May 23, 2011 • 4:48 pm

“This year giving by the top hundred donors in this country has gone down by a third, there is a £3 billion gap in funding for charities.” Hazel Blears, Sky News, 22 May 2011

Today was a big day for the Government’s Big Society, with the Prime Minister using a speech in Milton Keynes to rejuvenate his flagship policy, and the Cabinet Office publishing a White Paper announcing £40 million in funding initiatives for the voluntary sector.

However former Communities and Local Government Secretary Hazel Blears yesterday suggested to Sky News’ Dermot Murnaghan that this funding would do little to plug a £3 billion gap in charity accounts left by cuts in government grants.

However readers of the Sky News website might have a different understanding of the size of the hole left in third sector balance books by public sector retrenchment. Back in January it reported on some of the proposed ways to “fill the gap left by the estimated £1 billion shaved cut [sic] from their local government grants.”

Yet another Sky News story from January reported that “charity leaders are warning their organisations are facing bankruptcy because Government cuts will leave a £5 billion funding black hole in the voluntary sector.”

So are all these figures merely pie in the Sky, or can we get a true handle on the size of any “funding gap”?

The problem with reaching a definitive sum by which charities will lose out as a result of the local government spending settlement is that there is no definitive figure for the amount they currently receive from councils. Indeed Decentralisation Minister Greg Clark wrote to council leaders in February to ask them to detail the amounts given to voluntary organisations; until this data is available, any figures on the size of a ‘funding gap’ must remain estimates.

Furthermore, different local authorities have indicated funding decreases to the voluntary sector of different sizes, and attempts to estimate the nationwide impact have therefore relied upon models and extrapolations.

For example, a 2010 report by third sector consultants New Philanthropy Capital estimated that the fall in voluntary sector funding would be between £3.2 billion and £5.1 billion, based on the assumption that they would be in line with cuts in public services of between 25 and 40 per cent.

Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations (ACEVO), estimated at the time of last October’s Spending Review that the result of public sector retrenchment, combined with an anticipated decline in donations, could cause a funding gap of £4.5 billion.

Looking purely at the impact of the spending cuts, ACEVO estimated that the total reduction in voluntary sector this year would be £1.1 billion, rising to £3.1 billion by 2015.

So whereas Ms Blears’ figure of £3 billion seems reasonable given the available estimates, in such an uncertain field it is important to pin down the terms of reference. Whilst Ms Blears figure seems to tally most precisely with ACEVO’s estimate for the end of the Spending Review period, the fact that she also seems to include falling donations in her calculation means that she may have actually under-estimated the gap.

However the sparsity of solid data and the variety of factors that may or may not be included in these calculations mean that a wide spectrum of estimates could be supported. Given that the two estimates currently in circulation take their provenance from organisations intimately involved in the voluntary sector, it might be best to reserve judgement on the true size of any funding gap until more official data is available.

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