Recession ‘to cost charity sector £2.2bn’ over next two years

Think tank Pro Bono Economics estimates that charity sector income will be slashed by £2.2bn within two years, based on its analysis of Chancellor Jeremy Hunt’s autumn statement.

It says that considering rising costs, government spending plans and household finances charity income will rise by around £1bn in cash terms during 2023/24.

But if costs rise in line with broader inflation the real value of the charities’ income will fall by £2.2bn over that period.

This is a 4% real terms decline from the level of income expected by the end of next year, the think tank added.

The analysis follows Hunt’s admission in his autumn statement that the UK is in recession. His statement outlined a raft of plans to cut government spending and increase taxes.

Early years, advocacy and employment training charities “are particularly exposed to risk” as government funding makes up a significant part of their income, the think tank as warned.

Pro Bono Economics director of policy and communications Nicole Sykes added that charities serving the vulnerable, including food banks and health services face a “grim winter” due to rising demand for help.

The think tank warns that volunteering rates could also be impacted, which will further weaken their ability to support people.

“With the country now in recession, living standards are set for the biggest hit on record,” said Pro Bono Economics chief executive Matt Whittaker.

“Surging inflation, spiralling borrowing costs and rising unemployment mean household budgets will come under severe strain. As has been the case throughout the cost-of-living crisis, the demand for charity support will be substantial.”

He added that the fall in charity income by the end of 2023/24 “all comes on the tail of unprecedented upheaval resulting from the pandemic, which has seriously weakened the charity sector’s resilience and ability to cope with increasing pressures from inflation”.

“Through the worsening economic headwinds in the coming months, charities will continue to support the most vulnerable and aid those left stranded by public service backlogs and delays.

“But the sector will need strategic investment now and in the long-term to weather this storm and future crises,” said Whittaker.

Swift support needed

Hunt also pledged to ensure benefits keep pace with inflation and will rise by 10.1% from April next year.

The decision has been welcomed by charities, which have been campaigning for this move.

But organisations including Refuge and the Children’s Society have warned that support for vulnerable people is needed immediately to help them this winter.

“The government has taken important steps to protect the most vulnerable in the Chancellor’s Autumn Statement, but benefit uprating will not kick in until the spring and timelines for additional payments are still unclear,” said Whittaker.

“Charity demand is already rocketing and will only intensify as we head into winter. Given the enormous pressure on public spending and household budgets, charity income will inevitably dip as people have less to give and government funds are stretched.”

Whittaker also called on charities to ensure they are engaged with government’s review of support to business and charities to meet rising energy costs.

Earlier this week separate analysis by agency Beautiful Insights estimated that festive fundraising could be reduced by £580m as more than a third of people are looking to cut back on their giving to good causes over the next three months.

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