Voluntary sector and the recession #1

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A review of evidence on how the voluntary sector manages in recessions

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  • Lag times!
  • Commentary The CC register is the only indicator of start ups/closures we have: however, major changes are likely to reflect administrative effort. There does not however appear to be significant changes in start ups or removals at times of recession. The important point also is that downturns might lead to a redistribution of income – to be frank from the weak to the strong. Some have argued that, at an aggregate level, this will lead to an improvement in efficiency. This however only relates to the public services delivery function of the sector.
  • Dependence upon philanthropic support from individuals: unpaid time, charitable donations (whether actual or promised in the form of legacies) and other charitable purchases; Dependence upon statutory sources of income, whether contract income for the delivery of welfare services or grants from government agencies (including the Big Lottery Fund); Reliance upon philanthropic support from other institutions: grants from trusts and foundations (which implies significant recycling of capital within the sector); Reliance upon investment income, which in turn is a function of the performance of equity markets and property markets.
  • Giving – what you think happens to giving might depend on what happens to income and to wealth… NAVCA argues: Furniture recycling charities illustrate a way that changes can have multiple effects on an organisation. Furniture projects are seeing a decline in donations (as people “make do” rather than purchase new) but simultaneously an increase in demand on the retail side as more people look for cheaper ways of obtaining furniture. But its also a result of the collapsing housing market – people are not replacing their stuff.
  • Paul Bostock, incoming chair of CFN, is upbeat. "Community foundations managed initiatives that saw increased charitable giving through the recession of the early nineties and through the teeth of the dot-com crash," "Where major donors become involved with a local community then our experience is that they respond first and foremost to increased demand, rather than a squeeze on finances."
  • Commentary The black bars indicate years with a month or more of recession. Giving does not go down during all recession years. It rose or stayed stable (adjusted for inflation) in 9 of the 15 years on record with at least one month of recession.
  • Commentary This is from a paper that argues corporate giving is closely related to the business cycle – hence the dip in cash and real donations at the end of the 80s/early 90s
  • NAVCA argue: When under pressure councils often take services in house or target voluntary sector grants. A lot of fear has been expressed that this will happen. The extent to which this is happening will become clearer as we approach April 2009.
  • ACRE are concerned that the fall in asset prices is causing the delay or cancellation of some community building projects as either credit is unavailable or the fall in property prices is making commercial ventures unviable. Louise Beaton, Acre’s village hall advisor, argued: A £1.2 million project including a Children's Centre in Sussex should have been on site now, but the developer building both the new community hall and housing (including social housing) on the old site has pulled out, another in Dorset has a £30K hole in funding owing to the fall in value of the old site. Research in June 2008 by the Community Transport Association found that that 55 per cent of organisations believe that increasing fuel costs have resulted in the loss of volunteer drivers or delivered difficulties in recruiting new ones. See http://www.ctauk.org/uploadedFiles/News/CTA%20Mileage%20rate%20final%20(2).pdf
  • Volunteering – this has real costs for the volunteer (e.g. mileage expenses don’t cover fuel costs), not just opportunity costs. Volunteering England survey suggests: 1. Many volunteer involving organisations are anticipating that the economic downturn will increase the numbers of people coming to them to volunteer. One trend they expect will be for more people from professional roles who have become unemployed to seek volunteering as a way back into employment. But many organisations are concerned that other people may be put off volunteering by economic pressures. 2. About half the respondents are anticipating difficulties due to reductions in funding and donations, and increased numbers of volunteers will increase the need for resources to manage them. Only a few organisations have so far heard their funding will be reduced due to the economic downturn; in these cases, the largest concern is funding from local government.
  • Advice services – esp. debt advice – are widely regarded to be under more pressure. NAVCA have also argued that mental health services are under more strain. Futurebuilders: The prevailing view is that economic conditions are likely to create increased demand for advice services, mental health support and services to combat drug and alcohol dependence – all areas in which the third sector’s ability to provide added value are widely recognised.
  • Voluntary sector and the recession #1

    1. 1. The potential impact of a downturn on the voluntary and community sector A short review of the available evidence NCVO Research Team November 2008 Contact: [email_address]
    2. 2. <ul><li>We caution that the evidence is mixed and often conflicting. </li></ul><ul><li>There is little UK long-term trend data, and a considerable amount of media conjecture and anecdotes. </li></ul><ul><li>Individual organisations experiences will differ from those of the sector overall </li></ul><ul><li>Is this a different type of recession? </li></ul>
    3. 3. The growth in charity numbers, 1960-present
    4. 4. The Sector’s income sources Statutory sources & Lottery: 36% The public (giving and purchases): 37% Other VCOs: 11% Private Sector: 4% Interest & Dividends: 12%
    5. 5. Income sources <ul><li>Charitable giving: heavily dependent upon core of 2.1m donors who give </li></ul><ul><li>Evidence suggests individual philanthropy is resilient, but donors’ habits change (and lag) </li></ul><ul><li>Purchases: the public are trading down </li></ul><ul><li>Charity shops: short of stock? </li></ul><ul><li>Business giving falls in line with profits </li></ul>
    6. 6. Income sources <ul><li>Foundation support stays firm in the short term but dips in the medium term </li></ul><ul><li>Legacies are expected to fall as property prices and investment assets fall in value </li></ul><ul><li>Interest & dividend income falls: the sector is a net saver </li></ul>
    7. 7. Inflation adjusted total giving (US) Source: Giving USA Using one definition of a slowdown, giving grows an average of 0.8% in years with a slowdown
    8. 8. Foundation Giving, 1997-2007 (US) Source: The Foundation Center , Foundation Growth and Giving Estimates , 2008. Figures estimated for 2007. Dollars in billions (inflation adjusted) Total Giving During Recession Years: 1975; 1980; 1981–1982; 1990–1991; 2001–2002.
    9. 9. Total corporate giving 1980-1994 $m (US)
    10. 10. Income: statutory sources <ul><li>Government funding policies, practices and attitudes are crucial – statutory income 36p in every £1 </li></ul><ul><li>However, continued evidence of poor funding and contracting processes </li></ul><ul><ul><li>Late payment </li></ul></ul><ul><ul><li>Little or no notice of renewal </li></ul></ul><ul><li>Last recession: widespread experience of funding cuts </li></ul>
    11. 11. How did government respond in 1991-93? Local Government Central Government Commentary A majority report no change in attitude of government to the sector – but where there was a response the most widely cited response was a funding cut.
    12. 12. Dependence on statutory income <ul><li>Significant proportions of mid-sized and large organisations receive majority of income from government </li></ul>Source: NCVO
    13. 13. Assets and expenditure <ul><li>Evidence suggests the sector is poorly capitalised </li></ul><ul><li>Assets (by value) largely held by foundations </li></ul><ul><li>Inflation: fuel costs a known problem (mileage allowances </li></ul><ul><li>Staff costs – c. 50% of total expenditure </li></ul>
    14. 14. Workforce <ul><li>The sector employs 1 in 20 of the paid workforce, predominantly based in social care </li></ul><ul><li>Anecdotal evidence: cuts in employment already occurring </li></ul><ul><li>Volunteering: those in paid employment more likely to volunteer (volunteering has real costs) </li></ul><ul><li>Evidence suggests VCOs cannot simply soak-up unemployed as volunteers </li></ul>
    15. 15. Social need <ul><li>Increased demand for some areas </li></ul><ul><ul><li>Advice services </li></ul></ul><ul><ul><li>Housing </li></ul></ul><ul><ul><li>Labour market integration </li></ul></ul><ul><li>Increasing concern regarding social tensions: tolerance, cohesion, immigration </li></ul>
    16. 16. Conclusions <ul><li>Income streams do not necessarily decrease in economic downturns </li></ul><ul><li>Charitable giving and government contracts/grants are critical </li></ul><ul><li>The sector is poorly capitalised and relatively unable to deal with falls in income/cashflow problems </li></ul><ul><li>Impact will be variable: by size, by sub-sector, by geography </li></ul><ul><li>The largest organisations are more capable of resilience </li></ul><ul><li>Smaller or less established organisations are the ones more likely to suffer hardship </li></ul>

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