The Domino Effect of the Cost of Living Crisis: A Spotlight on Charities and Vulnerable Communities
In an era where "cost of living" has skyrocketed, its far-reaching implications for the most vulnerable among us and the organisations designed to help them cannot be overstated. This crisis has created a domino effect that leaves no stone unturned - particularly for charities.
Impact on Vulnerable Populations
Let's begin by understanding who bears the brunt of this economic onslaught. Those previously tagged as 'just about managing' (JAMs) have been pushed further into financial instability, as even their tightrope act of balancing income and expenditure wobbles dangerously. People from Black and minority ethnic (BME) backgrounds and those already disadvantaged find themselves further marginalised as the basic costs of living soar.
For these communities, every percentage increase in energy prices or the cost of essential goods strips away a bit more dignity and worsens social inequalities. When fuel prices hike, the routine school run or commute to low-income jobs becomes a potential financial breaking point. With this in mind, the 65.4% rise in electricity prices and 128.9% rise in gas prices in the past year are more than statistics; they are alarm bells.
TheStrain on Voluntary Sector Organisations
The plight of charities is twofold: rising operational costs and diminishing income. Charities also have to grapple with inflated energy bills, price increases for daily consumables, and even wage inflation. The fiscal sustainability of many organisations is teetering on a knife-edge, more so for smaller charities with an income under £1m, whose financial trends already show a concerning trajectory.
To make matters worse, charities are experiencing a fall in income streams. The reduction in individual giving - now further exacerbated by the cost-of-living crisis -presents a bleak outlook. The Charities Aid Foundation UK Giving Report 2022 shows a consistent drop in donations, as 55% of the public find it harder to donate given their strained finances. Simultaneously, changes in housing prices have impacted legacy income, adding another variable to an already precarious situation.
Public sector funding, accounting for around 26% of the sector's income - the lowest since 2004/2005 - has been a lifeline for many charities. With rising inflation and decreased public spending, the government's support is dwindling when it's needed the most. The short-term funding cuts and the Institute of Fiscal Studies' prediction of a 1% yearly growth in government departmental funding post-2025 signal an urgent need for action.
It's alarming that two-thirds of charities involved in public service contracts are inadequately paid to cover their operational costs, according to charity sector think tank NPC. This unsustainable model calls for commissioners to reassess their approach. The 'commissioning expenditure' must align with the increasing cost of living, as charities can no longer afford to subsidise these contracts at their own expense.
Charities and non-profit organisations are not just service providers; they are lifelines for those they serve. Their role in society is particularly crucial during crises, and yet they themselves are endangered by the same economic forces that amplify the needs of their service users. Commissioners and government bodies must recognise this intricate dance and take steps to ensure financial sustainability for these organisations. Contracts and service level agreements (SLAs) should not only be honoured but also adjusted in line with inflation rates.
The cost-of-living crisis is more than an economic term; it's a social epidemic that threatens to unravel the fabric of our communities. As demand for charity services reaches an all-time high, it's clear that charities are not just victims of this crisis but also a part of its solution. Failure to appropriately fund and support them not only imperils their existence but also jeopardises the well-being of the very populations they serve. Hence, a re-evaluation of commissioning expenditure is not a box-ticking exercise; it's a moral and social imperative for the times we live in.
Stephen Craker,
Chief Executive, Communities 1st.