With inflation now at 9%, we are living in extraordinarily challenging times and almost everyone is feeling the effects on their finances. Charities are impacted in numerous ways: their running costs are increasing, and demand for their services is increasing, while their cash balances don’t stretch as far, and their income is falling as people have less to give.
We invited Rob Trimble, CEO of the Bromley by Bow Centre, Rosemary McDonald, CEO of UK Community Foundations, and David Owen, Senior Investment Director at Investec Liverpool, to discuss the impact of the cost of living crisis on charities with our Head of Charities, Nicola Toyer. Watch the video and read some of the highlights below.
How is the cost of living crisis impacting charitable organisations?
Rob: The short answer is: hugely. It’s having a huge impact on demand for our services, particularly around advice and support with money management, but it is compounded with all the other challenges that people have been facing.
A number of crises have been coming along over these last few years, not least the impact of COVID. The challenge that we're seeing isn't just the cost of living crisis, but how that sits alongside the long-term impact of COVID on our community. I think we’ve only seen the tip of the iceberg so far.
Rosemary: I completely agree. I think that what Rob is seeing in his community in the East End is what's being seen around the country.
We’re certainly seeing increased demand for just the basic costs of running an organisation, like fuel and lighting. If you're running a food project or a day centre providing meals for the elderly, all those costs have gone up hugely. We serve a lot of rural areas, and when you see the cost of fuel going up in the way that it's going up and you know, it becomes much harder for groups that are serving a large geographical area.
It’s been a tough challenge, especially when grant-making hasn't increased. The size of grants that organisations offer has remained the same over many years and hasn’t taken into account the cost of living crisis. The value of a £3,000 grant is a lot less than it was before.
How do you prepare to meet the increased demand for charitable services?
Rosemary: I think the best thing that any funder can do is to give unrestricted funding as much as possible. Just to respect the work that charities are doing and give them credit for knowing what's needed in their communities, and then make it as easy as possible for them to deliver the services that they're great at.
Rob: I wholeheartedly agree. I also think that, as a nation, we need to notice what community organisations are doing, particularly those that are not centrally funded by the government or local authorities. Not just to notice it, but to respect it and to recognise that isn't produced out of thin air. We need proper resourcing coming centrally into the community sector.
What’s your perspective on the government's response to the cost of living crisis so far?
Rosemary: It's great that they’re doing something, but it's not very well targeted. Many people don't need the £400 energy grant and could meaningfully divert that to charities. If the government wanted to be really helpful, they could put out a note saying that if you don't need this rebate, please consider giving it to a charity.
Rob: I think with the return on investment that the government would get from funding the community sector, alongside any direct payments to households, would be money well spent.
The impact of not doing that will be to the detriment of the communities themselves, but also ultimately to the Treasury, in the cost of needing to provide additional services to support people who become unemployed or who lose household income.
How is Investec helping charity clients face the cost of living crisis?
David: Having come through COVID, and with the charitable sector having given such a massive contribution to society over that period, it became clear in the first quarter of 2022 that we are lurching into another environment whereby the demands on our charitable clients would be increasing again.
In this context, I think budget setting has become increasingly important, i.e. what can we reasonably expect to receive and what can we reasonably expect to be distributing? Part of what we’re doing at Investec is giving good, solid, professional advice as to what is sustainable in the short, medium, and long-term when it comes to drawing down on charitable funds.
How can charitable organisations balance the needs of today versus the needs of tomorrow?
David: We work together with our charitable clients very, very closely and provide them with the impartial information they need to make a reasonable assessment of the sustainability of the drawdowns they are taking.
We come at it with an element of pragmatic realism as to what would be sustainable, and honestly advise the trustees of the board what the potential impact of levels of drawdown could be on the longevity of the fund.
Will investment income keep pace with inflation?
David: I think we've got to be really honest and say, certainly not, when inflation is at nine or 10%. The ravages of inflation in the short term will be felt throughout the economy. So, I'm sorry to be the bearer of bad news but I think it's beholden on us to give you that pragmatic, impartial advice and say it's going to be very, very tough.