Charities Subsidise State By £130m

Charities are subsidising the public sector by up to £130m a year, according to an official report. Leading charities such as Barnardo’s, Capability Scotland and Quarriers are being forced to use their own funds to pay for services they provide for the state. As a result, a number of voluntary organisations say they are being forced to cut services.

More than 70% of voluntary organisations which provide services such as social work, nursing or care services, are not recouping the full cost of the service from local authorities.

Cornerstone, a charity which provides support services for 1400 children and adults with learning disabilities across Scotland, is one of a number of voluntary organisations which face cutting services and staff because they have been unable to recover full costs from local authorities.

Cornerstone has an annual turnover of £26m and last year the charity was £17,000 in the black. However, this year it predicts a major deficit running into hundreds of thousands of pounds. Cornerstone says it has decided to cut its service in Aberdeen, which provides support for more than 100 people with learning disabilities, because it claims it cost tens of thousands of pounds more than the council was willing to pay.

“It is not our job to subsidise the local council,” said a spokesman. “We have got to cut this service because we could not recoup the full costs from the council. We are also looking at the future employment of 48 members of staff.” Drug and alcohol support charity Turning Point and Ark Housing have already cancelled services in Glasgow and Aberdeenshire because they could not recoup their full costs from the councils.

Almost 30% of Scotland’s 50,000 voluntary organisations have contracts to provide services to the public sector, ranging from those worth £50,000 a year to £1m a year. The report, which was commissioned by the Scottish Executive, found that only 14% recovered full costs on contracts and warned that this would undermine the future sustainability of the voluntary sector.

The report estimated that between £106m and £130m would be required to cover full cost recovery, which equates to about 5% of the sector’s annual income.

The Scottish Council for Voluntary Organisations (SCVO) said it believes the report has underestimated the figure and that it could be as much as £180m. SCVO said action has to be taken by ministers to ensure that the sector is no longer seen as a cheap alternative to local authorities and health services.

A Scottish Executive spokeswoman said: “The executive recognises that voluntary sector organisations are dedicated to delivering services, but this is sometimes to the detriment of their overall finances. While we all understand their motives in doing so, it is not in anyone’s interests to risk their long-term viability in this way.”