Charities provide vital support for struggling people—but they're also feeling the squeeze

Charities are leading creators of social capital—and they need help to cope with rising costs

August 15, 2022
Photo: Gordon Scammell / Alamy Stock Photo
Photo: Gordon Scammell / Alamy Stock Photo

“Can't believe I'm writing this, but I wonder if this winter we’ll need 'warm banks' the equivalent of 'food banks' where people who can't afford heating are invited to spend their days at no cost with heating?”

This was the disturbing suggestion last month from consumer champion Martin Lewis. Charities, churches and other religious spaces have long been at the heart of community resilience—providing safe spaces and nurturing the relationships within and between communities which build trust and enable people to share information, find out about opportunities and help one another. From coffee mornings and toddler groups, to foodbanks, cooking classes, cricket clubs and debt advisers, they form a web of support and enrichment which many of us will rely on or benefit from throughout our lives. 

During the pandemic, charities were able to swing into action faster than many public bodies, using their position of trust to identify the most pressing needs and adapting quickly to meet them. As the cost-of-living crisis intensifies, foodbanks and debt advisers are seeing an unprecedented wave of demand. By the end of this year, Citizens Advice expects to have given crisis support to 57 per cent more people than last year. Mental health and domestic abuse charities are bracing for this wave of hardship to drive up demand for their services next.  

Charities have a unique place in public and political debate, combining insights form their work in communities and supporting vulnerable groups with political independence. They have been among the most compelling voices calling for greater help from government for the people they support. This weekend, over 70 charities and community organisations signed a letter calling on the two remaining Conservative Party leadership candidates to show “compassion and leadership” to those on low incomes by significantly increasing the support on offer to meet soaring energy and food costs. 

But many charities are themselves struggling to meet these rising costs. The Theos think tank reports a “deepening crisis facing institutions like churches, charities and voluntary groups” trying to keep open church halls, scout huts and community centres. It highlights struggles to keep other services, such as food deliveries, going as petrol and food prices climb. Gareth McNab of Christians Against Poverty recalls one church leader telling him a couple of weeks ago that their energy bill was set to rise by £30,000 a year from October. Lori Hughes of PKAVS (a charity in Perth and Kinross) echoed this, saying, “We are looking at energy prices as our contract is up. The gas hike in particular is astronomical. We budgeted for an increase of around a third, but this is up hundreds of percent. Core cost funding rarely rises with inflation, so reality is it’s likely to be reserves. It’s precarious times for the sector.” 

Many of those who require support from charities are especially exposed to rising energy costs, particularly disabled people with conditions made worse by cold or needing energy to run lifesaving equipment. Many charity-run care homes and therapy centres face eye-watering bills to keep residents warm and provide treatments such as hydrotherapy. Martin Lewis’s “warm banks” will provide cold comfort if they can’t even afford their own heating bills. 

These costs are landing on a sector whose finances have been battered by the pandemic, with donations falling as rising bills leave people with less spare money to give. The think tank Pro Bono Economics estimates that the double whammy of the pandemic and cost of living crisis is likely to leave the charity sector’s income more than £5 billion lower in 2022 than it might have expected in 2019.  

The government already provides support to charities through grants and measures such as 80 per cent relief on business rates, but more is needed. Hannah Rich, of Theos, argues that charities could be exempted all together from business rates for a time and an energy price cap could be introduced for third sector organisations and faith groups. McNab also proposes a new price cap for charities, or for the Department for Culture, Media and Support to provide grants to charities covering the difference between this year and last year's energy bills. Others are calling for funders (philanthropists, trusts, foundations and government funders) to follow precedents set during Covid and offer greater help and flexibility to grantees to enable them to tailor their resources to the current crisis. Tax changes could also help. Matt Downie (CEO of homelessness charity Crisis) suggests increasing gift aid (which currently allows charities to claim an extra 25p for every £1 donated by a taxpayer), increasing the amount charities are allowed to pay volunteers for mileage or introducing tax exemptions for fundraising costs.  

And it’s not just the immediate crisis that makes action imperative. The contenders for prime minister have been criticised at times for debating the best way to promote long-term growth rather than focusing on responses to the current crisis. It is clearly vital for the new prime minister to act fast with a package of support to hold back a wave of hardship, debt and destitution as energy bills rocket again this winter. But they are right that we need a longer-term strategy for growth and economic security, to build up our national resilience to future shocks.  

The potential long-term damage to civil society from rising costs and falling incomes is troubling. Social infrastructure—the places, organisations and connections that support community life—is as important as “hard infrastructure,” like transport and broadband, when it comes to creating strong economies that deliver rising living standards. Charities are leading creators of social capital, which is necessary alongside financial capital to revive the economy. A study of social capital in 21 EU countries found social capital is closely linked with regional economic growth, especially in “low-skilled places.” In the UK, analysis of previous approaches to regeneration shows that strong civil society involvement is vital to success. Charities deliver enormous amounts of the training people need to get jobs. They also deliver healthcare and prevent ill health escalating by breaking down isolation and providing volunteering opportunities. This is especially important given the rising numbers of people falling out of the labour market due to long-term health conditions.

We simply can’t weather the current cost-of-living crisis without charities and our economic recovery will falter if we don’t have a strong social sector to support it. But the sector is under threat. As Alison Taylor, CEO of CAF Bank and Charity Services, said: “Their resources are stretched after two years supporting their communities throughout the pandemic, and they are also having to find the funds to pay higher costs. With tightening household budgets impacting donations, there is a perfect storm facing the sector, and sadly, there are likely to be some charities unable to survive this year.”

There’s no shortage of ideas for how the government, businesses and philanthropists can step in to help the charity sector cope with rising costs. But we need action quickly, to ensure charities themselves weather the storm, so they can keep providing a safe harbour to those they support.