UK charities urged to rethink their strategies as the Cost of Living Crisis begins to impact on how grant providers allocate funding

The Charities Aid Foundation (CAF), New Philanthropy Capital (NPC) and the Charity Finance Group (CFG) are warning that UK charities are likely to face both new financial challenges and increased demands to support people as inflation in the UK has jumped to its highest level in 40 years.

Official figures released on Wednesday 18th May 2022 showed that consumer price index (CPI) inflation soared to 9% in the year to April, a level last seen in 1982. The poorest households, who spend proportionately more of their total budget on gas and electricity, faced inflation rates of 10.9% which is three percentage points higher than inflation rates for the wealthiest. 

Inflation was mostly driven by recent spikes in energy and gas costs. Other factors, including the ongoing war in Ukraine, further increased prices.   

According to data from the Ofgem, the Office for Gas and Electricity Markets, higher energy prices means that an average household will now be faced with an increase in gas and electricity bills of almost £60 a month. 

Earlier this year, the government announced that it would raise benefits by 3.1% from April. The Institute for Fiscal Studies said that this represents “big real terms cuts to the living standards of many of the poorest households”. 

What can charities do?

1. Rethink strategies

Dan Corry, Chief Executive of New Philanthropy Capital, said charities “must start planning now”. 

Inflation reduces the real value of everything. So if you don’t increase spending you are cutting the good you can do,” he said. 

But this is very hard to do when your donors will also be feeling squeezed and commissioners are very unlikely to pay more to cover those extra costs. It’s what makes inflation a uniquely pernicious problem for charities. 

Funders will therefore need to rethink their strategies. Many will have hoped to replenish their coffers after paying out more than usual through the pandemic. But with returns on endowments having done pretty well despite Covid-19, is now really the time to do so?

2. Build financial resilience

Alison Taylor, Chief Executive, of the Charities Aid Foundation bank and charity services said that charities will have to find “more efficiencies in their operating models and look for ways to make their existing resources go even further, particularly their cash reserves” as interest rates increase

She said: “Building financial resilience, a cornerstone of pandemic survival, will remain a priority, including expanding and diversifying the ways in which income is generated. Charities should make every effort to remind UK taxpayers about the value and vital importance of declaring Gift Aid, which effectively adds 25% to every donation, and make full use of any opportunities for unrestricted funding.

The full article, featuring quotes from the Charities Aid Foundation, New Philanthropy Capital and the Charity Finance Ground, can be accessed via this link to Civil Society News.

Source: Civil Society News