Constrained public spending

The economic downturn and the government's objective of eliminating the budget deficit mean that the increases in public spending over the last decade have come to an end. Public spending will remain constrained for the forseeable future. The level of public expenditure will fall over the next four years as the Government cuts spending by £80billion. The health and international aid budgets are protected, but all other departments face cuts. Local councils are facing substantial reductions in their grants from central government, although fewer ring-fenced funding streams gives councils some freedom over which services they cut.

What are the implications?

  • A difficult funding environment for VCS organisations.
  • Increasing pressure to achieve value for money and efficiency in public services.
  • Decision making devolved locally in the hope that local priorities can be met more effectively (see localism agenda).
  • Services that the government does not have a statutory obligation to provide may see a significant reduction in funding.
  • Increased demands placed on charities working with vulnerable groups as public services are withdrawn.
  • Increased outsourcing of public services, with tenders open to all sectors in the hope that competition will drive down costs (see public service delivery).
  • A large number of redundancies as public sector jobs are cut to save money.
  • Spending cuts or further tax increases could risk stifling the economy and impacting on consumer confidence.
  • Increased competition for available funds for VCOs which may lead to increased collaborative working and merger.

Moving forward

What can you do to protect your beneficiaries from the brunt of the cuts?

  • How will you decide what services to provide and who to provide them to if and when funding is withdrawn?
  • How can you influence the new local decision makers? What evidence can you provide to Commissioners to convince them to fund the services that your beneficiaries need?
  • Are there any further efficiency savings you could make - could you collaborate more with other organisations?

Pressures on public finances are going to lead to a reduction in funding for VCS organisations:

  • How can you replace lost statutory income? Are you ready to operate in the new procurement landscape (see procurement practice)?
  • What other sources of funding are there - could you persuade more individual donors or corporate donors to support your work?
  • How can you be strategic given the increased competition for funds from other VCS organisations?

Want to know more?

NCVO Policy analysis of the Spending Review

Published by: NCVO

Date: October 2010

Format: PDF

What is it? An indepth analysis of the measures announced in the spending review and their likely impact on the voluntary sector.

How useful is this? It outlines the cuts department by department, as well as outlining the measures such as the £100million Transition Fund for charities who deliver public services facing hardship as a result of the cuts.

UK Public Spending since 1948

Published by: The Guardian

Format: Web

What is it? A interactive graphic showing the levels of UK public spending since 1948, including a breakdown by government funcion

How useful is it? It provides a good overview of the projected level of public expenditure, putting it in context with historical spending levels and past reductions in government expenditure as a percentage of GDP.

Public Finance Databank

Published by: HM Treasury

Date: Monthly

Format: Web

What is it? The Public Finances Databank is a compilation of published data covering the main aspects of the Government Finances including receipts, expenditure, borrowing and debt.

How useful is this? The data is collated from OTS, a reliable source. All the data is presented in clearly defined tables and charts which provide a quick and easy way of assessing past performance as well as showing forecasts for the future. The data is also available to download in excel spreadsheets.

Spending Review

Published by: HM Treasury

Date: October 2010

Format: Web

What is it? An ebook version of the full Spending Review document.

How useful is this? This is the full document, so it is not the simplest of reads, but this is the primary source for the other analyses. It sets out the spending plans in full detail, and there are also a number of other documents on this site which outline different aspects of the plans for a wider audience.

Last updated at 17:27 Mon 07/Feb/11.

Recent comments

Helen's picture


Guest specialist

Niche markets are key for local Age Concern organisations as they can bring added value to services that other providers do not have a track record in - but - economies of scale are key in making services stack up financially. Toe nail clipping is a point in case where many Age Concern organisations make a small charge knowing they are subsidising a vital service. Making that service break even is a big challenge and brings into play issues about charging, pricing and costing, public perception of the charity and staff, volunteer and trustee perceptions too. A complex mix!

Joh's picture


The Whole Truth is that despite Small organisations suffering from the "40%" cuts in public spending - We need to get behind these companies and support them as a collective rather then allowing them to drop out of the way and be forgotten quicker then how I forget my way home after a heavy night out. Investments need to be made now by the 'public' in securing the future of small Organisations. Its a shame though, because we all know that people are not prepared to help out.

Kathryn's picture


Third Sector Foresight

Useful bit from the Guardian website which looks at some of the implications for the VCS of a 30% cut in a local authority's - Rotherham's - budget. The borough council's chief executive emphasised what he sees as opportunity for the voluntary sector in the face of these cuts: the efficiency drive could be positive for charities who currently provide public services. And although this taps into the 'purpose of a charity' debate, it could be a small ray of sunshine.

He also mentioned that they will no longer provide some "non-core" services, with a view that "The communities that can help themselves, will help themselves,". This links to empowered communities, which I talk about in our localism driver and the personalisation agenda.

Jemma's picture


Guest Specialist

Of the 17,000 organisations that make up the BME voluntary and community sector (VCS), 53% receive their funding from statutory sources (central government (49%); local government (26%); health authority (16%); and EU (9%)). This dependence on Government funding for many organisations means that the impact of public sector cuts is likely to be significant for the BME VCS (see Bridge the Gap: What is known about the BME Third Sector in England, 2007, Voice4Change England).

Research by MiNet, (The Economic Downturn and the Black, Asian and Minority Ethnic (BAME) Third Sector) focusing on London, found that funding cuts have already been widespread across the VCS as a result of the recession and that this has impacted significantly on London’s specialist services. The report found ‘widespread concern that even if funding is maintained for the third sector it will not reach local BAME groups and will be received by larger organisations that are not connected with the needs of London’s BAME communities’. In addition BME voluntary and community organisations (VCOs) may find themselves responding to the fallout of public service spending cuts if cuts reduce access to services or create a new need for services amongst the communities they work with. MiNet’s research found that despite cuts in funding, BME VCOs were experiencing high increases in the need for their services and that organisations were having to introduce new areas of work such as unemployment counselling and jobs skills training.

The impact of public spending costs is likely to lead to an increased number of BME VCOs closing down. Some may continue to function on a reduced basis, depending on volunteer support. Others may disappear completely. With reduced budgets, Local Authorities may try and improve efficiency by awarding contracts to larger providers that can demonstrate ‘value for money’. This will disadvantage the smaller, more specialised providers that characterise the BME VCS.

However Voice4Change England research (Stories of Resilience) has also identified that faced with public spending cuts, BME VCOs have developed resilience by: improving efficiency, reducing waste, re-structuring staffing, and increasing the engagement of volunteers. Others have formed consortia and partnerships to spread risks and resources and to benefit from economies of scale. There has also been a trend for community led initiatives, with a greater focus on re-cycling and drawing income streams from trading in existing and new markets.

Further reading: see Policy Studies Institute and Voice4Change England research on Cohesion in Bradford: disadvantage, solidarity and recession and Voice4Change England’s briefing on the 2010 Comprehensive Spending Review.

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