The Covid-19 crisis and charities Contents

3The Government’s support for charities

16.Since the start of this crisis, the Government’s support for the charity sector has involved a combination of access to business support schemes and dedicated funding announced by the Treasury and other Departments. Furthermore, non-departmental public bodies, including those that distribute National Lottery funds for good causes such as Arts Council England and Sport England, have made additional support available, including to charities and voluntary organisations under their remit. However, the evidence we have received makes the case for further support to be made available.

Challenges for charities in accessing Government support for businesses

17.In correspondence to us on 30 March, the Secretary of State for Digital, Culture, Media and Sport confirmed that “Charities are eligible to access many of the measures announced for businesses by the Chancellor”, including the Coronavirus Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme.32 In oral evidence, the Secretary of State outlined the principle that such schemes are “horizontal interventions, so the support should apply to all sectors equally”.33 However, barriers to charities benefiting from such support illustrates that, in reality, it does not apply to this sector equally.

18.The need for many charities to continue to deliver services throughout the Covid-19 crisis means that they are limited in the extent to which they can make use of the Government’s Coronavirus Job Retention Scheme. As Karl Wilding explained:

The problem is that the furloughing scheme, or laying staff off, means that you are standing down staff at exactly the time when you want them to step up.34

This problem also applies to charities that do not deliver frontline services but require staff to keep working to maintain facilities or collections, for example in the museum and heritage sectors.35 Charities that facilitate sailing trips for disadvantaged children, as another example, cannot furlough those who maintain the vessels, despite a collapse in income.36 Ocean Youth Trust South therefore calls for “a more flexible furlough scheme with salary support allowing small charities to reduce staff hours, rather than the current choice between working or not working at all”.37 Furthermore, charities that receive a combination of public funding alongside other income are ineligible for the Coronavirus Job Retention Scheme, leading the NCVO’s Karl Wilding to conclude that:

Even if the intent is right, the design simply does not work for vast swathes of the charity sector.38

The umbrella body estimates that a “maximum of one in three charities can deploy the furloughing scheme”.39

19.Many charities also identify what the NCVO has termed an “unintended consequence of the design of the scheme”, whereby workers who have been furloughed from one charity are able to volunteer their time and services to another charity, but not back to their main employer.40 The Minister for Civil Society, Baroness Barran, told the House of Lords that this rule is to prevent fraudulent claims and to protect workers41; however, We The Curious, an educational science centre in Bristol, makes the case for greater flexibility, stating:

We understand the concern that businesses should not benefit from government support for private gain, but as a charity we operate for the benefit of the public [ … ] This change to the job retention scheme would not result in any additional cost to the Government, as we would still eventually be left with no choice but to put all staff on furlough. The overwhelming benefit of this change to the furlough rules would be that thousands of charity staff can mobilise for social good at a time when the British public needs us the most.42

Those organisations that are using the scheme to furlough workers also urge the Government to provide forewarning and clarity as and when the scheme comes to an end, to enable them to plan for any subsequent staffing changes.43

20.Initially, to be eligible for the Coronavirus Business Interruption Loan Scheme an organisation had to generate at least 50% of its income from trading. This excluded “a large proportion” of the charity sector, with just 7% of charities surveyed by the Directory of Social Change saying that they qualified for the scheme.44 In oral evidence, the Secretary of State acknowledged this challenge and confirmed that the Department was working with HM Treasury to address it.45 The British Business Bank, which oversees the scheme, has since amended the eligibility criteria to clarify that registered charities are exempt from the requirement.46 However, adjustments to the scheme still do not make it viable for many charities. As the National Church Institutions of the Church of England explains, many charities that may be eligible for the loan scheme:

are not in a position to take on debt finance as they do not generate the level of surplus income with which to repay loans and service interest.47

21.The Coronavirus Job Retention Scheme and Business Interruption Loan Schemes promptly addressed an urgent need across the economy; however, with the Government consistently referring to them as a solution for charities in financial hardship, there is a clear need to ensure such measures are suited to the particular needs of the charity and voluntary sector. To that end, we welcome the exemption for charities from the 50% trading requirement under the Business Interruption Loan Scheme. This approach indicates a willingness to flex the schemes to ensure charities can benefit; however, in the longer term, charities, like many other sectors, also need clarity about the Government’s intentions for the support schemes. We recommend that the Department for Digital, Culture, Media and Sport works with the charity sector and HM Treasury immediately to review the measures in place to support businesses, and to ensure they fully meet the needs of the charity and voluntary sector. In particular, the Government should introduce a separate Coronavirus Job Retention Scheme for charities within four weeks. The scheme should enable furloughed employees of charities to volunteer for their organisations providing appropriate safeguards are met. We also ask the Government to guarantee that six weeks’ notice will be given of the Coronavirus Job Retention Scheme ending so that charities can plan accordingly, and to phase the ending of the scheme to support any charities that are unable to return immediately to full capacity.

A dedicated package of support for charities

22.On 8 April, recognising the limitations of existing support schemes for charities and the need to increase support for those dealing with Covid-19, the Chancellor announced an additional £750 million for the charity sector. This included £370 million for small, local charities supporting vulnerable people during the outbreak, to be distributed by the National Lottery Community Fund, £360 million of direct Government support to charities providing essential services related to the Covid-19 pandemic, including up to £200 million for hospices, and a commitment to matching public donations to the BBC’s ‘Big Night In’ appeal, including £20 million for the National Emergencies Trust.48 On 22 April, the Secretary of State told us that, in his view, the package, when combined with the other measures for businesses, “does the job”.49 This seemed a curiously downbeat reflection on the Government’s long-awaited response to the sector’s calls for support. Implying ‘job done’ wrongly, and perhaps inappropriately, conveyed that the crisis in the charity sector has been solved. It has not.

Concerns about the level of support available

23.Given that the sector says it stands to lose £4 billion in income over the next quarter, the NCVO told us that the Government’s intervention of £750 million “will not be enough to prevent good charities around the country from closing their doors”. Moreover, it states:

Many of the charities which do survive will look very different in a few months’ time, with severely reduced capacity to provide support that people rely on at a time when their contribution to recovery will be vital.50

While the Secretary of State observed that such “support is pretty unprecedented”, with the closest equivalent being the £40 million provided by the then Labour Government in 2009 to help charities during the financial crisis, we have heard that the size of the sector, its role in delivering public services and the scale of the impact that Covid-19 is having on its finances mean that the sector’s needs at this time are similarly unprecedented—hence the need for a substantial stabilisation fund.51 In oral evidence to us, the Secretary of State also denied that the sector had ever been in line for a higher package in the region of £1 billion, indicating that the Department had not made the case to HM Treasury for such an amount.52

24.We welcome the £750 million of support for charities delivering frontline services and assisting vulnerable people during the Covid-19 outbreak. Difficult decisions are being taken about which charities should benefit from Government support at this time, however, as the level of financial assistance announced to date falls short of the sums the sector says it needs, the Government must not assume that the problem has been solved or that the crisis facing charities will not grow as reserves are depleted. The Department for Digital, Culture, Media and Sport must demonstrate that it is making the ongoing case to HM Treasury for the charity sector to get the support it needs. We back the charity sector’s calls for a stabilisation fund to secure the long-term financial health and organisational diversity of the sector. It also needs to be recognised that some organisations may take time to recover following the ending of the crisis and may need support beyond that point to get to a sustainable position. In addition to the support that has already been announced, the Government should establish further funding to assist charities and voluntary organisations to stay afloat throughout the Covid-19 crisis. This should be available to organisations facing financial pressures, even if they are not involved in the frontline response to Covid-19. We request that the Secretary of State updates us, preferably via an oral hearing as well as in the Government’s written response to this Report, on what progress has been made in securing additional support for charities and tailoring the business measures to them, as well as the Department’s plans for monitoring the ongoing impact of this crisis on the charity sector’s financial resilience. Given the urgency of the matter, we request that we receive this update by Friday 5 June.

Concerns about eligibility and how to apply

25.Many charities are concerned that the parameters for the funding laid out by the Government, in essence restricting it to those working on the Covid-19 response, mean that they will not be eligible for support. Clinks, which supports voluntary sector organisations working in the criminal justice system, states that:

the focus on organisations working specifically in response to the COVID-19 pandemic risks omitting organisations affected by the crisis that provide vital services but are not specific to the COVID-19 response.53

The Association of Medical Research Charities observes that:

Medical research charities are unlikely to benefit from the support package for charities announced by the Chancellor as they do not provide commissioned frontline services, despite supporting vulnerable patient communities through this crisis. AMRC members are concerned that the announcement may falsely reassure the public and others that the charity sector as a whole is being financially supported.54

The Directory of Social Change therefore calls for support for charities to be “unrestricted and not confined to only those charities dealing with COVID-19 responses”.55 There are also calls for funding to be targeted to address the needs of marginalised groups and communities, with the NCVO stating that:

there is currently no clarity on what, if any, consideration will be given to equality and equity, including the need to fund organisations that represent marginalised communities. Furthermore, clarity is required on how the fund will address significant regional inequality across the UK. Some poorer areas of the country have populations that are more reliant on charities and will feel the impacts of a reduction in services far more than wealthier parts of the country.56

Stonewall, which campaigns for LGBT equality, calls on the Government to ensure equality impact assessments inform the allocation of funds, and that particular consideration is given “to marginalised communities and the organisations that represent them”. Highlighting the impact of Covid-19 on racial inequalities, the charity also supports calls “for ringfenced funding for civil society organisations representing people of colour”.57

26.The general lack of clarity about how the £750 million will be allocated means that charities are unclear about their eligibility and how they should apply. For example, Children and Families Across Borders, which works to reunite families around the world, calls “for greater clarity on the eligibility criteria for this funding and an indication of the prioritisation principles”.58 Headway, which works with people with acquired brain injuries, states:

There is, as yet, no guidance on eligibility criteria or how applications can be made. This needs urgent attention as even a short delay could lead to smaller charities, such as local autonomous local Headway charities, folding in the intervening period.59

27.The Secretary of State confirmed to us that the Department was working with the National Lottery Community Fund to determine the criteria for the £370 million it will distribute, which would then be published before the scheme opens to applications.60 He indicated that a charity’s financial position, including its reserves, would be a factor in assessing eligibility, as well as the work a charity is doing to respond to Covid-19.61 The Secretary of State also explained that other Departments have been asked to identify which charities should benefit from the £360 million of central Government funding.62 When pushed on how charities should make their needs known to Departments, the Secretary of State suggested that it would be up to individual charities to contact the relevant Department.63 When we expressed concern that the lack of guidance was putting organisations, such as Citizens Advice, under increased pressure, the Secretary of State assured us that he was “very conscious of the need for speed”.64

28.Some two weeks after HM Treasury outlined £750 million of support for charities, the Secretary of State was still unable to provide sufficient detail or clarity about the eligibility criteria for allocating that funding. An announcement of support is of limited benefit if charities facing imminent closure and workforce pressures are unclear whether they are eligible or how to apply. While we recognise that the Government is working under considerable pressures to deliver support to charities at speed, we are concerned that £360 million is being allocated through conversations between Departments, rather than clear engagement with the sector. The onus should not be on individual charities to make their needs known to Departments, and there remains a lack of clarity at sector-level about how the Government is determining which charities should receive support. It seems inevitable that this lack of transparency means deserving charities will miss out on much-needed support. We urge the Department for Digital, Culture, Media and Sport and the National Lottery Community Fund to publish clear and comprehensive guidance about the criteria that will be used when allocating support, and how organisations can apply for it, without delay. Going forward, such guidance should be published to coincide with the announcement of public funding to minimise uncertainty within the sector.

32 Letter from Rt Hon Oliver Dowden MP, Secretary of State for DCMS, re Covid 19 and the creative and charitable sectors, 30 March 2020

33 Oral evidence taken on 22 April 2020, HC 157, Q3

34 Q3

35 The Mary Rose Trust (COV0021), Birmingham Museums Trust (COV0063)

36 Association of Sail Training Organisations (COV0034)

37 Ocean Youth Trust South (COV0046)

38 Q3

39 Q3

40 Q4

41 HL Deb, 30 April 2020, col 324

42 We The Curious (COV0073)

43 National Church Institutions of the Church of England (COV0037)

44 Q9, Directory of Social Change (COV0053)

45 Oral evidence taken on 22 April 2020, HC 157, Q16


47 National Church Institutions of the Church of England (COV0037)

49 Oral evidence taken on 22 April 2020, HC 157, Q3

50 NCVO (COV0047)

51 Q12, 43

52 Oral evidence taken on 22 April 2020, HC 157, Q7

53 Clinks (COV0057)

54 Association of Medical Research Charities (COV0054)

55 Directory of Social Change (COV0053)

56 NCVO (COV0047)

57 Stonewall (COV0035)

58 Children and Families Across Borders (COV0059)

59 Headway (COV0060)

60 Oral evidence taken on 22 April 2020, HC 157, Q12

61 Oral evidence taken on 22 April 2020, HC 157, Q9

62 Oral evidence taken on 22 April 2020, HC 157, Q10

63 Oral evidence taken on 22 April 2020, HC 157, Q11

64 Oral evidence taken on 22 April 2020, HC 157, Q17

Published: 6 May 2020