Covid-19 support again puts charities in a bind
As soon as the reality of the Covid-19 pandemic became clear, the third sector knew it would face a financial crisis.
Even in March it was clear that fundraising would become far more difficult. Projections indicated that income across the sector in the UK would fall by billions of pounds in spring alone.
Spring is long over. Covid-19’s second wave is happening now. Measures are being taken to reduce its impact and hopefully they will prove significant.
Exciting news about the possibility of an effective vaccine came to light this week. That is cause for celebration and, while there is as yet no clear timescale for any medical solution to Covid-19, it is a welcome reminder that we are living in a temporary situation. Things won’t always be like this.
However, for now the pandemic goes on. To date the UK’s efforts to avoid a cycle of lockdowns and re-openings have so far failed.
This means some of the terrible consequential effects of Covid-19, such as economic slumps and social hardship, march on. The financial state of the charitable sector is one such crisis – and one that continues to grow.
Less than a fortnight ago, Action MS announced that it will close after 44 years of helping people and families in Northern Ireland live with Multiple Sclerosis.
Ann Walker MBE, the founder and Chief Executive, said: “During our time, the core aim of Action MS has always been to improve the lives of those living with MS here in Northern Ireland. We have been able to achieve that through the generosity of so, so many individuals, groups and the school family through the Walk for MS in particular… It has been a privilege to be a part of your lives and we will miss seeing you all.”
This is a devastating decision for the charity and for those who have valued its support over the years.
This withdrawal of a cherished service gets to the heart of the third sector’s unique dynamic during this pandemic – a dynamic that the government has not properly catered for.
The pandemic response is being driven by Westminster.
Although the devolved governments in Scotland, Wales, and here in Northern Ireland are all tailoring their responses to meet local needs, they must operate within boundaries set elsewhere.
Only London and the Treasury have the financial powers to define what is possible in terms of any lockdown measures.
Ironically – or perhaps not – the UK’s general short-term economic outlook recently improved as the mood in London has shifted from a determination to avoid blanket lockdowns to a recognition that broader and stricter measures are necessary.
This is because Chancellor Rishi Sunak has extended the Coronavirus Jobs Retention Scheme and shelved his planned Jobs Support Scheme (JSS).
This feeling of improvement is as much a reflection of the unpopularity of JSS as anything else. The new furlough package is essentially identical to the equivalent scheme from spring – with some critics saying a more detailed and tailored initiative should have been possible, given the benefits of more time to prepare and also of hindsight.
This lack of detailed thinking, and lack of refinement in the new furlough scheme, is of particular relevance to the third sector.
The option to furlough staff will be welcomed by many community and voluntary organisations. Certainly, it is better than no support at all. But maybe not that much better.
In the private sector, income is inextricably linked to the goods and services an organisation provides. During the pandemic, businesses are struggling because of a slump in demand, because they cannot properly provide their services, or both.
For the third sector, things are different. Charities face similar hurdles as private enterprise when it comes to provision – and have made similar efforts to adjust working models – but there has been no reduction in demand. In fact, the need for charity has generally increased.
Income has dried up, but income and demand for services are separate matters in the third sector.
Furlough does not provide a solution, because furloughed employees are not allowed to work. That is a roughly suitable arrangement for the private sector, but it leaves charities facing a tough choice: take the financial hit and keep employees active, enabling services to continue, or use furlough and reduce what you can offer to the people relying on your efforts.
Last week a coalition of civil society leaders – including NICVA – wrote to the Chancellor asking him to develop a Coronavirus Job Retention Scheme (CJRS) fit for purpose for social change organisations.
The coalition is comprised of 32 different organisations, led by Charity Finance Group (CFG). Top of its agenda is getting the Chancellor to tackle this furlough Catch-22 faced by community and voluntary organisations.
Its letter lays all this out very well: “The CRJS was an exceptionally generous scheme which was welcomed by the sector and which charities and social enterprises have availed themselves of during its first phase. However, as a scheme designed predominantly with private enterprise in mind, it had the perverse effect of incentivising mothballing of provision and not mobilisation.
“As we enter this further lockdown charities and social enterprises have already depleted their reserves, started to reduce their workforces and many are facing a critical dilemma; ensure the sustainability of their organisations through making use of a scheme that helps to conserve funds spent on salaries but which incentivizes the cessation of activity when it is never more needed, or risk financial collapse in the near future so that beneficiaries are supported over the second lockdown. History tells us that it will continue to be the latter choice they exercise.
“We seek a simple time limited extension, similar to the steps taken by the DfE in respect of adoption services to support practitioners' income while continuing their work with families, to enable those social change organisations who are facing financial distress to furlough staff and enable volunteering back to the cause to ensure maximum public benefit delivery can continue.
“We know from recent surveys that a third of charities have already announced redundancies in service delivery roles, at a time when supporting people on the front line is never more needed.3It is counterproductive to be paying for a charity or social enterprise employee to stop working when our citizens so desperately need helplines, advice, support and guidance; whether on mental health, unemployment, homelessness or loneliness and isolation.
“We are happy to work rapidly with HMT and HMRC to ensure that abuse of such an extension can be avoided by establishing appropriate parameters and criteria for eligibility.”
It is now up to the government to listen. These problems were flagged up months ago, during the first phase of furlough, and were not addressed.
If the same attitude and same lack of detailed thinking prevails again, it is likely that more organisations will be forced to go the way of Action MS.
That would be devastating news for the third sector – and for the people and families who rely on charitable services.
Instead, the government should find a way to shore up organisations in financial trouble while still allowing staff to work. This is not a case of buttressing some failing industry. The vaccine news is a reminder of that.
This is about helping good, valued organisations through an extraordinary – and temporary – period of global history. A period whose end is hopefully in sight.
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