Facing the Storm: Why We Must Rally Around the Third Sector Now
Across the UK, charities and community organisations are grappling with a harsh new reality. The third sector, already stretched to its limits, is being hit by a wave of financial pressures that threaten its ability to serve the communities that rely on it most. At the Heart of England Community Foundation, we are witnessing these challenges first-hand.
Our CEO, Tina Costello OBE, sheds light on the urgent need for collective action.
The third sector is facing a perfect storm of financial pressures, the Heart of England Community Foundation are seeing first hand how the voluntary and community sector is struggling to meet demand for services against rising costs.
Charities, like all sectors, must now absorb higher employment costs through the rise in National Insurance employer contributions and increases in both the National Living Wage and Minimum Wage. Whilst we appreciate the rise in minimum wage is essential and a positive move for low-paid workers, for charities this comes with a substantial financial challenge.
Two recent policy shifts—rising National Insurance employer contributions and increases in both the National Living Wage and Minimum Wage—are placing an unprecedented burden on the sector. While these changes are designed to improve worker welfare, they come at a time when charities are already grappling with heightened demand for their services and a chronic lack of sustainable funding.
Charities, like businesses, must now absorb higher employment costs. Many operate on lean budgets, relying on every pound to deliver frontline support. The increase in employer National Insurance contributions means higher operational expenses, stretching already thin reserves. For smaller charities, these extra costs could mean difficult decisions: reducing staff hours, cutting vital services, or even facing closure.
The rise in the National Living and Minimum Wage is a positive move for low-paid workers, ensuring they earn a fairer wage. However, for charities that employ support workers, carers, and community outreach staff, this represents a substantial financial challenge. Funding for these roles often comes from grants, donations, and contracts that were agreed upon before these wage hikes. Without additional funding to match these increased costs, charities may find themselves in an impossible position—either reduce services or attempt to do more with even less.
This financial strain is exacerbated by the growing need for charitable services. The cost-of-living crisis continues to drive people towards food banks, mental health support, and community services. Charities are being asked to do more, yet the funding landscape remains stagnant or, in some cases, is shrinking. Many funders, including government bodies, have not adjusted grant amounts to reflect inflation or increased wage bills, leaving charities to bridge the gap themselves.
Its vitally important that our voluntary and community sector remain robust and resilient, they’re not just ‘propping up’ what the public and private sector can’t support, they offer lifelines for communities and the people that live in them, they play a significant role in civic society.
Collaboration is key, working together to find solutions and ensure the vital work of sector can continue and ensure services aren’t cut or sadly seeing charities close their doors.
As a place-based funder for the West Midlands and Warwickshire, we are committed to supporting our local communities, but we need to collaborate more with regional businesses, think outside of the box in terms of financial support, and deliver meaningful programmes that truly tackle current societal challenges.
How do we broaden the conversation to see how we can safeguard our sector through these uncertain times.
How can we collaborate and support our local communities to ensure they don’t just survive but thrive!