the cost of living crisis on the back of the Covid pandemic, during which one in four people saw their income drop by at least 40 per cent, according to recent research published by the University of Birmingham.
Many are also under pressure to do more with less. Staff numbers at Macmillan Cancer Support are down by 15 per cent compared with pre-pandemic levels, while The Children’s Society cut 8 per cent of its staff last year.
Staff at homelessness charity Shelter recently warned that they risked being out on the streets themselves as they threatened strike action over a below-inflation pay offer.
Sam Mercadante, policy and insight manager at the National Council for Voluntary Organisations, warned that austerity policies had chipped away at public services over the past decade, and that “charities and community groups have increasingly stepped in to fill the void”.
In total they provide more than £15bn worth of public services each year, he estimated. But he warned that many are facing a desperate choice this winter.
“Charities know their value to communities and won’t walk away in times of need. Many, though, are now asking themselves whether they should spend everything they have to get people through the winter, knowing full well this will mean they have to close later on.
“We are going to see the voluntary sector shrink over the coming months, leaving people with nowhere else to turn,” added Mr Mercadante.
Neil Heslop, the chief executive of the Charities Aid Foundation, said charities were on the front line in helping communities to cope with the difficulties of the cost of living crisis “but at the same time they are facing a triple threat of falling donations, increasing costs, and rising demand”.
He said ministers could help by extending support for those struggling to pay energy bills beyond March next year.
Smaller charities have been hit particularly hard. Heeley City Farm, a community farm in Sheffield, this week announced plans to make almost half of its staff redundant as it fights for survival.
The Social Workers’ Benevolent Trust, which has seen a spike in demand, is among the organisations that have been forced to lower their maximum grants to those in financial distress. And Kidney Care UK said it had experienced a more than 200 per cent rise in demand for hardship grants to help people with their heating bills.
As demand has spiralled, Citizens Advice found that referrals for help in the three months to October, the last period for which data is available, were 85 per cent higher than during the same period last year. And The Trussell Trust said a record 1.3 million emergency food parcels had been handed out between April and September this year by food banks.
Organisations that require large amounts of energy are also badly affected, such as charitable organisations that run community centres and leisure centres around the country.
The charity that runs Rye Leisure Centre in East Sussex announced last month that it would close for the winter after its annual energy bill jumped from £8m to £20m. Experts fear that others will have to close for good.
That concern was echoed by Ms Sykes, who also said that many charities would appreciate government support for measures to make them more energy-efficient and cut their bills over the longer term.
The current six-month support package, worth £18bn, is due to expire at the end of March. The scheme discounts the wholesale cost of energy for all companies, charities, and public sector organisations.
Ministers have said they will continue to support some, under a more targeted scheme, after April, but they are yet to set out who will benefit. The results of a review are due to be published before the end of the year.
A spokesperson for the Department for Digital, Culture, Media and Sport admitted that civil society organisations would be “crucial in supporting communities and households over the winter”. That was why ministers had stepped in to help charities with their energy costs this winter, they added.
