Local councils and local charities need to find a common cause

We hear a lot recently about what’s happening to funding and grants in our sector. We know anecdotally that it’s tough out there and that competition for funding is high, but the difficulty of getting reliable hard data in a timely fashion about what’s really going on is a perennial challenge.  

DSC’s latest Grants for Good report examines an important but under-researched part of the funding landscape for charities: local authority grant-making. This has been under pressure for decades, not just since the advent of austerity and the big squeeze on local authority finances which took place after 2010. The pressure really began to rise much earlier, with the move towards contracting services during the 2000s.  

In that context, grants often came to be viewed as less efficient or less competitive compared to contracts, or even in some cases (wrongly) as not legal by some commissioners. Local charities that may have been in receipt of grant support for years were sometimes shunted into procurement exercises they were ill-equipped to navigate, with damaging results. 

Despite these factors, we know that local authorities historically have played an important role in supporting their communities by legitimately providing grant funding to local organisations, not just for service delivery, but for things that the community valued and needed which the council otherwise wouldn’t provide directly. And many have continued to do so over the years, despite the prevailing wisdom.  

This latest version of the report reconfirms that the vast majority of grants made by local government are made via competitive processes (just under 80% of respondents), and that they are almost never subject to legal challenges, with just 1% of respondents reporting any legal challenges to their grant-making.  

The research puts the value of local authority grant-making to Voluntary, Community and Social Enterprise (VCSE) organisations at around £600m for the latest financial year. This is a significant part of the funding mix for the sector; comparable to what the National Lottery Community Fund distributes in a good year. It doesn’t compare with the tens of billions donated by the public, or the several billion given by charitable foundations, but the sector would definitely miss it if it disappeared entirely – especially at local level. 

Many councils (and councillors) have recognised the value that local organisations provide in terms of bringing in volunteer contributions and community connections. By providing one part of the funding puzzle for local charities, local authority grants can help even small, volunteer-run organisations to bring in other sources of support from the lottery, foundations or companies for example, and to combine that with volunteer effort to benefit all concerned. 

Surely we need these aspects of community building and mutual support, especially right now, when the after-effects of the pandemic and cost-of-living crisis are visible everywhere? However, local government in the UK is under severe financial pressure, with more councils in ‘financial hardship’ and filing for the equivalent of bankruptcy with Section 114 notices. Their income has not kept up with costs and demand, and central government’s control over so many of the purse strings leaves councils at the mercy of shifting administrations and disruptive policy changes. 

This research, unfortunately, finds that councils in financial hardship are significantly more likely to reduce their grant funding than those which aren’t. This may be unsurprising, as the examples of Nottingham and Birmingham recently have highlighted this issue nationally, but this data points to a wider trend that needs to be addressed urgently. When councils collapse financially, there are devastating effects on the local community and its people, and VCSE organisations are simply not going to be able to pick up the pieces on their own. 

Many structural changes need to happen to ensure that local charities and local government can continue to serve their communities, and finding ways to boost grant funding and other types of local funding is only part of the picture.  

As we pointed out in our response to the UK government’s Spending Review consultation, the result of which is due to be announced on 11 June, the government urgently needs to put councils on a sustainable financial footing. Ultimately, this is a long-term and complex project, which involves reversing the damaging cuts that have taken place over decades, but also decentralising how councils raise revenues. 

The government also needs to do much more to boost local philanthropy, for example via Community Foundations, and to create frameworks for locally-controlled funding such as via Community Wealth Funds, which put people in charge of making decisions about their own communities. 

In these difficult times, despite the funding pressures and difficult decisions and actions by councils, I think local charities and voluntary organisations also need to keep seeking ways to communicate, create dialogue, and influence their local councils. Central government is distant yet powerful, and too often ties the hands of local leaders. So it’s more important than ever that people in the community, whichever hat they wear, find a common cause.  

Click here to read the new Grants for Good report.