Tethered fortunes

Think tank: Pro Bono Economics

Author(s): Dr Beth Kitson

February 29, 2024

This report from UK think tank Pro Bono Economics looks at the threat to charities from trouble in local government.

Across England, local government funding is in disarray. Councils are issuing section 114 notices – indicating unlawful expenditure or their equivalent of bankruptcy – at unprecedented rates. Cuts are following rapidly, with even more looming as local and national government tussle over responsibility for services such as social care.

These cuts are already hitting charities, because the fortunes of local councils and many charities are tethered together. Nine in 10 charities (87%) that work with councils state that relationship is “important”, and four in 10 (38%) go so far as to state their relationship with government is “critical”. And when one partner goes into difficulty, the other struggles too.

Local government is an important source of the charity sector’s income, providing around 13p in every £1 through grants and contracts. This funding has been in decline over the past decade, as austerity led to a 23% real terms drop in charity income from local government. That equates to a cumulative loss of £13.2 billion over that period.