What are the trends in income from government?


  • In 2020/21, government remained the second largest income source for the sector, behind the public. Income from government stands at £16.8bn and makes up 30% of the sector’s total income.
  • Income from government includes income from:
    • central government departments
    • local authorities
    • devolved and regional government
    • the EU and international governments
    • town and parish councils
    • NHS trusts
    • a range of non-departmental public bodies (NDPBs).
  • The income from government generally goes directly from the government body to the voluntary organisation. There are sometimes more complex arrangements such as:
    • subcontracting
    • match funding
    • direct payments to the beneficiaries.
  • These arrangements are much more difficult to identify in the data.
  • The majority of government income came from contracts to run public services and for fees provided by charities, which made up £13bn (77%) of all income from government. The remaining 23% (£3.8bn) came from grants.

Income from government made up a quarter of the sector’s income, of which three-quarters of sector income was contracts

Over time

  • Adjusting for inflation, compared to the previous year, income from the government rose by £960m or 6% in 2020/21, reaching £16.8bn, and 30% of total income.
  • As both a proportion and in real terms, income from the government rose from £11.7bn (32%) in 2000/01 and peaked in 2009/10, making up 37% of all income or £18.5bn. Government income then fell consistently as an amount and more dramatically as a percentage of all income until 2019/20 when government income declined to its lowest proportion of total income (26.2%), at £15.9bn.
  • The increase in 2020/21 has taken levels of government income back in line with those seen in 2017/18. This may be related to greater government activity during the covid-19 pandemic.
  • Contracts made up half (49% or £5.8bn) of all income from government in 2000/01, peaking at £15bn or 82% of all income in 2010/11. From then until 2017/18, contract income fell by £3.5bn or 24% to £11.4bn, though has increased by a further £1.6bn since then.
  • Grant income rose from £6bn in 2000/01 to £7.2bn in 2003/04 but halved to £3bn in 2012/13, recovering to £5.5bn in 2017/18 before declining again to £3.8bn in 2020/21. The rate of decline has slowed, however, in 2020/21: it fell by 21% from 2018/19 to 2019/20 but by just a further 3% in 2020/21. It remains to be seen whether the impact of the pandemic will drive an increase in 2021/22.

Government income has broadly plateaued over the last decade while falling proportionally over time, albeit with a small uptick in both amount and proportion in 2020/21

By source

  • Central government income made up roughly half of government income, worth £8.6bn 2020/21. This included 39% of total government income from government departments (the largest source) and 10% from the NHS.
  • In 2020/21, income from central government rose by 17% (£1.2bn) since 2019/20, to £8.6bn. Over the past decade (adjusting for inflation), this level had remained roughly between £7bn to £8bn every year and this increase means the highest level seen in that timeframe.
  • Income from local government was £7.2bn in 2020/21, with little change since 2019/20 (£7.1bn). There had been gradual pattern of decline over time, after peaking in 2007/08 with £9.7bn, falling by 26% to 2019/20. This decline has been halted in 2020/21, after a particularly large decline of 9% from 2018/19 to 2019/20.
  • Large, major and super-major organisations (income above £1m) receive 86% of central and 87% of local government income.
  • Both the increase year on year in central government funding and the lack of further decline in local government funding may be related to relatively greater funding during the covid-19 pandemic.

Over the last decade, central government funding has been relatively steady while local government funding has declined steadily over time; in 2020/21 there has been an uptick in central government funding and a halt to the decline for local funding

By size

  • Smaller voluntary organisations receive both a much lower proportion of their income and share from government. Micro and small organisations (income below £100,000) received 15% of their income from government and less than 2% of all government income.
  • Bigger organisations depended more on income from government as a proportion of their total income:
    • 25% for medium
    • 32% for large
    • 33% for major
    • 26% for super-major organisations.
  • As a share of the total, major organisations (income between £10m to £100m) took 37% of income from government while large organisations had 30%. Organisations with an income of over £1m had 87% of all income from government.

Larger organisations receive a greater share of all government income than medium and smaller ones

By subsector

  • Voluntary sector organisations working in social services received the largest amount of income from the government with £5.4bn or 42% of their total income, followed by health with £2.5bn or 37%. This was largely contracts for social services (91% of government income).
  • Playgroups and nurseries received a relatively higher proportion of their income from government (50%).
  • There have been substantial rises in income from government from 2019/20 to 2020/21 for health (£671m), culture and recreation (£367m), and social services (£288m). This was partially balanced by a fall in government income for the international (-£200m) and employment and training (-£296) sectors.

Social services and health organisations received almost half of all government income

Putting it into context

Income fluctuations

Fluctuations in income from government for the sector have historically been in line with departmental spending, with public spending cuts often happening at the beginning of spending cycles.

The Almanac data covered the fourth year of the 2015 spending review period, which set out £18bn of cuts to departmental spending by 2020.

The continuing small reductions in overall funding from government in the previous year up to 2019/20 is consistent with those spending review reductions. In 2020/21, the covid-19 pandemic had a strong influence on spending priorities, which is likely to explain the increase in government income for charities since 2019/20, particularly from central government.

The next spending review, announced in November 2020, will cover the year from April 2021, so will not have influenced the findings in this year’s Almanac.

Income distribution

The continuing uneven distribution of income from government across different-sized voluntary organisations reflects the trend towards the commissioning of large-scale contracts.

Major organisations, which receive the largest proportion of income from government, are more likely to have the resources and capacity to bid and deliver large-scale public service contracts.

This page was last reviewed for accuracy on 12 October 2023