mapping the cuts

Belinda Pratten and Rosie Chapman Associates

Mapping the Cuts

A report to the Esmee Fairbairn

Foundation

By

Belinda Pratten

May 2013

http://bprcassociates.com/

Belinda Pratten and Rosie Chapman Associates of 21 www.bprcassociates.com

Mapping the cuts: Executive Summary

This reports brings together evidence from a range of sources to build a picture of the impact

of welfare reform and public spending cuts on communities in the UK. It begins by looking at

the extent of poverty in the UK, highlighting differences within and between the four nations.

It then examines the impact of:

welfare reforms, particularly in the English regions;

cuts to local government funding;

cuts to the voluntary and community sector generally;

cuts to sectors of particular interest to Esmee Fairbairn Foundation, namely early

years and education; the arts; and the environment; and

wider policy changes to the voluntary and community sector.

A key finding is the extent of cumulative disadvantage arising from these measures: the

most vulnerable people in the most deprived areas are most affected by each and every one

of these changes.

Welfare reform

Welfare reforms hit hardest where deprivation is greatest; the worst affected areas are:

older, industrial areas – Yorkshire, North West & North East England will lose

around £5.2 billion a year; South Wales valleys (£1.07bn)

seaside towns such as Blackpool, Hastings, Yarmouth & Margate

some London Boroughs

In contrast, much of southern and eastern England and rural areas in the north will remain

largely unaffected by these changes.

Public spending cuts

The same pattern can be seen in relation to cuts to local authority funding: the frontloading

of cuts and targeting of specific grants to deprived authorities, has meant that these

authorities are being cut faster and harder. More deprived authorities are also more grant

dependent, and so lose more in absolute terms.

Council spending will be cut further next year: by 2015 it is estimated that councils will have

lost one third of their budgets; by 2019/20 councils will have a 29% shortfall between

revenue and spending, a funding gap of £16.5 billion a year

A key issue is the cumulative impact of cuts on the most disadvantaged individuals and

households: as well as losing income from benefit cuts, they are also most reliant on public

services and least able to afford alternatives.

Impact on voluntary and community organisations

All voluntary and community organisations (VCOs) are experiencing rising demand for their

services and falling income across all income streams. However, organisations in the most

deprived areas are more likely to be funded by the state and therefore more susceptible to

reductions in public expenditure.

Children’s services have been hit hard by local authority cuts: it is estimated that voluntary

organisations working with children and young people will lose over £400 million between

2011/12 and 2015/6.

Arts funding will be significantly squeezed in coming years, both as a result of Arts Council

cuts and as councils prioritise social and other public services.


These cuts will hit smaller and regional arts organisations and those working in and with

local communities hardest: these organisations are more reliant on public funding,

particularly from local authorities.

The environment appears to have been less affected by funding cuts but more affected by

a lack of policy coherence. There may be a need to build the capacity of the environmental

sector to enable it to shape and influence policy agendas.

More generally, VCOs are experiencing turbulence as a result of changes to

commissioning, with many local organisations not so much squeezed as squashed: too

small to compete, too big to survive without funding.

While there have been a number of government initiatives to help VCOs compete in this

environment, less attention and resources has been given to other roles that VCOs play:

campaigning and advocacy; developing and mobilising social capital; facilitating social and

economic participation; or as a source of social innovation finding new ways of addressing

social problems, from the bottom up.

The way ahead

The speed, scale and scope of change is unprecedented. We are now entering uncharted

waters, where there are no easy solutions and where social innovation is at a premium.

Meeting the needs of disadvantaged communities will require

effective co-operation and co-ordination across sectors and organisations;

the engagement of communities themselves; and

holistic approaches that address and create synergies between economic

development, social / community development and the local environment;

In the past communities would look to the state for support, but while many local authorities

are doing what they can to mitigate austerity, there is a limit to what they can now do.

Charitable foundations, however, could play a crucial role as social innovators, bringing

together people, ideas, money and power to create social change. The challenge for them is

to consider what austerity means for them and their willingness to test out what might work

in this new environment.


Mapping the Cuts

Introduction

This reports brings together evidence from a range of sources to build a picture of the impact

of welfare reform and public spending cuts on communities in the UK. It begins by looking at

the extent of poverty in the UK, highlighting differences within and between the four nations.

It then examines the impact of:

welfare reforms, particularly in the English regions;

cuts to local government funding;

cuts to the voluntary and community sector generally;

cuts to sectors of particular interest to Esmee Fairbairn Foundation, namely early

years and education; the arts; and the environment; and

wider policy changes to the voluntary and community sector.

A key finding is the extent of cumulative disadvantage arising from these measures: the

most vulnerable people in the most deprived areas are most affected by each and every one

of these changes. The final section highlights the need for innovative and holistic

approaches to tackle the problems that are starting to arise and which are likely to worsen as

austerity tightens its grip, with the bulk of cuts still to come.

Poverty & Inequality

Inequalities in income and wealth in the UK are high, both compared with other industrialised

countries and with 30 years ago.

The experience of poverty has changed in that time:

the proportion of pensioners living in poverty has halved since the early 1990s,i

although the majority of pensioners living below the breadline are women;ii

in-work poverty has increased in the last 3 years, a result of low pay and

underemployment: 1.4 million part time workers want full time jobs

there is a high turnover of people claiming Job Seekers Allowance: although the

number of claimants at any one time stayed at 1.6 million between 2010-2012, 4.8

million claimed JSA at some point in that period;

the number of unemployed young adults seeking work has been rising since before

the recession: 22% of 16-24 year olds were unemployed in the first quarter of 2012,

compared to 6% of 25-64 year oldsiii

In Scotland: deprivation is less severe than for the UK as a wholeiv: the child poverty rate is

7% lower than the UK average, but this is largely due to lower housing costs.

In Northern Ireland, 36% of households do not have what people consider to be basic

necessities; comparisons across a range of indicators show that social exclusion has

increased since 2003.v

In 2009/10 22% of people in NI were living in poverty. Since the middle of the last decade

poverty for children, working age adults and pensioners has increased (NI is the only country

where pensioner poverty has increased). Other key trends:

increase in in-work poverty: half of the 120,000 children living in poverty live in

working households

between 2009 and 2011, 34% of working age adults in NI were not in paid work –

higher than UK average, but similar to Wales & north east of England


7% of working age people are out of work because of long term sickness and

disability, compared to UK average of 4%vi

In Wales nearly 400,000 working age adults; 200,000 children and 100,000 pensioners in

Wales are in poverty (after housing costs)

One third of these adults are either disabled or have a disabled partner

One quarter of these children live with a disabled adult.

Half the children in poverty belong to working families

Half the improvement in the child poverty rate between mid-1990s and mid-2000s

has been lost in the last 5 years

The London factor: ‘inequality in any dimension is wider in London than any other region.

And inequality in earnings and income has risen faster in London over the last decade than

anywhere else’vii.

Unemployment

There have been significant increases in underemployment and in male unemployment in

Wales; those with the lowest qualifications have been hit hardest by the recession – a 10%

drop in their employment rate in the 3 years from 2007viii. The Central Valleys area has the

third highest percentage of workless households in the UK at 28.7%.

In Scotland underemployment and youth unemployment, are, on average, similar to other

parts of the UKix. However, Glasgow City has the fourth highest percentage of workless

households in the UK at 28.7%.

In England, 31.6% of households in Liverpool are without work, this is the highest

percentage in the UK (and has been for the last four years). South Teeside and

Sunderland are also experiencing high levels of worklessness, affecting 29.1% and 28.2%

of households respectively.

Of the five local authority areas with the fewest number of workless households, four are in

the south of England, Oxfordshire being the lowest. The other is East Cumbria, highlighting

disparities within regions.

Public sector employment

In December 2012, 5.7 million people worked in the public sector in the UK, representing

19.2% of the workforce, the lowest percentage since records began in 1999.

Public sector employment is highest in Northern Ireland (27.7%) and Wales (25.7%).

In England, the public sector accounts for just over 19% of the workforce, but it is higher in

the North East (22.2%), the North West (20.3%) and Yorkshire and Humber (20.6%).

These areas are more vulnerable to public sector cuts: local government employment has

already fallen by 24% in the North East and by 14% in the North West of England.

The loss of public sector jobs will also have a disproportionate impact on women and people

from Black and minority ethnic (BME) communities, who are more likely to work in this

sectorx.

Yet it is estimated that 75% of public sector job losses are still to come.

Inequalities between social groups


Although deep-seated and systematic differences between social groups (eg by gender,

ethnicity, disability) remain, some of the widest gaps have narrowed in the last decade.

Nevertheless:

women’s unemployment is at a 25 year high and women’s pay remains on average

22% below that of men, but public sector jobs have offered more equal pay and

career opportunitiesxi;

between 2008-2011 BME employment rates declined, with Black African and

Caribbean people 2.5 times as likely to be unemployed as White people (and more

likely to be / have been working in the public sector)xii;

although the proportion of disabled people not working fell slightly from 2001-2011,

from 53% to 49%, they are still more likely to lack work but want work and if in work

to be low paid;xiii

the low level of part time pay is a crucial factor in the earnings of women, certain

ethnic groups and disabled people, but these groups also experience an

‘employment penalty’ that cannot be explained by qualifications or occupation.

However, inequalities within groups is growing, eg the gap between high and low paid

women is now as significant as between women and menxiv.

Impact of welfare reform in England & Walesxv

Welfare reforms hit hardest where deprivation is greatest; the growing spatial polarisation of

wealth and income, particularly in England, will mean that they will have a significant impact

in some areas. This in turn will have a knock on effect on local economies.

The worst affected areas are:

older, industrial areas – Yorkshire, North West & North East England will lose

around £5.2 billion a year; South Wales valleys (£1.07bn)

seaside towns such as Blackpool, Hastings, Yarmouth & Margate

some London Boroughs

beyond the largest cities, County Durham and Cornwall are particularly adversely

affected

Much of southern and eastern England and rural areas in the north will remain largely

unaffected by these changes.

A key issue is the cumulative impact of cuts on individuals and households:

the biggest financial impact comes from the reform of incapacity benefits: individuals

affected can expect to lose £3500 a year;

many of them will also be affected by changes to Disability Living Allowance, and

may expect to lose an average of £3000 a year

they may also lose entitlement to housing benefit changes, leading to a further

significant loss of income, often £1000 a year

While these reforms appear to target individuals with some level of disability, it should be

noted that:

nearly half of those reporting ‘work-limiting’ disability or classed as disabled under the

DDA have no or low qualifications – twice as many as those who are not disabled;

their paid employment rates are less than half of people who are not disabled – and

this ‘disability penalty’ has grown over the last 30 years, with some evidence to

suggest discrimination by employers;


DDA disabled have a median net income 30% less than that for working age adults –

even taking into account social security benefits intended to cover the extra costs of

being disabledxvi.

Given the extent of change, it is likely that more claimants will need professional advice and

support to claim their entitlements. But a £350 million cut to the legal aid budget in this

financial year (2013/14) will make this more difficult to come by, with Shelter, the Red Cross

and Citizens Advice Bureau all reporting significant cuts in advice services.

The introduction of Universal Credit will not, by itself, change the amount of income

households receive, but it will:

be paid on a monthly, rather than weekly basis;

include housing benefit, previously paid direct to the landlord; and

go to fathers rather than mothers in two-parent households (unlike child benefit).

This will be challenging for many people: already an increasing number of families are

experiencing food poverty, in London alone the number of food banks rose from six food

banks feeding 400 people in 2009, to 40 feeding 34,000 in 2012/13. One third of households

currently do not have enough money to cope with necessary but unexpected costsxvii - and

changes to the social fund, making it discretionary, will make it even harder to budget for

such events, leading to more rent arrears and evictionsxviii.

And this is taking place against a background of entrenched financial exclusion in some

communities. Five million households do not have access to financial services; in the most

deprived areas there are very few free ATMs for those who do. Because poorer people are

more likely to take out smaller amounts more frequently, they are doubly disadvantaged by

chargesxix.

Further cuts to welfare spending are expected to be announced in June, when the

Chancellor will announce his spending intentions for 2015-16. This includes a previously

announced cap on annually managed expenditure, of which working aged benefits, including

tax credits, housing benefit and some disability benefits are the main target.

Geographical impact

Blackpool is the worst affected area, with a high proportion of adults on out of work benefits;

one of the highest incapacity claimant rates in the country; and a high proportion of

households in the private rented sector.

Knowsley will also be hard hit, with all changes except the household benefit cap having a

significant impact.

South Tyneside will be particularly affected by changes to under-occupation; council tax

benefits and non-dependent deductions.

As noted below, both Knowsley and South Tyneside councils have been amongst those

hardest hit by changes to local authority funding.

The South Wales Valleys will be severely affected by changes to Disability Living

Allowance and Incapacity Benefit (IB): the three most affected areas for IB, and 7 of the ‘top

twenty’, are in South Wales.

Wales has a higher dependence on welfare benefits than Great Britain as a whole. For

example, in May 2011, 18.4 per cent of the working-age population in Wales were claiming


welfare benefits compared to the average of 14.5 per cent for great Britain. The main reason

for this is the higher proportion of people claiming disability and sickness benefits.xx

Liverpool, the most deprived local authority area in Britain, is amongst the 20 hardest hit

areas for all categories.

London

The Household Benefit Cap (HBC) impacts overwhelmingly on London, largely because of

high rent levels and high numbers of people claiming housing benefit; outside of London it

has hardly any impact at all.

Although it impacts on fewer households, the impact on each is relatively large. Therefore

the HBC and other housing benefit reforms mean that Westminster is the second highest

loser (after Blackpool) in financial terms.

However, in terms of the number of individuals and / or households, Brent is the worst

affected borough; it too is particularly affected by the HBC and changes to Local Housing

Allowance for households living in private rented accommodation.

Some London boroughs have said that they want to transfer homeless families and others in

priority housing need to areas such as Stoke or Walsall where housing is cheaper. However,

while there is political capital to be made from such announcements, councils may find it

more pragmatic to go for a more dispersed approach. It is not yet clear what the picture will

look like in a years time, except that there will be increased insecurity and transience for the

most vulnerable families.

Elsewhere, places such as Croxteth in Liverpool report social housing being boarded up as

tenants move out of ‘underoccupied’ homes, leading to further decline of the areaxxi.

Scotland

Scotland is less affected, partly because poverty is less concentrated and partly because

housing costs are lower. Nevertheless the Scottish Government has estimated that the

cumulative impact of welfare reform in Scotland to amount to a £4.5 billion cut in income; £1

billion of which will have a direct impact on children

The Scottish Government has sought to mitigate the impact of these reforms by funding

social landlords and advice agencies, including Citizens Advice Scotland, and pilot projects

in 3 local authority areas, to provide advice and support to those affected.xxii

Both the Scottish Government and the Welsh Assembly have chosen not to pass on

reductions in Council Tax Benefit (CTB) to local authorities.

In England, 18% of councils will retain the current level of CTB, but 71% will require all

working-age adults to pay at least some council taxxxiii. In North West England, for example,

the poorest residents in Blackpool will not have to pay any council tax, while in Knowsley

every person of working age will have to pay at least 20%.

Changes to local government funding

The 2010 Comprehensive Spending review cut central government funding to local

authorities by 28% over 4 years.

Key features of the new formula, including frontloading of cuts and targeting of specific

grants to deprived authorities, has meant that these authorities ‘face a swifter and more

severe cut.’ More deprived authorities are also more grant dependent, and so are likely to

lose more in absolute terms. xxiv


As can be seen from the table below, Liverpool, the most deprived authority in England loses

11.3% of its cash spending power, making it the worst off under the new arrangements;

whereas the most affluent, Wokingham, is one of the least affected, losing only 0.6%.

Grant changes for unitary authorities 2011/12: greatest impact on spending power (worst off)

(Index of Multiple Deprivation score in brackets)

Grant changes for unitary authorities 2011/12: least impact on spending power (best off)

(Index of Multiple Deprivation score in brackets)

Liverpool (1) Richmond-upon-Thames (309)

Manchester (4) Wokingham (353)

Knowsley (5) Poole (216)

Blackburn with Darwen (17) Windsor and Maidenhead (323)

South Tyneside (38) Cheshire East (256)

A similar picture can be seen in shire districts, with Great Yarmouth, Burnley and Bolsover

biggest losers and East Dorset, Elmbridge (Surrey) and Hart (Hampshire) the least affected.

The required savings can only be met by significant cuts in spending on public services,

hitting the most disadvantaged hardest: they are most reliant on public services and least

able to afford alternatives.

Council leaders are looking to make ‘even deeper cuts’ next year, with arts and sports; youth

services and care for people with moderate needs being the main targets. By 2015 it is

estimated that councils will have lost one third of their budgets.xxv

But this is only the start: the Local Government Association estimates that by 2019/20

councils will have a 29% shortfall between revenue and spending, a funding gap of £16.5

billion a year.xxvi

In Scotland, the Scottish Government has sought to maintain the overall share of its budget

that goes to local authorities ‘despite funding cuts imposed by the UK government’. Councils

will lose on average 2.6% in cash terms (6.4% of revenue budget)xxvii

Impact of cuts on the voluntary and community sector

Public sector spending cuts are having a direct impact on the 25 – 35% of voluntary and

community organisations that rely on the state for funding.

An analysis of cuts to voluntary organisations in London and 8 other major cities, undertaken

by LVSC and GMCVO found that in all areas VCOs were experiencing rising demand for

their services and falling income across all income streamsxxviii. However, sectors / services

that are most reliant on government funding have been hardest hit:

Children England estimates that organisations working with children and young

people will lose over £400 million between 2011/12 and 2015/16xxix;


CLINKS reported that in 2011 86% of organisations working in criminal justice had

been negatively affected by the cuts and wider policy changes; 80% reported a fall in

income, 77% were drawing on reservesxxx;

Justice for All has claimed that ‘advice agencies are on the brink of collapse’, with

22% facing closure and most making major cutbacks

WRC reports that 75% of women’s organisations in London had to reduce or close

services and 58% made staff redundancies in 2012/13, even though demand for their

services had increased during that timexxxi.

Although there are more voluntary and community organisations (VCOs) in less deprived

areas, these are more likely to be unfunded organisations working in the field of arts, culture

and education, reflecting the greater levels of social and cultural capital in such areas.

Organisations in the most deprived areas tend to be larger (£100,000+) and more involved

in economic well-being and delivering public services; significantly organisations in these

areas are more likely to be publically funded and therefore more susceptible to reductions

in public expenditurexxxii.

This suggests a high degree of interdependence between local authorities and local

voluntary organisations in certain neighbourhoods: the voluntary sector providing reach and

responsiveness; councils providing resources. The combined pressures on both is likely to

lead to reduced provision and worse outcomes in the most deprived areas.

Local authority planning and development budgets were an early spending target, being cut

by 43% on average in 2010/11. This was largely due to significant cuts in economic and

community development programmes, particularly in London and the northern and midlands

regions of Englandxxxiii. This is likely to have had a knock on effect on the resilience of local

communities.

At the same time, Regional Development Agencies were replaced by Local Economic

Partnerships, with much greater involvement of business and no requirement to engage the

voluntary and community sector (or local communities). This means that local organisations

and local people will be excluded from development decisions in many areas.


Impact of cuts by sub-sector

Early years and education

People’s occupational and economic destinations in adulthood depend to an important

degree on their origins. The early years have a significant impact on life chances:

children entering primary school in 2005-6 whose mothers had degrees were 6

months ahead of those with no qualifications;

every £100 per month in income when children were small was associated with a

difference equivalent to a months development.

This gaps widens through childhood:

By age 16, half of boys receiving free school meals have results in bottom 25% in

England; bottom 20% in Wales;

White British, Black Caribbean boys and mixed WB / BC boys have lowest average

assessment of any group except Gypsy and Traveller children (who have the worst

results at age 16);

Low income acts as a barrier to post-compulsory education: young people with

GCSE results above the national median who were in receipt of free school meals

are less likely to go on to HE.

Today, youth unemployment stands at 1 million, and rising – the third highest in the OECD

after Spain and Greece – the costs of which will be borne by individual young people and the

society as a whole for many years to come.xxxiv Given the relationship between disadvantage

and low achievement, young people from the poorest backgrounds will be most affected.

A study of children who ‘succeed against the odds’ highlights the importance of the home

environment: parents who value learning and engage their children in learning activities from

a young age and throughout their schooling.

As well as supporting school-related activities, these parents draw on what cultural capital is

available within their own social networks, however limited, and encourage a variety extra-

curricula activities, giving children a positive attitude to learning and to themselves as

learners. This, together with average or good quality pre-school education, can alleviate the

effects of disadvantage. xxxv

Evaluation of the previous government’s Sure Start programme found that those attending

Children’s Centre’s experienced positive improvements in the home environment, including

more cognitive stimulation. However, children’s services have been hit hard by local

authority cuts and the removal of ring fenced funding for Children’s Centre’s will exacerbate

this, so that future families may not benefit from the Sure Start approach.

The cuts have had a particular impact on local voluntary organisations working with children

and young people. According to Children England:

‘It has been cautiously estimated that the children, young people and families

voluntary and community sector will lose a total of almost £405 million in statutory

funding between 2011/12 and 2015/16. The lion’s share of this cut, £324 million will

come from local government …’xxxvi

There appears to be an expectation that the voluntary sector will replace lost statutory

provision, but it cannot do this without funding and the children’s sector has been more

reliant on statutory funding than other voluntary organisations.


At the same time funding cuts to arts and cultural events will limit access to school visits and

extra-curricular activities with a corresponding loss of essential creative learning

opportunities.

Changes to housing benefit and tenure will also make vulnerable children’s lives more

transient, more frequent moves between accommodation and less emphasis on maintaining

a local connection will have a direct impact on their schooling and their life chances.

Children England describe these changes as a ‘perfect storm’.

Both the Scottish Government and the Welsh Assembly have anti-poverty strategies that

include a strong focus on early years support and developing skills and work experience

opportunities for young people.

Arts sector funding

In 2011 just over half of the art sector’s income came from statutory sources; approximately

one third came from income generation (box office; shops) and one sixth from private

sources.

However, it is not just the amount of funding that is important, but the way it can be used as

leverage: according to the National Council for the Arts, every £1 invested by the Arts

Council generates a further £2 from private and commercial sources. While the funding mix

could be improved, it is not clear that this can be achieved by cutting public subsidies.xxxvii

In 2011, 206 arts organisations received 100% funding cuts, worth, £19.1 million from Arts

Council England. The majority of these organisations were visual arts (24.8%); combined

arts (21.8%) and theatre (18.4%).

Local government has been the second most important funder of the arts (£220.5 million in

2009/10), cuts to council spending is having a major impact, with Somerset and Moray both

cutting their arts budgets by 100% and others seeing it as a ‘soft target’.

It is clear that the Arts will be significantly squeezed in coming years as councils prioritise

social and other public services, as the recent controversy in Newcastle has demonstrated.

These cuts will hit smaller and regional arts organisations and those working in and with

local communities hardest: these organisations are more reliant on public funding,

particularly from local authorities.xxxviii

A survey of the impact of budget cuts on theatres found that:

2/3 of respondents had cancelled one or more productions since April 2012;

fewer new plays are being commissioned or produced (with a consequent impact on

the development of new writers / writing);

again, regional theatres have been disproportionately affected, along with youth and

community theatre work;

staff are spending increasing amounts of time fundraising, rather than on core artistic

activity in the face of multiple cuts (Arts Council, local authority, trusts and

foundations) and reduced consumer spending.xxxix

A similar survey by the Museums Associationxl found that:

51% of respondents had their funding cut in 2012/13 (60% local authority, 26%

independent);


almost 1/3 were cut by 10% or more and of these 83% had reduced staffing levels;

43% had reduced access to their collections; 49% had introduced or increased

charges for school visits;

of those who had experienced a cut of less than 10%, 42% had cut staff, 22% had

reduced access

31% had had their budget cut two years in a row, and 1/3 of these had experienced

cumulative cuts of 35% or more.

As a consequence, museums are becoming more focused on audiences, and more effective

at engaging with groups and communities, but there is a concern that this is at the expense

of research, development and curating, leading to a loss of core skills and expertise in these

areas over time.

Although charges are not the only barrier preventing people from poor and marginalised

groups accessing museums and galleries, they are a barrierxli that if introduced or increased

would make it more difficult for those parents who are trying to help their children ‘succeed

against the odds’.

The Government has said that the case for future arts funding will rest solely on its economic

value. This case can be made: Nesta has estimated that the creative industries contribute

some £50 billion every yearxlii.

However it is important that value is defined broadly. Creative skills and achievement is

‘obvious in the arts but essential to achievement in all other fields, including the sciences

and business’. In a knowledge-based economy these skills encourage innovation,

communication, motivation and self-esteem.xliii

A recent study of community arts projects has found that participation in arts groups helps to

create social networks and promote social cohesion as well as leading to increased

confidence and the development of transferable skills for future employment for individual

participants (but less evidence of a direct economic impact)xliv.

It is not at all clear that private philanthropy will fill the gap left by the loss of statutory funding

and the leverage it provides, particularly in relation to smaller, less prestigious organisations

and those working with communities. And as major funders such as the Arts Council and

local authorities disengage, other potential funders may be unwilling to support ventures that

might be considered to be ‘sub-prime’.

The organisation Mission Models Money has identified a need for greater collaboration

between arts organisations to build up the resilience of both individual organisations and the

arts sector as a whole. It suggests that funders can play a key role in promoting collaboration

by:

using their convening power to connect potential collaborators;

building on existing assets and sharing learning from successful partnerships; and

support the costs of technical assistance needed to facilitate collaboration.xlv

In this way funders can make best use of their funding and create a more healthy and

sustainable ecosystem.

The environment

Although local government spending on environmental services were cut in 2010/11, this is

one area where spending was expected to rise, by 1.7% in real terms in subsequent years.

However, transport spending has been harder hit, with some councils seeing real-terms


reductions in spending of more than 23.7 However, this does vary, with a few councils

reporting expected increases, albeit very slight.xlvi

A more significant issue appears to be the lack of a detailed policy framework for the

environment at central government level, with reports of political disagreement between

Coalition partners on this issue adding to a sense of disarray. For example, attempts to

promote pro-environmental policies are sometimes seen as adding to the burden of ‘red

tape’, and therefore as having a negative impact on business and the economy, as the

recent debate on the use of neonicotinoids has shown. Confusion over feed-in tariffs for

solar energy has also had a negative impact on the development and implementation of

renewables.

Anecdotal evidence from key environmental organisations suggests that this makes it harder

for them to engage with government at the level of strategy and policy, instead they are

having to react to decisions that have already been taken on an ad hoc basis.

Environmental issues are only on governmental agendas because of campaigns by

environmental NGOs. Yet despite overwhelming scientific evidence demonstrating the

causes and consequences of climate change, and the fragility of many ecosystems,

wholehearted support is still lacking. Many opinion-formers, including those in the media and

in Parliament, remain sceptical. Perhaps it is time for those NGOs to reclaim the agenda and

play a more active role in leading and shaping policy.

For this to happen, resources will be needed to develop policy skills and capacity within

these organisations and build strategic alliances across the sector, so that their collective

expertise and voice can influence policy agendas. The Esmee Fairbairn Foundation has a

long history of supporting environmental action and promoting collaboration in this area and

therefore would be well-placed to identify potential collaborators and leaders who could take

on this mantle, giving them the support they need to set the agenda.

Wider impact of policy change on the VCS

VCOs are also experiencing turbulence as wider policy changes impact on the sector’s

operating environment. Local and regional surveys of the VCS in England suggest a middle

that is not so much squeezed as squashed: too small to compete, too big to survive without

funding.

Over the last two decades, the role of many local voluntary organisations has changed from

providing services that are complimentary or ancillary to the welfare state, to delivering

services on behalf of the state. Linked to this has been a shift in funding from grants to

contracts. This has left them vulnerable to rapid and significant changes in contracting and a

much more competitive environment.

Statutory funders are allocating scarce resources to those in greatest need, leading to cuts

in prevention and ‘non-crisis’ services that VCOs are more likely to provide. At the same

time, new commissioning and procurement arrangements make it more difficult for them to

compete:

Payment by results: favoured by central government, the most prominent example being the

Work Programme. VCOs have been disadvantaged because they are too small to be prime

providers; have been given unfavourable terms of contract from primes; and have received

fewer referrals than anticipated. A lack of working capital also makes it harder for them to

manage deferred payments.


Any Qualified Provider: more contracts are open to tender from providers in any sector:

public, private or voluntary. In this environment, size is more significant than sector, with

local voluntary organisations and small local businesses now having to compete against

larger, national VCOs or companies such as Serco that can afford to invest in bidding for

contracts and have the expertise to do so.

Economies of scale: as local authorities and other statutory bodies seek to make efficiency

savings they are offering fewer, larger contracts, making it more difficult for smaller ‘niche’

providers to compete.

Personalisation: in theory the personalisation agenda should play to the sector’s strengths,

which include: closeness to the clients / communities they serve; understanding their needs;

and developing tailored responses to meet those needs. However, it also brings with it the

uncertainty of irregular usage (and the possibility of future cuts to individual budgets) as well

as much higher administrative costs associated with individual rather than block contracts.

There may be a role for VCOs in providing advocacy or brokerage services to those with

individual budgets, but this would need to be appropriately funded and supported, a prospect

that does not seem likely in the current financial climate.

Many VCOs are having to decide whether or not to compete in this environment. It is

possible that the increased marketization of public services leads to less choice for service

users as these providers are squeezed out.

Potential responses

One response from charitable foundations might be to identify ways of enabling

organisations to compete more effectively in this environment. For example, there is

evidence to suggest that those organisations with the confidence and experience to

challenge ‘prime contractors’ have fared better under the work programme than others.

However, there is already some investment in these areas, for example:

Capacity building: this is a major focus of the Big Lottery Fund’s infrastructure

workstream and anecdotally some local authorities also see this as a priority for

infrastructure (one will only fund ‘market development’);

Social investment: Big Society Capital has been established to bolster the social

investment market and address issues of under-capitalisation.

But a concern is whether VCOs are becoming more like business in this environment, rather

than simply more business-like. There are huge dilemmas for mission-driven organisations

trying to survive in a market-driven world.

What is missing in the current environment is any focus, or resources, on the other roles that

VCOs play:

advocating on behalf of marginalised individuals and communities, ‘speaking truth to

power’;

giving people the skills and confidence to speak for themselves;

developing social networks and social capital and increasing social and economic

participation, particularly in disadvantaged areas (often in ways that reduce reliance

on public services); and

as a source of social innovation, finding new ways of addressing social problems,

from the bottom up.


Voice and advocacy

Anecdotal evidence from VCOs suggests that Government tends to consult at a late stage,

seeking input on implementation rather than policy development. Indeed, the decision to

reduce the minimum time for consultation implies that it is not valued, seen as a delaying

tactic rather than a means of improving policy. Failure to consult effectively means that the

sector’s expertise is lost and the voices of marginalised individuals and communities are

excluded from policy debates.

Government criticism of advocacy and campaigning has been mounting in recent years and

is likely to intensify in coming months. Eric Pickles, for example, has told local councils they

should save money by cutting funding to ‘sock puppets and fake charities’xlvii while

campaigns by Save the Children and Shelter, highlighting the plight of people in poverty in

the UK, have come under sustained criticism in some quarters for being ‘political’.

There is also evidence of:

the increasing use of gagging clauses in Government contracts; xlviii

self-censorship by some organisations either because they do not want to ‘bite the

hand that feeds them’ at a time of austerity or because ‘there is no money in

advocacy’xlix; and

nobody is listening.

National charities with a high fundraising profile are perhaps better able to speak out than

medium-sized charities that are more reliant on restricted funding for particular projects or

services: most funders will only fund frontline work. The Women’s Resource Centre, for

example, has lost almost all of its funding for policy work and even larger bodies such as

NCVO have made major cuts in this area. The loss of policy skills and capacity, combined

with the rapid pace of change, makes it harder for VCOs to be proactive, to set the agenda

rather than simply respond to Government initiatives.

Locally, the focus on the capacity building role of local infrastructure organisations (LIOs),

means that fewer resources are available to build connections between organisations at this

level (bridging social capital) or to represent their interests to decision-makers (linking social

capital).

Without this it is harder for organisations to work together to support local communities,

share experiences and learning or make common cause: a healthy voluntary sector

ecosystem needs LIOs to make these bridges and links.

Against this background charitable foundations play a crucial role in ensuring that space for

campaigning is protected and organisations have the confidence and skills needed to be

effective advocates and campaigners and enable individuals and communities to make

themselves heard.

Social capital and community resilience

A key finding here is the cumulative impact of austerity on poorer communities and the

negative impact this will have (is having) on the resilience of local people in disadvantaged

communities and their ability to challenge or engage with decisions that affect their lives. But

it is important that attempts to counter this see individuals and communities as active change

agents, not as passive victims.

Social networks can be restricting, limiting aspiration to the lowest common denominator.

But they can also be a significance source of social capital and social exchange, enabling


people to share resources and opportunities and work together to address or challenge

common problems. This is particularly important for those in poverty:

‘Networks also underpin economic and collective resilience, reinforcing a shared

capacity to recover from setbacks and adapt to changing circumstances.’l

The Greater Manchester Poverty Commission recently found evidence of such resilience:

‘communities working together to alleviate the negative impacts of poverty and make their

communities better places to live’. The question it poses is what more can be done to

harness this energy and creativity, eg supporting communities that want to set up informal

co-operatives.li

While VCOs can – and do - facilitate and support social networks, opportunities for casual

interaction in an area, for ‘sociability’, at local events or amenities such as shops, pubs,

parks or other public spaces are also important, enabling networks to grow organically. This

suggests that the quality of the physical and economic fabric of an area can help or hinder

people getting to know and trust each other. It can therefore have a crucial effect on

community resilience.lii

Attempts to mitigate the impact of austerity on disadvantaged areas therefore need to use

holistic approaches that address and create synergies between economic development,

social / community development and the local environment, focusing on place as well as

people. As previous regeneration programmes have found:

‘locally tailored interventions with individually tailored support, sustained over time,

are important factors in success, as long as there are strong connections with the

wider labour market.’ liii

This focus on place is important because the way in which the austerity agenda is playing

out in different areas reflect factors that are specific to each locality, including:

its relationship to the housing market;

links to the wider economy and the quality and quantity of jobs available;

the fabric of the physical environment;

the existence of social networks that foster a sense of community, leading to a

culture of resistance and resilience;

the role of the local council and other influential bodies, including grant funders.

Going forward

Public spending cuts have already had a significant impact, but this is only the tip of the

iceberg, deeper cuts to jobs and services are yet to hit. In England there are also signs of a

growing north – south divide, with many disadvantaged areas being hit by the triple whammy

of welfare reform; the loss of public services; and cuts to voluntary and community

organisations.

The speed, scale and scope of change is unprecedented. We are now entering uncharted

waters, where there are no easy solutions and where social innovation is at a premium.

In the past communities would look to the state for support, but while many authorities are

doing what they can to mitigate austerity, there is a limit to what they can now do.

This also has an impact on the role that charitable trusts and foundations might play:

previously they might have pump primed innovative projects or services that would, if


successful, become part of the ‘mainstream’. Today the mainstream has dried up. As one

CVS Director has said, ‘what we are left with is a lot of rusty old pumps’.

Meeting the needs of disadvantaged communities will require effective co-operation and co-

ordination across sectors and organisations and the engagement of communities

themselves. This might include, for example:

harnessing local assets, including the creativity and imagination of local people as

well as local agencies - schools, business, arts organisations, the local council;

developing leadership and entrepreneurial skills in those who are most marginalised

in the labour market (eg women, young people, people from BME communities);

facilitating new partnerships eg between the financial services industry and third

sector organisations, including social landlords, to ensure that people have access to

basic banking services and objective debt advice.

Specifically there is a need for approaches that

respond to the needs of particular areas, addressing causes rather than symptoms;

deal with problems in their complexity, rather than just one element;

encourage experimentation and creativity;

enable small organisations to test out new ways of working with local communities,

particularly with hard to reach groups;

create new partnerships and synergies between different organisations, agencies

and activities, for example recognising and valuing the role of arts organisations in

community regeneration and resilience.

Charitable Foundations such as Esmee Fairbairn are therefore well placed to become a

catalyst for change. But they need to do all of the above at the same time: bringing their

experience of working across different strands of activity to more intensive work to counter

the impact of degeneration in specific localities.


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xlii

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mapping the cuts

Documents