Charities and COVID-19: the scale of the government’s £750 million coronavirus bailout does not match the charity’s sector’s true value to the economy
- Charities contribute £200 billion in economic value each year – twelve times the official estimate of £17 billion, according to top economists at Pro Bono Economics.
- The future of thousands of charities is at risk. If half disappear, the economic loss could equate to as much as 5 per cent of GDP.
- Nearly six-in-ten charities say they’ve reduced activity in a “significant” way in response to COVID-19
The chronic under-valuation of the UK charity sector has led to policy neglect and a dramatic under-estimation of its true economic contribution – by a factor of twelve – according to new analysis by expert volunteering charity Pro Bono Economics: ‘Undervalued and overlooked? The need for better understanding of civil society’s contribution to the UK economy'
PBE estimates that the UK’s 168,000 charities and vast army of volunteers could contribute as much as £200 billion to the economy in ‘gross value added’. Representing a full 10 per cent of the country’s economic output, this is twelve times higher than the official valuation of £17 billion.
Before the COVID-19 crisis, the undervaluation of the sector meant that charities were apportioned too small a role in government policy-making. Now, as many thousands of charities risk permanent closure, it means that the government is offering the sector insufficient support.
Its £750 million package of financial assistance has been welcomed by charities, but it falls well short of what is needed, with the National Council for Voluntary Organisations estimating that the sector is facing a £4.3 billion funding shortfall over the next three months.
Asked to rate the sufficiency of the government’s financial support for the sector, 43 per cent of respondents to the new weekly charity tracker survey, run by PBE in conjunction with Civil Society Media, scored it 3/10 or lower.The average score was just 4.3.
Approaching the end of the sixth week of lockdown, 92 per cent of those responding to the PBE survey said they expect COVID-19 to have a negative impact on their ability to deliver on their charitable objectives over the coming six months. More than two-in-five (44 per cent) said they had become more pessimistic over the course of the last week, and close to six-in-ten (57 per cent) said they had reduced activity in a “significant” way in response to the crisis.
With some surveys suggesting that as many as half of the UK’s charities could fold over the coming months,* PBE has warned that the wider impact could equate to as much as 5 per cent of GDP.
The organisation says the value added by the sector is higher still once the “spillover” benefits associated with charitable and voluntary activity is accounted for. Its work has shown that when charities help the homeless or ex-prisoners into stable accommodation and work, or support children with mental health needs, they can help reduce crime, raise tax revenues, and lower future expenditure on public services such as health – thereby generating significant savings for the public purse and benefiting the economy more generally
Drawing on its work with hundreds of charities over the past decade, PBE says that adding in such benefits could lift the overall value added to the UK economy by the sector to around £200 billion a year: twelve times the official value.
It adds that the government should undertake a review of the way in which the value of the sector is estimated in order to more accurately capture its contribution to the UK economy, and that – more urgently – it should revisit the sufficiency of the support package made available to the sector in response to COVID-19.
Matt Whittaker, Chief Executive of Pro Bono Economics and co-author of the report, commented:
“The rescue package announced for the charity sector is large and is welcome. But it falls well short of the level of need in the sector. This under-resourcing is in large part a product of the chronic under-valuation of the contribution made by civil society to the UK economy: an under-valuation which has resulted in policy neglect over a number of years.
“The government needs to revisit the adequacy of its rescue package as a matter of urgency. Our weekly tracker highlights the very considerable pressures being endured by charities across the country. Vital activity has already been scaled back, and there is the very real danger that some services and support will be withdrawn altogether over the coming months.
“Alongside rising to today’s very visible funding challenges, it’s important that we do more to better understand the all-too-often invisible value of civil society. It is only by doing so that we can ensure that the sector gets the recognition – and therefore the policy attention – that it deserves.”
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NOTES TO EDITORS
About the report – Undervalued and overlooked? The need for better understanding of civil society’s contribution to the UK economy. This analysis builds on Pro Bono Economics’ 2019 Annual Lecture, ‘The Third Pillar and the Fourth Industrial Revolution’ given by Andy Haldane, Chief Economist at the Bank of England, and co-founder of Pro Bono Economics.
The report has been produced for PBE by Jon Franklin, Mark Graham and Matt Whittaker, with comments by Andy Haldane and Karl Wilding, Chief Executive, NCVO. All views and errors remain those of Pro Bono Economics.
All quoted survey figures are from PBE and Civil Society Media. Total sample size was 433 UK charities. Fieldwork was undertaken between 28 and 29 April 2020. The survey was carried out online.
About Pro Bono Economics:
PBE helps charities and social enterprises understand and improve the impact and value of their work, matching professional economists who want to use their skills to volunteer with charities. Set up in 2009, PBE has helped over 500 charities large and small, covering a wide range of issues including mental health, education, employment and complex needs.
PBE is supported by high-profile economists, including Andy Haldane (Bank of England), Sir Dave Ramsden (Bank of England), and Clare Lombardelli (HM Treasury) as Trustees, and Diane Coyle (University of Cambridge), Kate Barker, Lord Jim O’Neill, Robert Peston, Martin Wolf and Lord Adair Turner as patrons. Lord Gus O’Donnell has been Chair of the Board of Trustees since September 2016.