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How Money and the Cost of Living Crisis Impacts Charities

The cost of living crisis is having a noticeable difference on all areas of our life; food shops, spending habits, our jobs and business. But how does the cost of living crisis impact the charity sector? With 170,000 charities (Statista, 2022) and an annual income of £58bn in 2020 (NCVO, 2022), it is clear that there is a lot of money in the industry.

Public funding

To fund themselves and their goals charities heavily rely on public funding. With the cost of living rising people are starting to cut down on “luxuries” and only spending money on necessities such as food and bills. Unfortunately donations is one of the first things to be cut from our spending when we are trying to save. The Charity Aid Foundation found that in 2022 4.9mil people less said they donated compared to 2019 (Masonic Charitable Foundation, 2022). This puts monetary stress on charities and makes it harder for them to support those in need.

Decreased government funding

Another major source of funding is the government. In the last few years government funding of charities has dropped. For the first time in 20 years the public provides half of the sectors income. The government now only makes up 26%. The cuts and declined contracts have especially effected the larger charities (NCVO, 2022). Due to this many charities have had to close down programs meaning they can support less people and causes.

Increased dependency on charities

Adding to the lack of funding, since the pandemic there has also been an increased dependency on charities. 75% of the UK population use charities’ for support with mental health, food provision, employment help and more (Covid-19 Support Fund, n.d.). This means that charities are trying to support more people with less funding.

Running cost increase due to inflation

With inflation at a 40-year high reaching 9.3% (National statistics, 2022) the charities’ running costs will increase. The rise in inflation means that the amount given is reducing in value. The awards granted to charities in 2021 are worth 6% less in 2023 (Taylor A., 2022). Therefore the charities will be trying to cover increasing costs with decreasing funding. This is causing charities costs to further increase and the gap of income and spending increases.

Difficulty recruiting and retaining volunteers

As we have seen charities are heavily relying on support from the public, however many organisations across the country are having increasing difficulty recruiting and retaining volunteers. This can also be traced back to the cost of living crisis as people may need to do more paid work to get by. As well as this charities are struggling to cover volunteers costs such as travel expenses (NCVO a., 2022). This results in charities financial and nonmonetary support is dwindling.

How charities spend money impacts peoples trust and donations

Charities rely on the public’s support. In order for people to be willing to donate and volunteer it is important for them to feel like they can trust the organisations. Throughout the pandemic there was an increased level of trust. This may be due to the heightened reliance on charities. Although there is hope that the trust level stays high, it is hard to predict how it will be post-pandemic (Taylor A., 2022). The publics’ persistent concern is how charities use their money. Charities need to be transparent about how donors money is being used and show the change they have made in order to keep and increase the overall trust in charities (Gov, 2022).

If you want to read up more about the unknown activities of charities why not check out this article: The True Cost of Charities.

It is clear to see that the cost of living is having a major impact on the charity sector in the UK. Not only is there a decline in donations and gifts from the public but the government as well. With increased demand and costs for charities they will soon struggle to make ends meet. It is important for us to help out where we can, whether it is to round up your food shop, volunteer or even go charity shopping. There are many ways in which we can support charities without spending the money.

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