The Big Squeeze: Charities Caught Between Rising Need and Falling Funds

Charities and voluntary organisations are the backbone of community support, stepping in where others cannot to help the most vulnerable. But the sector is under acute strain, caught in a damaging squeeze between rising demand for its services and falling income, and the consequences are being felt across the North East.

A Perfect Storm.

The voluntary sector faces what has been described as a triple threat: rising costs, falling income and increasing demand, all at the same time. The compounding effects of the pandemic, the cost-of-living crisis and persistent inflation have created a perfect storm.

Many organisations are being forced to do more with less, while the people and communities they serve face growing hardship. It is a combination that has left the sector stretched to its limits.

A Sizeable Sector.

The scale of what is at stake is considerable. There are well over 160,000 registered charities across the country, employing well over a million people and delivering billions of pounds worth of public services, often acting as the provider of last resort for those with nowhere else to turn.

These organisations range from large national bodies to tiny local groups run on a shoestring, and together they form an essential part of the social fabric. When they struggle, the impact falls on the vulnerable people who rely on them.

Falling Income.

The income on which charities depend has come under pressure from several directions at once. Government grants have declined significantly in real terms in recent years, while donations from a public facing its own financial pressures have become harder to come by.

Competition for the grants that remain has intensified, and many charities have found their reserves depleted by successive crises with little chance to rebuild them. For organisations already operating on tight margins, even small shifts in income can threaten their ability to keep going.

Rising Costs.

At the same time, the costs of running a charity have risen sharply. Higher wages, energy bills, rents and general expenses have all added to the burden, and changes to employer national insurance contributions have placed a substantial additional strain on the sector's finances.

Many charities cannot reclaim much of the value added tax they pay, adding a further pressure. Every pound raised now has to stretch further than ever, at the very moment when more is being asked of it.

Demand on the Rise.

While income falls and costs rise, demand for charitable services has surged. The same economic pressures squeezing charities' finances are driving more people to seek their help, whether for food, advice, mental health support or assistance with the rising cost of living.

This is the cruellest aspect of the squeeze: the need is greatest precisely when the means to meet it are most stretched. Charities are being asked to support more people with fewer resources, an equation that cannot hold indefinitely.

Hard Choices.

Faced with this squeeze, many charity leaders are being forced into difficult decisions. Some are reducing staff or restructuring, others are cutting services, and some are closing altogether or merging with other organisations to survive.

Research has suggested that a significant proportion of smaller charities are at risk of closure within a year. Each of these decisions ultimately affects the people and communities who depend on the services, and the loss of a trusted local charity can leave a gap that nothing else fills.

The North East's Stake.

This national picture has a particular significance for the North East, a region with high levels of need and a strong tradition of community and voluntary action. Charities and community groups here play a vital role in supporting people through hardship, and the pressures bearing down on the sector threaten that support.

In a region where many rely on the safety net that the voluntary sector provides, the consequences of the squeeze are especially serious. The health of the sector and the wellbeing of communities are closely linked.

Securing the Future.

The voluntary sector has shown remarkable resilience through successive crises, and necessity has driven innovation and new ways of working. But resilience has its limits, and the sector cannot absorb rising demand and falling income indefinitely without support.

There have been calls for more stable public funding, a fairer tax treatment and a genuine partnership between government and civil society that recognises the value charities deliver. Securing the future of the sector matters not just to the organisations themselves but to the countless people and communities who depend on them.

The Hidden Value.

Part of the difficulty the voluntary sector faces is that so much of the value it delivers is hidden, hard to measure and easy to take for granted, which makes it vulnerable when difficult funding decisions are made. Charities and community groups provide a vast amount of support that rarely appears in official statistics, from the befriending of isolated older people and the running of clubs and activities to emergency help in times of crisis and advocacy for those whose voices might otherwise go unheard.

Much of this work prevents problems from escalating, keeping people well, connected and supported in ways that reduce the need for far more expensive interventions later, yet because the benefits are diffuse and long-term, they are often overlooked when budgets are set. The sector also brings qualities that are difficult to replicate: trusted relationships built over years, a deep understanding of local needs, the ability to reach people that statutory services struggle to engage, and the dedication of staff and volunteers who give far more than they are paid for.

These qualities make charities uniquely effective partners in tackling social problems, yet they are precisely the things that are lost when an organisation is forced to close. Recognising and valuing this hidden contribution is essential if the sector is to be supported through the current squeeze, for treating charities merely as cheap deliverers of services misunderstands what they offer and risks losing it.

A wiser approach would see the voluntary sector as a vital partner, worthy of stable support and genuine collaboration, whose value to communities and to the public purse far exceeds the relatively modest sums it costs to sustain. Protecting that value, especially in a region where the need is so great, is in everyone's interest, and it begins with recognising just how much the sector quietly does.

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