Deprived areas hit most by austerity – what can a grant revival do for them?

New research has provided hard evidence that reductions in government spending on disadvantage have mostly hit most deprived local authorities. Areas which have the highest service demand suffered the most. And funding is increasingly addressing crisis not prevention. Local authorities that cannot generate their own income are set to fall further behind. Communities need more capacity to deal with changes to their environment but resilience has decreased. A real solution to this requires a new funding settlement. But a revival of government grants for the voluntary sector needs to be part of that reform. Why? They are a vital tool for increasing resilience of local communities.

Funding for services for those in need dropped…

Lloyds Bank Foundation’s report ‘A quiet crisis’ looked into how English local authorities are supporting people facing disadvantage. We keep hearing a lot about the funding crisis of local services – but we now have more hard evidence that it is hitting the most deprived areas and people most in need. Spending on services that support people facing disadvantage dropped by 2% over the five years between 2011/12 to 2016/17. Spending on disadvantage in housing has fallen by 13%. In the three years to 2016/17 spending on youth justice has fallen by 14%. Spending on substance misuse by 59%. The list goes on and on.

Those who already don’t have enough get less…

Two messages in the report really stick out: funding is increasingly addressing crisis not prevention; and almost all of the reductions occurred in the most deprived local authorities. These are areas with the highest demand for services – but also the least ability to generate their own income. They are set to fall further behind as a consequence. In a nutshell: the most disadvantaged people in the most deprived areas – are most hit by austerity. As a result, they will be less prepared to deal with future changes – of which there are many on the horizon. These communities are at risk of a self-enforcing downward spiral.

Who could help build community resilience up?

The charity sector is often the backbone of our communities – supporting in particular the most disadvantaged. Grant-funding is one the most effective ways to get the best out of charities. Grants are often less costly than contracts, enable innovation and can be focussed on prevention – which will save councils money in the long-term. They also normally go to organisations rooted in the community – which means more money is spent locally. By investing in local charities, councils can actively contribute to making their community more resilient.

But we currently have a commissioning regime for public services which suffocates charities and side-lines in particular smaller ones. This happens often through the use of competitive commissioning models and contracts with conditions that don’t work for charities. The relation between income that the sector receives from government grants vs. contracts is completely lopsided. Government grants to the voluntary sector have fallen from £6bn in 2003/04 to just £3.8bn in 2015/16, while income from contracts has risen exponentially and stands at £11.4bn.

A new funding settlement for councils should include a rethink on grants

Local authorities – in particular in the most deprived areas – need a new funding settlement. Lloyds Bank Foundation’s report is clear that this needs to address the detrimental reductions of spending for services that help the most vulnerable. And part of that settlement has to be also a rethink of how to best support local voluntary sector infrastructure. Local decision-making and spending can be a tool to increase local resilience. Grants for the local voluntary sector can and should be part of the solution. Of course, contracts can play a role and it largely depends on what the service is for, the nature of it, and what the commissioner is trying to achieve. But the balance between grants and contracts is currently so skewed that it represents an additional risk to communities – in particular those that have been weakened by austerity. Government has already issued a new commitment to grants in its new Civil Society Strategy. Surely the timing is right to start connecting the conversations and start discussing how to use it as a tool to counterbalance some of the worst effects of recent spending cuts for local councils.


DSC has been campaigning with others as part of the Grants for Good Campaign to reverse the trend of declining government grants to charities and community groups. The campaign has some key principles which go to the heart of this debate. Learn more and support the campaign here.


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