“75 per cent of voluntary and charitable organisations have never had any tax payer funding at all and so there are no impact of these reductions on them at all”. Francis Maude, Cabinet Office Minister, The Politics Show, 13 February 2011
Amid doubts regarding the viability of David Cameron’s ‘Big Society’ during a time of intense cuts to local authorities, Francis Maude argued that actually the vast majority of voluntary groups do not depend on Government money for their income.
The figures he cited over the weekend check out. The National Council for Voluntary Organisations does indeed state that most voluntary sector organisations do not have a financial relationship with the state, estimating that 75 per cent are not funded by the government or in receipt of contract income.
The most common funding arrangement for a charitable organisation supported by the government is a combination of grants, contracts and service level agreements, involving the provision of services such as health and social care, advice and advocacy, education, social housing or urban regeneration, to, or on behalf of, a public authority.
But is looking at the figure as a proportion of the total number of voluntary organisations the best way of assessing the figures?
According to the NCVO, many of those voluntary organisations who do not rely on state funding and government contracts are small organisations generating a low income, casting uncertainty on how independently sourced the funds accumulated by the third sector really are.
Figures from the Charity Commission show that around 45 per cent of all charities, over 70,000, are in the annual income bracket £0-£10,000. The annual income for these does not even exceed £1 billion; with an approximate income of £241 million.
Around 9,500 charities earn over £500,000, less than 6 per cent of all charitable organisations, generating an income of nearly £48 billion a year, approximately 89 per cent of the total.
So what role does state funding play in these larger organisations, which account for a much greater share of the total income of voluntary organisations?
A working paper from the Third Sector Research Centre utilising evidence from the National Survey of Third Sector Organisations also found that the larger the organisation, the greater the likelihood of it drawing on at least some public funding.
At least half of organisations with an income of £150,000 or more are ‘likely to receive some public money, and around two thirds of organisations with income of greater than £5 million receiving public funding’. Fewer than 5 per cent of organisations with an income below £10,000 regard the public sector as their most important source of funding with over a third of organisations earning over £500,000 stating so.
The issue has also been examined by Nigel Hawkes of Straight Statistics who states that according to a Charity Commission survey from 2006, two thirds of bigger charities, i.e. those with an income of £10 million a year, derive 80% of their income from delivering public services.
As Mr Hawkes states, bigger charities may derive a large majority of their income from the public sector but out of 162,415 charities as of December 2010, only 883 earn more than £10 million annually. These high earning charities he refers to make up a very small proportion of the total number of charities in existence.
However, the fact that they count for over half of the proportion of total income from all domestic charities serves to substantiate the unmistakeable correlation between the size of a third sector organisation and the amount of public sector funding it receives that Mr Maude overlooks.
When Mr Maude claims that three quarters of voluntary organisations are free from taxpayer funding, these would consist, therefore, of mainly small and micro organisations that contribute to a relatively minor proportion of the total gross income from the whole of the sector itself.
His numbers are accurate, but it must be kept in mind how the inclusion of so many small organisations affects the figures.
Although fewer in number, it is those larger, more well-known charities that will potentially be affected by changes in the amount of government money going to the voluntary sector.