How much do voluntary organisations get from government?

Overview

Government remains the second largest income source for the voluntary sector

  • In 2017/18, government remained the second largest income source for the sector just behind the public. Income from government stands at £15.7bn and makes up 29% of the sector’s total income, no change from the previous year.
  • Income from government includes income from:
    • central government departments
    • local authorities
    • devolved and regional government
    • the EU and international governments
    • town and parish councils
    • NHS trusts
    • a range of non-departmental public bodies (NDPBs).
  • The income from government generally goes directly from the government body to the voluntary organisation. There are sometimes more complex arrangements such as subcontracting, match funding and direct payments to the beneficiaries, but this is much more difficult to identify in the data.
  • Although this income represents a significant amount for the voluntary sector, it accounts for only a small part of total government spending: around 2%.

Over time

  • Over the last four years, the amount of income from government has remained largely stable, with fluctuations reflecting spending cycles.
  • As a proportion of the sector’s total income, income from government has fallen continuously over the last eight years. It made up 37% of the total income in 2009/10 but dropped to 29% in 2016/17 and again in 2017/18.
  • Looking at longer-term trends, income from government grew significantly between 2000/01 and 2009/10. The peak was followed by reductions until 2012/13 (in line with the general reduction in government spending following the recession) and then a sharp increase and finally a continuation of the trend.

The amount of income from government has remained fairly stable over the last few years but it has fallen as a proportion of total income

By source

  • While overall income from government has remained fairly stable over the last four years, income from local government has fallen on average by 1% since 2007/08.
  • As a proportion of all income from government, local government income fell from 53% in 2007/08 to 46% in 2017/18, its lowest proportion since 2004/05.
  • Compared to 2016/17, income from central government has grown by £281m to £7.1bn (+4%). This is a similar to the previous year, where it increased by 5%.
  • European and international sources of income remained the smallest component, accounting for 9% of income from government. However, the amount of income from European and international government has grown continuously since 2011/12 and stood at £1.3bn in 2017/18.

Income from local government and central government have reached similar levels, mainly as a result of falling local government income

By size

  • Smaller organisations continued to receive a lower proportion of their income from government than other income bands. In 2017/18, micro and small organisations – those with an income below £100,000 – received 13% of their income from government compared to 27%–36% for large to super-major organisations.
  • Larger organisations receive a greater proportion of their income from government. In 2017/18, organisations with an income of over £1m received 87% of all the money given to the sector by government.
  • Major organisations, with an income between £10m and £100m, received the greatest amount (£6.1bn) from government, accounting for 39% of total government income in 2017/18.

Major organisations receive a substantial share of the total income from government

By subsector

  • In 2017/18, voluntary organisations delivering social services continued to be the subsector receiving the largest amount of income from government (£5.2bn), accounting for 45% of their total income. Other subsectors receiving large amounts of government income are health (£2bn), international development (£1.8bn) and culture and recreation (£1.3bn).
  • Some subsectors also receive high proportions of income from government, although they received smaller amounts in cash terms. Government income makes up 49% of the total income for organisations working in employment and training, 44% for playgroups and nurseries, and 46% for organisations working in law and advocacy.
  • Until 2017/18, international development was the only sector that has seen almost continuous growth in government income in the preceding eight years. However, in 2017/18 government income for the international development subsector fell by 3%. Over the same period, other sectors have seen almost continuous decline in government income, eg organisations working in housing or community development.

The social services sector continued to receive the largest amount of income from government, but the amount was lower than in 2016/17

Spotlight: Government grants versus contracts

For VAT purposes HMRC provides a ‘supply’ and ‘business’ test to distinguish between grants and contracts, and the National Audit Office has highlighted how challenging that can be.

Within the Almanac we rely on how charities report their income in the financial accounts. For the most part the classification is done automatically, but we also undertake some manual checks, particularly for bigger charities. This means that the description given by organisations in their accounts becomes a key indicator of whether something is a grant or a contract. But the description is often not specific enough to distinguish between the two reliably.

Grants should normally be placed under ‘voluntary income’ and contracts under ‘charitable activities’. Yet, in some accounts the term ‘grant’ appears under ‘charitable activities’ rather than under ‘voluntary income’, which could imply that government has procured a service rather than given out a grant. In recent years, we have also seen more charities use terms such as ‘performance related grants’ in their accounts, highlighting the blurred boundaries between grants and contracts. In addition, some accounts report grants and contracts together as ‘grants and contracts’ or ‘grants/contracts’. If it is a big amount of money, we try to source additional information, but this is not always possible.

In this context it is increasingly difficult to produce statistics on government grants and contracts that are sufficiently robust.

For further information, read this article from Goodman Jones.

Putting it into context

Income fluctuations

Fluctuations in income from government for the sector have historically been in line with departmental spending, with public spending cuts often happening at the beginning of spending cycles. Last year’s Almanac data covered the second year of the 2015 spending review period, which set out £18bn of cuts to departmental spending by 2020. The continuing small reduction in overall funding from government in the previous year (from £15.6bn in 2015/16 and £15.4 in 2016/17) is consistent with those spending review reductions. It is true however that the £0.4bn increase in 2017/18 does go against the grain but is nevertheless below the £16.5bn figure in 2014/15 before the spending review was announced.

Income distribution

The continuing uneven distribution of income from government across different-sized voluntary organisations reflects the trend towards the commissioning of large-scale contracts. Major organisations, which receive the largest proportion of income from government, are more likely to have the resources and capacity to bid and deliver large scale public service contracts.

More data and research

Notes and definitions

While the figures for England and Wales remain unaffected, the last three editions (2017, 2018 and 2019) of the Almanac have included incorrect income breakdowns for Scotland and Ireland. As a result, income from government for the UK was slightly overestimated at the expense of income from the public. We have now corrected these in the Almanac 2020 and all references to historical data for the years in question are presented as they should have been. The change does not affect overall findings, but it is important to note that income from the public has started to rise as a proportion of total income while income from government as a proportion of total income has fallen.