The True Cost of Delivering Public Services

The voluntary sector is an integral part of the public services system. Charities, voluntary organisations, and other purpose-driven organisations deliver services and support that communities need and deserve.

Charities develop their services to meet the needs of the people they support. They fill gaps in existing services and build long-term relationships in communities. They can be very flexible in responding to changing needs.

This makes them a critical partner for delivering public services. They can reach and support people who may not be able to access mainstream services.

But charities do much more than deliver services. Under the right conditions, charities are a force for both good and growth in their communities. This is because they:

• continually improve services by using specialist knowledge, investing surplus money, and codesigning services with communities
• use a strengths-based approach to tailor support and fill gaps between other services
• offer upstream preventative support and advocate for systemic change
• strengthen communities by building long-term trusted relationships. This includes engaging volunteers and providing social infrastructure.

Uncertain, fragmented and insufficient funding makes it hard for charities to deliver services. It makes it even harder for them to bring their unique value to service delivery.

Being able to rely on long-term funding that meets the true costs of delivery gives charities the stability they need. It allows them to work in partnership with authorities to deliver services that change lives.

With the right funding, they can focus on enriching their communities and improving the systems that impact them.

Many charities deliver public services on behalf of government. By ‘government’, we mean public bodies. These include (but aren’t limited to):

• central government departments
• local governments
• combined authorities
• the NHS and integrated care boards
• HM Prison and Probation Service
• police and crime commissioners.

In 2020/21, charities delivered £16.8bn worth of public services. This represents 30% of the sector’s income. It’s the second-largest source of income after public donations.

The types of public services delivered by the voluntary sector (pdf, 1.6MB) include, but aren’t limited to:

• homelessness support and temporary accommodation
• domestic violence and sexual abuse services
• social care services
• services for disabled people
• education and training
• support for people with experience of the criminal justice system
• youth services
• mental health support, including counselling and suicide prevention
• advice, including support with debt and benefits
• health services, including hospices, sexual health services, and rehabilitation services.

These services are indispensable to communities. Particularly following the covid-19 pandemic and the cost of living crisis.

Many people have been pushed into poverty by rising energy prices and high inflation. Our members tell us that, no matter the service they provide, people are coming to them with a much wider and more complicated range of needs.

We want charities to be empowered to play their full role in delivering public services. We need government and public bodies to commit to working in partnership with the voluntary sector. Together we can deliver excellent services that respond to people’s needs and prevent problems from developing.

To realise this vision, public bodies must, at a minimum, fully fund voluntary organisations to cover the true costs of the public services that they deliver.

For decades, charities have warned that contracts and grants are not keeping up with inflation. This problem has become much worse over the past few years due to rapidly rising prices.

The inflation rate began to rise above the Bank of England’s 2% target in May 2021. It peaked at 11.1% in October 2022. There has been little to no increase in the overall value of contracts and grants in this time.

Contracts aren't covering the true costs of delivering public services, let alone providing any surplus to improve support to communities. Charities are increasingly subsidising public services with voluntary income and reserves. They’re risking their long-term sustainability to meet urgent needs now.

This means that:

• people and communities are at risk of losing the services and support they rely on
• charities are finding it harder to provide support and services to people who need it
• government is facing a shrinking, less resilient market. This reduces quality, choice, and innovation in public services.

This trend has worsened due to cuts to local government funding. Since 2010/11, local authorities have experienced unprecedented reductions in spending power.

The National Audit Office’s financial sustainability of local authorities report describes changes in English local authorities’ finances over the last decade.

It estimates that real terms spending power for local government across England was 26% lower in 2020/21 than in 2010/11. This was despite council tax rising by 15.6% in real terms over the same period. The drop was mainly due to a real terms decline of more than 52% in government-funded spending power.

Research by Lloyds Bank Foundation highlights that councils are increasingly forced to shift spending away from preventative services to meet crisis needs. The research also found that cuts impact deprived communities the most. This is despite demand typically being higher in these communities.

Other public bodies are also managing tight budgets. For example, spending on health and social care is expected to grow by only 0.1% in real terms from 2022/23 to 2024/25. This is despite a clear increase in need, as outlined in the NHS’s future of human resources report.

Not increasing grants and contracts with inflation is a false economy. It puts unsustainable pressure on charities and voluntary organisations that are delivering public services. This is particularly concerning for poorer areas, where charities have a smaller presence and are less likely to be able to raise other funds.

This is leaving communities without the support they need.

In 2023 we surveyed 331 voluntary sector organisations. We wanted to understand:

• the scale of the issues faced by voluntary organisations delivering government funded public services
• the impact of these pressures on the public services they offer.

This report sets out the findings of our survey. Although the survey isn’t representative of the overall voluntary sector, it gives us a meaningful snapshot of the experiences of voluntary organisations delivering public services in 2023/24.

Survey methodology

The survey was carried out online between 1 August and 8 September 2023. Survey respondents were invited by NCVO and other voluntary sector infrastructure bodies to take part via email and social media.

Respondents weren’t representative of the overall voluntary sector in terms of organisation size. A large proportion were medium-sized (54%), with incomes between £100,000 and £1m per year. A disproportionately high number of large, major, and super-major organisations also responded to the survey.

We expected this. While small and micro-organisations make up the majority of the voluntary sector, they’re less likely to deliver public services.

The types of services delivered by survey respondents were also not representative of the sector as a whole. This is because we were only interested in organisations delivering government funded public services. For example, social services, health, housing, employment and training, and law and advocacy.

Respondents were geographically spread, although Scotland was slightly underrepresented.

You can learn more about the breakdown of survey respondents and methodology in the appendix.

We’ve published this report to raise awareness of the negative impact government funding decisions are having on voluntary organisations and their communities.

We hope this report and accompanying data will be used to support conversations and create change at both national and local levels.

Commissioners

We encourage commissioners to use this report to proactively open conversations with providers and voluntary sector partners about how to best work together.

The data shouldn’t be used to make decisions about individual grants and contracts or individual providers.

Voluntary organisations

Voluntary organisations struggling to deliver public services should take heart from this report. You’re not alone in facing these challenges.

We encourage voluntary sector organisations to read our survey findings alongside our help and guidance on delivering public services.

We recommend you use both resources to support conversations with commissioners.

Government and decision makers

You can read our recommendations for central government in the what we’re calling for section.

Decision makers at all levels of government have a role to play in improving public services for communities across the country.

We encourage decision makers to consider what changes you can make to ensure that people have the services and support they need for the long term.

NCVO is grateful to the many voluntary organisations that supported and fed into this report. They helped us shape the survey questions, disseminate the survey to their members and networks, and interpret the findings.

Their contributions to this work demonstrate the role and power of infrastructure in supporting and advocating for the voluntary sector.