Grants, contracts and loans: DSC says…

by Jay Kennedy, Policy Officer, Directory of Social Change

A recent NCVO report illustrates what DSC and many others have been arguing for several years now – that grants from government bodies to the voluntary sector are in decline, especially at the local level.  This has been the main reason that DSC, together with organisations like Navca, founded the Local Grants Forum: to campaign for maintaining and supporting local grant funding.

The report shows that in the three year period between 2004/05 and 2006/07 grant funding declined by £400 million, with around £300 million of that loss accounted for from local authorities.  This has been accompanied by an increase in the overall value of contracts and the amount of funding going from government to the voluntary sector during this period.

Whilst this report is very welcome, the most recent of this data is already nearly three years old; we know anecdotally that the trend of declining grants has continued in the interim.  And in the future environment of public spending cuts and outsourcing of core public services to the sector, the outlook for grants looks even bleaker.

The shift is a combination of several factors.  The way government administers grants has never been perfect, but reform has often involved crudely shifting grant funding streams into the procurement process. The drive to involve organisations in delivering more core public services for government – where specific outputs are required – is also central to the rise of the contract.  Finally, many of those charities which are eager and prepared to deliver services to the state have been pushing for contracts, largely because of a perception that they offer a more secure and defined funding relationship.  Government has partly been responding to this demand.

Sadly, in all of this the views of the 77% of our survey respondents who said grants were a better option for them are mainly ignored, or even patronised.  ‘Grants have their place in the funding mix’ we hear, but it looks like an ever diminishing and narrow place. The demand for grants is increasingly portrayed as backwards and outmoded, or evidence of some kind of ‘dependency’.  In fact it is an entirely rational desire for the funding option that is most widely accessible and manageable for charities, and which allows the most flexibility to respond to beneficiaries’ needs.

Our defence of grants is not naïve or based on some kind of wish to return to halcyon days which never existed, as Seb Elsworth of Acevo has suggested in a recent article.  We know that grants from public sector organisations are not perfect, never have been, and never will be.  In fact, we see plenty of examples of poor grant-making practice from statutory bodies on a daily basis in our research.

And we acknowledge that grants are not ‘money for free’ – that they should be competitive, and that organisations need to be able to demonstrate what they are achieving with the money.  We accept the need for reasonable and proportionate monitoring and reporting that accounts for how public money is spent.

But our solution is to try to make grants better, not to replace them with a procurement system that invariably involves contracts as the funding mechanism, which most charities find alien and difficult to navigate.  That is what is happening, and the data is finally starting to illustrate it.

Just some of the reasons why DSC believes grants are a better option for charities:

• They are generally more accessible for a wider range of charities and community groups
• They can more easily demonstrate the ‘demand’ or ‘need’ in communities from the bottom up
• They are more likely to allow organisations flexibility in responding to those needs
• As a rule they don’t require as much ‘capacity’ to apply for or manage successfully
• Transferring grant streams into procurement processes, where EU regulations may apply, increases bureaucracy and waste

DSC recognises that contracts are likely to play an important role in the future, and that local councils and other local agencies are under severe budgetary pressure.  However, cutting grant funding streams or replacing them with contractual arrangements (often biased towards larger, non-local providers) is a false economy.  

Local governments and agencies need to preserve grant funding as part of addressing disadvantage and helping communities to thrive – this is all the more important at a time of recession when social needs are increasing.

For more advice about how you can defend local grants in your area, see these publications by the Local Grants Forum:

Defending Local Grants [pdf document]  and Sustaining Grants [pdf document].