This new report by Cordis Bright, commissioned by VODG, helpfully provides a spotlight on the impact of the budget on third sector providers of disability support, as an essential part of the wider social care sector.
This analysis intentionally sits alongside other survey work VODG has been involved with on the impact of National Insurance Contributions and will hopefully support members in their discussions with commissioners, MPs and other decision-makers.
Findings
- The research finds that many of the organisations polled will be forced to mitigate soaring wage bills by making redundancies, cutting hours or implementing a pay freeze for existing staff unless the government takes urgent action to fully fund or exempt charities from this cost burden.
- Almost a quarter of respondents (24%) believe staff cuts are inevitable, with 18 per cent reluctantly considering a pay freeze or reduction in the hourly rate of pay for its staff.
- For VODG members, the increased cost of NICs and wages will result in an estimated £266million shortfall next year. This would be far higher if it was not for the majority of organisations who responded to the survey already paying above national living wage (NLW). This somewhat mitigated the impact of NLW increases next year.
As Tom Noon, Chairman of Cordis Bright states in the report, ‘There is often a myth that not-for-profit organisations can somehow find ‘other sources’ of funding. In reality the disability charities we heard from are providing a public service funded by the state. This is not a lucrative activity, and many years of below inflation increases in funding have pushed these organisations to the limit of sustainability.
‘Local authorities derive significant benefit from the willingness of not-for-profit organisations to contribute to the costs of what some might describe as ‘extras’ but others would see as integral to good quality provision. Disability charities will not be able to continue to fund this type of additional input if the organisation is losing money.’
Other take aways:
- The average margin for VODG members is less than 2%. In other words, even if all members were to sacrifice their current surpluses they would still have insufficient monies to run the organisation in its current form (p1).
- VODG members are bound to the statutory sector in terms of what they deliver and how they are funded but are treated as if they were any other commercial business regardless of the fact they have no shareholder and pay no dividends (p4).
- VODG members support people with disabilities, many of these people have highly complex needs which require high staffing ratios… these organisations do not have a choice about having to employ a large workforce, they cannot simply charge more money for their services because in almost every case their main customer is either local government or the NHS (p4).
- The scale of the mismatch between the additional costs and the overall financial performance of (disability charities) means that most mitigations will only have a partial impact and will expose many voluntary organisations to the risk of deficit (p6).
Next Steps
As we look to the provisional local government settlement our messages are clear:
- The additional burden of NICs and NLW increases will have a detrimental impact on frontline provision for disabled people without urgent government action.
- The Chancellor pledged £680m for social care in the latest budget but this falls drastically short of the £2.8bn social care needs to cover the costs of NI and NLW increases (Nuffield Trust).
- Without an exemption, or protected funding to cover the commitments being introduced, services for disabled people will at best shrink, and at worse close. Without action, the rights and legal entitlements of disabled people to care and support will be pulled away.
Looking beyond the 19th December, we continue to work with and reach out to local government, meet with parliamentarians to brief them ahead of debates in the new year and encourage members to write to their local MPs. We will be sharing further resources we are developing as part of the #ProvidersUnite team, in support of regional action and a day of action in London.