Impact of the Cost-of-Living Crisis on the VCSE sector

Some stark news on the state of the sector amidst the cost-of-living crisis and the challenges that lie ahead. Here we’ll talk about issues arising from a fundraising conference organised last November by Community Action Suffolk. It also presents an opportunity to come together as VCSE organisations to support each other through choppy waters.

Whilst there has been a great deal of focus on the impact of the current cost-of-living crisis on individuals there has been less of a focus on the various ways that it is impacting on voluntary, community and social enterprise (VCSE) organisations.

At the end of November Community Action Suffolk organised Fundraising Suffolk 2022, a morning of presentations by a range of specialist speakers, from national VCSE infrastructure organisations, including the Charity Finance Group and National Council for Voluntary Organisations (NCVO), who talked about the triple threat to charity income and how the sector is responding. NCVO shared their State of the Sector Report based on their 2022 Almanac.

Whilst we are all only too aware of the huge increase in demand for VCSE services as a result of the cost of living emergency and, to some extent, the financial, social and health-related fall-out from the pandemic, the picture and challenges for the VCSE itself also make for stark reading, here are some hard-hitting headlines.

 

Summary of key challenges relating to the cost-of-living crisis
  • Over the last two and a half years 60% of charities saw a loss of income and 40% used up at least some of their reserves
  • The current crisis will wipe out the last 8 years of increase to living standards and lead to a drop of 7.1% in disposable income, with no real increase in disposable income forecast for the next 5 years+. This is, and will continue to, have a huge impact on charity donations. Already 26% of people surveyed are saying that they are reducing their donations to charities
  • Due to inflation a £20 donation in 2017 will be worth under £15 by 2024, and a grant or contract worth £100K in 2022 will be worth just £88,300 in 2024. Inflation will have a significant impact on reserves too
  • Income tax and NI threshold have been frozen, so more people will have to pay which will impact on charities’ mandatory contributions
  • National Living Wage and Minimum Working Wage are higher which may also impact on VCSE wage bills
  • Public spending squeeze – although there are no significant cuts now, by 2025 cuts of 7% are planned
  • Rising energy costs will have a high impact on VCSE organisations as many are based in older, less energy-efficient buildings so more difficult to reduce costs.
  • Budgeting for 2023/4 will be harder because in March 2023 the Energy Bill Relief Scheme ends and future energy quotes are being inflated due to uncertainty
  • Effect on the VCSE workforce – low pay in comparison with other sectors, short-term contracts and uncertainty about employment security, as well as stress, exhaustion and burnout are issues effecting the retention of staff

 

Message from national organisations about the cost-of-living crisis

The key message is that the VCSE sector needs to prepare itself and think outside the box. Some things that organisations can do include:

  • Reviewing and updating fundraising strategies and reserves policies.
  • developing links with companies for expertise and staff involvement.
  • developing new strands of earned income.
  • looking at sharing resources, office space and backroom costs with other organisations and considering joint working.
  • becoming part of a group structure, or full merger all need to be on the table.

In early 2023, the Voluntary Norfolk Communities team are planning a series of online workshops looking at the impact of the cost-of-living crisis on VCSE organisations, as part of the Empowering Communities programme.  These events will provide a forum for organisations to discuss these issues and share some of their successful approaches to addressing these challenges.  If there are any specific topics’ you would like to see addressed,  please do get in touch: network@voluntarynorfolk.org.uk

You can see a full notes from the session here and copy on what the cost of living crisis means for the charity sector, from CFG Group, here.

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