elizabeth chamberlain - ncvo · 2017-03-07 · colleagues at ncvo. our analysis sets out the major...

THE ROAD

AHEAD

A REV

IEW

OF

THE V

OLU

NTARY

SECTO

R’S O

PERAT

ING

ENVIR

ONM

ENT

Michael Birtwistle Elizabeth ChamberlainVéronique JochumChris Walker February 2017

The Road Ahead A review of the voluntary sector’s operating environment

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CONTENTS

Introduction 3The Road Ahead 4What’s next for the voluntary sector?Political Drivers 8Economic Drivers 13Social Drivers 22Technological Drivers 29Acknowledgements 34

NCVO ANNUAL CONFERENCE 2017: LEADING WITH PURPOSEOn 20 April 2017 we will be holding our Annual Conference in London. This will be an opportunity to discuss the topics raised in The Road Ahead, and consider the issues facing voluntary sector leaders and how they will shape sector in the future.Find out more about the NCVO Annual Conference


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INTRODUCTION The Road Ahead is our annual analysis of the changing operating environment for NCVO members and anyone working in the voluntary sector. It identifies and explains forces and trends that are shaping the sector, and that are likely to have an impact on the future of voluntary organisations.

As in previous years this report was developed using a PEST analysis to highlight the key drivers shaping the sector in four areas: political, economic, social and technological. To carry out the PEST analysis we used a wide range of information sources, from official statistics and research to the latest economic forecasts and futures analysis, as well as calling on the expertise of our colleagues at NCVO. Our analysis sets out the major issues that we identified, which we think will continue to shape the sector over the next five years.The report begins with a commentary from Elizabeth Chamberlain, NCVO’s head of policy and public services. She reflects on the four areas as a whole, and how they might combine to shape the future of voluntary organisations and voluntary action.All of the issues highlighted in The Road Ahead present opportunities and threats for voluntary organisations.

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We think that trustees and managers would benefit from using the analysis to explore the implications of these issues for their organisations when planning for the medium term.For help and guidance on strategic planning, see www.ncvo.org.uk/practical-support/strategy

https://www.ncvo.org.uk/training-and-events/ncvo-annual-conference

http://www.ncvo.org.uk/practical-support/strategy


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THE ROAD AHEAD WHAT NEXT FOR THE VOLUNTARY SECTOR?

2017 will be a challenging year for British politics and society – with far-reaching implications for the voluntary sector and its volunteers. As our government proceeds with delivering Brexit and enters into negotiations with the remaining 27 EU member states, Brexit will dominate the political agenda and almost completely monopolise the attention of decision makers. This will undoubtedly distract from existing policies such as devolution and the reduction of public spending, which will continue to be pursued. In domestic politics, despite facing what is often regarded as a weak opposition, the Conservative government still faces difficult tasks in negotiating radical policy change through the parliamentary challenges of a small majority and an assertive house of lords.

The international scenario is equally in a state of flux: following the unforeseen result of the presidential elections, the US will undergo dramatic political changes, and the consequences will ripple throughout other countries, including the UK.The strength of the EU will further be put to the test as anti-euro parties could score big wins in French, Dutch and German elections, risking a blow to the region’s growth and a breakup of the eurozone.

Pressures continue to rise2016 was yet another year in which many charities found the demands on their services rising while their resources were being constricted. The year ahead is unlikely to be any easier: government spending will continue to decrease and funding mechanisms will prioritise contracts over grants. If anything, the challenges are going to be greater, as households will continue to experience lower take-home pay and increased inflation.The combined effect of these trends, added to the fact that they are continuing after a number of already difficult years, will put even more pressure on charities and their volunteers, especially the smaller ones that have been struggling for a long time already.


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Resetting the relationship with governmentThe involvement of voluntary organisations in bridging the divides in society can be part of a wider reset of the sector’s relationship with government.Over the last couple of years there has been a steady erosion of charities’ right to campaign, and this has come not only from government, but also from the Charity Commission and certain parts of the media. This led to what many felt was an all-time low in the relationship between the sector and government.Fortunately, the end of 2016 saw a number of initiatives aimed at rebuilding the relationship: from the withdrawal of the ‘anti-advocacy clause’ in grant agreements (replaced with a set of guidelines and standards for grant making), to the creation of a new external relations unit within Number 10 including a senior adviser dedicated to engaging with the voluntary sector.So there is reason to be optimistic and see 2017 as the time to fully reset the relationship with government, particularly by showing that the voluntary sector remains one of this nation’s strongest untapped resources, and can be part of establishing a new social order in post-Brexit Britain.

The voluntary sector as part of the solutionDespite this gloomy picture, volunteering action and the voluntary sector will be as relevant and necessary as ever in 2017.There is no doubt that the Brexit vote has highlighted huge divisions in our society by class, education and region, with many parts of the country identifying themselves as ‘left behind’.As politicians will need to confront these disparities across different sectors of society and make sure prosperity is more evenly distributed, charities will also have an important role to play.Rooted in the communities they serve, and independent from statutory institutions, charities can help those who are most marginalised and hard to reach. Thanks to their skilled professionals and volunteers, they enable positive relationships even in the most difficult circumstances, such as when working with disaffected young people and chronically isolated older people. Most importantly, voluntary organisations can also bring about the transformation of people’s capabilities, offering hope and a fresh start, rather than simply the reduction of their needs.These unique aspects of how charities work are likely to be an attraction both to the politicians who are trying to engage with communities, and to the communities themselves that now see there are opportunities to be involved and listened to.

Most importantly, voluntary organisations can also bring about the transformation of people’s capabilities, offering hope and a fresh start, rather than simply the reduction of their needs.


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A year of regulatory challengesWhile much time will need to be devoted to the legislative and regulatory impact of leaving the EU, charities are also going to have to deal with a number of changes to existing regulation.We are entering a year in which data protection legislation will be a key area for charities: both in terms of complying with a tougher enforcement regime by the Information Commissioner’s Office, and preparing for the arrival of the General Data Protection Regulation (GDPR) in 2018.In the meantime, the Charity Commission plans to implement the new powers it was granted by the Charities (Protection and Social Investment) Act 2016. Some of the provisions, particularly those on automatic disqualification, could have far-reaching implications given their wide scope. In particular, their application to trustees risks undermining the positive and supportive message about volunteering, and could have a negative impact on people’s willingness to take on such an important role.

Is ‘brand charity’ still attractive?Furthermore, this is happening within an operating environment that has changed substantially. The status of ‘charity’ no longer automatically leads to an organisation having the public’s trust. Charities are also no longer the only types of organisations known for their focus on ‘social good’: the space that they have traditionally filled has opened up to a range of different actors, such as community interest companies, social enterprises, and hybrids of government, business and ‘social’ activity.The evolution and spread of digital technologies will continue to have an impact: as social networking platforms increasingly attract the younger generation and offer different opportunities for engagement, including social action.In the face of all of these challenges and in the fast changing world that 2017 will bring, a fundamental question will be: is it worth setting up a charity or are there other ways of doing things? Will social action find other forms to thrive?


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Even faster, bigger demographic change is imminent.

Looking further aheadThe clear picture that 2017 is showing is one where trends that have been developing for some time and have been spoken about as imminent futures are now current and real. A clear example is demographic change: this is no longer something we have to prepare for in the future, but something we have to deal with in the here and now. Even faster, bigger demographic change is imminent.The same goes for the rise of automation and machine learning, both of which, until recently, were spoken about almost as a subject of science fiction. Yet there is no doubt that machine learning is going to fundamentally disrupt the world of work – so as a society based around work as the organising principle of family life and welfare, the question we need to ask ourselves is what do we need to start planning for?2017 is also going to be the first year that deals with people’s attitudes to globalisation having changed to ambivalence and scepticism, as starkly shown by Brexit and Trump’s rise in America. For years we have been living in a world with no – or very low – growth, where the post-war settlement, with a benevolent and ever present state, has come to its end. This has already led to a rising dissatisfaction with politics, but what’s likely to come next is a more extreme situation where nationalism and populism are rife.

How will charities fare in this new world? 2017 is undoubtedly going to be a year in which our sector will have to adapt to seismic changes in the political landscape, as well having to deal with the rise of societal trends such as the hardening of public attitudes. Its relevance and value will continue to be contested by a public that is increasingly more questioning and distrusting.This is of course a worrying time, but there are also opportunities. Voluntary organisations have a track record of rising to the challenge and of providing a solution, either by finding innovative ways of doing things, or by drawing on the generosity and commitment of their supporters and volunteers. As dissatisfaction with the global leads to more focus on the local, charities working at this level and embedded in local communities have a lot to offer. The uniqueness of our sector, and its volunteers, will continue to be its greatest strength as people connect and work together in building a truly shared society. The years ahead will possibly provide the setting where the unique power of volunteers and the voluntary sector will come to the fore, and the role they can play in building a post-Brexit Britain will be a fundamental one.


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POLITICAL DRIVERS

Changed by BrexitThe short-term political impact of Brexit was hugely significant, ending David Cameron’s political career and putting senior figures of recent years, such as George Osborne and Michael Gove, on the backbenches. However, these immediate consequences may look less significant when compared to the long-term political challenges for charities, and the politicians they seek to influence.Article 50 will be triggered this year to launch negotiations for the UK to exit the EU, but the impact of the referendum on UK politics will not end in 2019, when the UK is expected to leave. Future economic performance will be viewed through the prism of Brexit, while much time will need to be devoted to the legislative and regulatory impact of leaving the EU. Charities need to quickly understand the threats and opportunities arising from Brexit; if they don’t, they will be left out of many important debates.

Charities need to quickly understand the threats and opportunities arising from Brexit; if they don’t, they will be left out of many important debates.


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Legislating for BrexitWhile the short-term implications of Brexit are likely to emerge from negotiations between the UK government and other EU member states, the progress of the government’s ‘great repeal bill’, due to be introduced in the next parliamentary session, may give us a clearer idea of what the future regulatory landscape will look like for charities once we leave.The purpose of the bill is to repeal the European Communities Act 1972, which gave authority to EU law in the UK, and to convert existing EU law into UK law to avoid uncertainty. As a large number of minor changes will be needed to keep the law up to date, the bill is expected to contain powers for ministers to further amend laws through secondary legislation, which do not require the same degree of parliamentary approval. Brexit will dominate the parliamentary timetable for several years at least, even where policy hasn’t changed, and charities will have to be vigilant about significant changes being introduced without meaningful parliamentary scrutiny. Charities will need to be alert and respond quickly to proposed changes to the law but also should keep an ear to the ground for potential opportunities to improve and strengthen legislation. Developing a strong evidence base and demonstrating popular support will be crucial.

A government agenda beyond Brexit?Theresa May’s government was formed on the back of the Brexit vote and inevitably looks like it will be defined by Brexit. While preparations are made for leaving the EU, charities will find it challenging to get their voice heard on other issues – but it’s worth remembering that it is of crucial importance to the government to be seen to have a clear agenda outside of Brexit.The prime minister made her pitch for the Conservative leadership as a promoter of ‘serious social reform’. It’s not yet clear what the government’s social reform agenda will be, but we should see more details in the run-up to the next Queen’s Speech. In a speech to the Charity Commission, Theresa May expanded on her idea of a ‘shared society’ to tackle injustice through institutions such as family and community: a vision to which charities should have a lot to contribute and a useful framework for charities looking engage.

While the relationship between government and the voluntary sector had become strained in David Cameron’s final months as prime minister, there are a number of early signals that suggest Theresa May holds a desire to build a more positive relationship. The appointment of a new external relations unit to work with charities, businesses and faith organisations shows that the prime minister recognises the value of good relationships with those groups. Charities must make the most of this opportunity for a closer relationship – even if this means being frank when the sector thinks things have gone wrong.In terms of May’s style of government, her positive image as a safe pair of hands in difficult times is starting to be overshadowed by complaints of excessive central control. Charities should keep an eye on any tensions that emerge within the Conservatives – a majority of just 10 will mean the prime minister can’t afford too many fights with her own party, however strong her position appears.


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Fragmenting oppositionBrexit could also lead to new dynamics within UK political parties. Just as the Scottish National party benefited from being the party to represent the 45% who voted for Scottish independence, we’re now seeing political parties make their pitch for two new groups of leave and remain voters created by the referendum – and not necessarily split along party lines. The Liberal Democrats have benefited from being seen as the most pro-remain party, most notably winning the Richmond Park by-election, but without much improvement to their polling position. By contrast, with an estimated 70% of Labour seats voting leave1 the Labour party has had to tread more carefully in how they respond to the Brexit vote.

The UK is likely to have left the EU by the next scheduled general election in 2020. By then, Brexit may not be as important for most ordinary voters – but it’s hard not to see it as the dominant issue over the next few years. Some commentators have previously suggested that the main dividing line in British politics will in future be open vs closed, where the big splits among voters will be on their attitudes to immigration and globalisation, rather than traditional questions of left vs right.2 Brexit could be totemic issue that allows this shift to take place.For charities, there is no sign that the fragmentation of support for political parties will end any time soon, so building relationships across a range of parties will remain important. There may also be opportunities to benefit from alliances between politicians from different parties who, during the referendum campaign, discovered they agree on more than they realised.

Big splits among voters will be on their attitudes to immigration and globalisation, rather than traditional questions of left vs right.


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Scrutinising Brexit through committeesWithin parliament, all select committees will be looking at the impact of Brexit on the areas they cover, but the establishment of an exiting the EU committee to shadow the work of the Department for Exiting the EU is set to provide the most significant opportunity for scrutiny. Given the importance of work on Brexit, this committee has been expanded to 21 members, instead of the usual 11, which could present some challenges in providing effective scrutiny, and make it harder for charities to influence through individual members.While the committee retains a government majority, it also has a 12-9 majority of MPs who supported the remain campaign. In practice, however, committees usually seek consensus among their membership, and are more likely to unite around scrutiny of the process rather than divide along campaign lines – though it’s expected to be a powerful voice in the debate about how we leave the EU.Charities should also be aware that the committee that now looks after charity policy is the culture, media and sport committee, after the Office for Civil Society was moved to the Department for Culture, Media and Sport. Early signs are that it may take some time for the committee to fully focus on charity policy, given the range of issues it is currently looking into.

Select Committee Size (2016-17)

Com

mitt

ee

Number of members

LiaisonExiting the EU

Environmental AuditEuropean Scrutiny

Public AccountsNorthern Ireland Affairs

Business, Energy and Industrial StrategyCommunities & Local Government

Culture, Media and SportDefence

EducationEnvironment, Food & Rural Affairs

Foreign AffairsHealth

Home AffairsInternational Development

JusticePublic Administration & Constitutional Affairs

Science & TechnologyScottish Affairs

TransportTreasury

Welsh AffairsWomen & Equalities

Work & Pensions

151050 20 25 30

21

Source: Institute for Government analysis of data from parliament uk3


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Lords looking before they leapDespite an increasing focus on Brexit, parliament will still be heavily involved in scrutinising other legislation. For the first time ever, a Conservative government does not have a majority in the House of Lords, which has made getting legislation through the Lords more challenging. Alongside this, peers have become more assertive in recent years, with a significant number of reform-supporting Liberal Democrat peers happy to go against established conventions that check the power of the Lords.However, after the government’s attempt to cut tax credits through delegated legislation was defeated in the Lords, the government has been robust in dealing with the Lords and has threatened to formally limit their powers further. Although a proposal to take away peers’ right to block delegated legislation has now been dropped, a clear warning has been sent to the Lords not to overstep the mark on existing conventions. It’s worth remembering that peers have been the driving force for any successful reform of the Lords since 1999, introducing new powers to allow peers to retire from the House of Lords, and currently discussing how to permanently reduce the number of Lords members.This means that while the Lords is still probably the best place for charities to improve legislation, peers are going to have to choose their battles wisely. Blocking anything against the will of the public, especially on high-profile issues such as Brexit, carries a threat of further reform, which is likely to mean tension between the government and the Lords will continue.

The rise of the SNP in parliamentThe extraordinary rise of the SNP in Westminster at the last general election has changed the dynamic of parliament, with their MPs often active participants in debates.Despite a small government majority, in practice the distance between the Conservatives and Labour in terms of seats mean it is much more comfortable on a day-to-day basis. As such, the SNP are crucial to any attempt to defeat the government in the House of Commons, and charities will need to develop relationships with SNP MPs, even when they work exclusively in England.Before the 2015 election, SNP MPs avoided voting on issues that don’t affect Scotland. However, now they hold more power, they’ve shown that they’re prepared to vote on these issues when they feel it’s in their political interest to do so. The SNP now look well established in parliament, and charities will have to consider them as part of their influencing strategies for the foreseeable future.

The SNP now look well established in parliament, and charities will have to consider them as part of their influencing strategies for the foreseeable future.

References:1. medium.com/@chrishanretty/most-labour-mps-represent-

a-constituency-that-voted-leave-36f13210f5c6#.siayl68ct

2. www.theguardian.com/commentisfree/2016/jul/04/post-referendum-politics-eu-vote

3. Contains Parliamentary information licensed under the Open Parliament Licence v3.0.

http://medium.com


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ECONOMIC DRIVERS

Mapping the Brexit uncertaintyThe government has given some indications of the trade relationship it wishes to secure with the EU following departure, but until negotiations start and it becomes clearer what terms the EU will agree to, the outlook for the UK economy remains uncertain. Formal negotiations will start once the government invokes Article 50 of the Lisbon Treaty, which will start a two-year countdown to the UK leaving the EU. Depending on the deal made, there will be direct implications for charities across a number of areas, including EU funding, regulation and staffing. There may also be indirect effects, such as the impact of the UK’s wider economic health on tax revenue and public spending.The government has indicated it intends to leave the single market, which is underpinned by the principle of free movement of goods, people, services and capital over borders. It has also said it does not wish to be bound by the EU’s customs union, which enforces no tariffs between members, and uniform tariffs against non-members. In the absence of a trade deal, the cost of trading with the EU will rise. Negotiations with the EU will therefore likely have a heavy focus on the extent to which the UK is able to re-secure some of the trade advantages it will lose by leaving the single market or customs union, and what it will have to offer to do so. This may involve bespoke trading arrangements for particular sectors or service types, such as financial services.

EU Funding continuationThe government has made some assurances regarding how projects currently funded by the EU will continue to be funded following the UK’s departure. All structural and investment fund projects (including the Regional Development Fund and Social Fund) agreed before the UK leaves (ie two years after invoking Article 50) will continue to be funded by the UK government. Projects seeking sign-off will still be subject to a ‘national interest test’ of being good value for money and in line with domestic strategic priorities, which have not been defined.Projects that are competitively bid for directly with the European Commission, such as Horizon 2020 funding, will also have their funding continued. However, it is not clear that the Commission will approve funding for any further UK project bids, as once the UK leaves, some projects will no longer meet the terms of their funding, which usually relate specifically to European legislative objectives. Charities may find such bids rejected for this reason and may wish to seek direct UK funding for developed bids.

World Trade Organisation (WTO) trade rulesIf the UK is unable to agree a new trade relationship with the EU within the two-year time limit imposed by Article 50, trade with the EU will be governed by WTO rules. This means that any preferential treatment that the EU gives to other WTO members must also be given to the UK. However, trade tariffs and other barriers to trade would likely remain and increase the cost of the UK and EU doing business, negatively affecting the economic picture. As many of the trade deals the UK had with countries outside the EU were EU trade deals, the UK will also need to renegotiate its trade relationships with those countries once it leaves, or use WTO rules.

Transitional arrangementsThe government has given a strong indication it would wish to see transitional arrangements in place to bridge the gap between the UK leaving the EU and a final trade deal being in place, thereby avoiding a ‘cliff edge’ in trade rules that would otherwise occur if a deal could not be negotiated within two years. Such arrangements would likely mean less disruption to the UK economy, but it is not clear whether EU leaders will agree to this approach.


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The Bank of England base rate is likely to remain unchanged, or very low. The pressures that might cause it to rise (growing inflation) or fall (weakening consumer spending) are currently more or less in balance. Charities should not expect significant returns from savings or reserves, but those borrowing on variable rates (such as for mortgages) should conversely not see big rises in their repayments.

A new economic trajectoryAfter a period of recovery, confidence in the long term prospects of the UK economy and its future relationship to the EU will dominate economic policy. The effects of both last year’s departmental cuts and the referendum will only start to be felt over 2017. The headline figure for the health of the economy is GDP growth, which has been revised down significantly by the Office for Budget Responsibility,4 as businesses hold back from investing, pending the outcome of the Brexit negotiations.Inflation is expected to climb rapidly and rise above the Bank of England’s 2% target, as the weak pound makes import costs rise. It is forecast to stay between 2.5 and 3%, at least until 2019, with significant consequences for wage growth, household income and the real value of benefits. The cumulative effect of higher inflation will also mean donations will be worth considerably less by 2020 than previously expected.

Inflation is expected to climb rapidly and rise above the Bank of England’s 2% target, as the weak pound makes import costs rise.


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Austerity extendedWhile the economic outlook may have changed, it has only reinforced the direction of travel for government spending. The chancellor has chosen to change his fiscal targets and borrow significantly more than his predecessor, but primarily only to fund investment in infrastructure, some tax giveaways, and to make up for the weaker tax revenue caused by lower growth.The £16bn of departmental spending cuts set out by the previous chancellor at last year’s Spending Review are almost all being carried forward, and now extended into the next parliament. The chancellor’s target of reaching fiscal surplus (ie raising more than is spent) has been pushed back to the next parliament, causing the Institute for Fiscal Studies to predict an ‘additional dollop’ of austerity in the 2020s.5

Charity income from government sources has previously tracked departmental spending fairly closely, so it is likely that it will continue to fall at least in line with the spending cuts. A particularly sharp drop in spending is expected between 2018/19 and 2019/20, which charities may wish to anticipate if they get a high proportion of their income from government sources.

Change in real departmental spending per capita from 2015-16

Source: OBR Economic and fiscal outlook – November 20166

2015–16 2016–17 2017–18 2018–19 2019–20 2020–21 2021–22

Perc

enta

ge ch

ange

on 20

15–1

6

-2

-3

-4

-5

-1

0

-6

-7

-8

November 2015 March 2016 November 2016


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Large gaps in local financesLower public spending will be particularly noticeable at the local level, where local authorities have statutory duties to provide certain services but are constrained in their ability to raise funding. The Local Government Association (LGA) has estimated that by 2020, local authorities will face an annual £5.8bn funding gap, almost half of which relates to adult social care.7

No additional central government funding for social care was announced at the autumn statement, but the government will be permitting councils to raise council tax by up to 6% over the next two years. LGA figures suggest that this rise will not cover the increased costs of the national living wage to the sector,8 and so will not address the wider social care funding gap. Surveys of local authorities have started to identify financial difficulty and failure among care providers9 (which may include some charities), as they struggle to make contracts economically viable.The NHS also received no additional funding in the autumn statement and continues to face a significant funding gap.10 Local Clinical Commissioning Groups will be facing similar financial pressure to local authorities when commissioning services.The amount of funding available for non-statutory services will continue to decrease, as the limited funding available is directed towards statutory services, and the demands on these services grow due to demographic change. Charities that deliver such services may find that they are recommissioned on a smaller scale, differently or not at all.

Lower income for low income householdsThis economic recovery has been unusual in terms of how little average wages have risen compared to previous recoveries. Following the referendum, wages will continue to rise very slowly for most, and will fall for the poorest third of households. The National Living Wage is linked to median earnings growth, so in the coming years it will continue to be uprated more slowly than previously expected due to the revised outlook for earnings.The government has restated its commitment to raising the personal income tax allowance to £12,500 and increasing the higher rate threshold to £50,000 by the end of the parliament. This will raise the income of all households, but the effect is not distributed evenly between income groups – less than 20% of the benefit is expected to be felt by the poorest half of households, with 25% going to the richest tenth of households alone.11

Following the referendum, wages will continue to rise very slowly for most, and will fall for the poorest third of households.


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The welfare changes announced at the last Spending Review are still largely set to be introduced as more claimants transfer onto universal credit. While the ‘taper rate’ (that defines how quickly Universal Credit is retracted as a claimant earns above a particular amount) was made slightly more generous in the autumn statement, it is only expected to improve claimants’ income by around £200–300 a year by 2020.Taken together, under the government’s most recent round of tax and benefit reforms the poorest households are still expected to be over 10% poorer by 2020. However, households across the income spectrum will be affected, with average disposable income expected to grow just 0.1% in 2017 and stay well below previous forecasts into the 2020s – potentially placing pressure on donations.

-£400

-£600

-£800

-£1000

-£200

0

-£1400

-£1600

-£1800

-£2000

-£1200

£200

£400

Impact of tax and benefit reforms May 2015 – April 2020 (including universal credit)

Source: Institute for Fiscal Studies

Poorest 2 3 8 Richest4 5 6 7 9 All

2%

0%

-2%

-4%

-6%

-8%

-10%

-12%

Income decile group

Chan

ge in

annu

al ne

t inc

ome

AS measures, £ per year (left axis) Before AS, £ per year (left axis) Total, £ per year (left axis) Total as a % of net income (right axis)


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Employment trendsLast year’s edition of The Road Ahead identified zero-hours contracts as a growing trend in the employment market. Focus has now shifted to a wider view of insecure work – the ‘gig economy’, exemplified by new businesses that are structured around digital platforms like smartphone apps. Rather than being formally employed to provide minicab hire, or food and parcel delivery, the workers are paid on a per-job basis.Increasingly, the businesses that provide the services are being challenged in disputes over the legal employment status of their workers, who in many cases do not receive the same rights as employed workers (such as holiday and sick pay). Despite this, the number of people working in the gig economy is expected to continue growing to over 865,000 in 201612 and one million by 2020,13 with retailers reportedly considering how they might make use of the trend to address busy periods.14

Many claimants in gig economy disputes highlight the low take-home pay that casual labour provides. Charities should be aware that improvements in top-line employment figures may not necessarily mean that average household incomes are improving – in fact, the levels of in-work poverty are at a record high.15

A challenging environment for smaller charitiesThe combined effect of public spending reductions, changing local authority finances, reduced public service provision and lower incomes for poorer households is likely to increase demand for many forms of charity services, while placing further pressure on commissioners. These will not be new trends for many charities, but the fact they are now set to continue for longer than expected will be significant.Recent analysis of charity accounts suggests that any rises in sector income from government have primarily benefited a small number of larger charities,16 and that small and medium-sized organisations have continued to see substantial decreases in government income in recent years.17 Small and medium-sized charities are adjusting to these changes by increasing their earned income, as well as forming consortia and merging to improve their ability to successfully bid for public services contracts18, but there is growing evidence on the commissioning barriers faced by organisations of this size.19

Small and medium-sized charities continued to see substantial decreases in government funding.


19

The government has announced plans to develop a Public Service Incubator,20 with the aim of piloting commissioning methods that will see more small charities engaged to deliver services, although it is unlikely to have an impact on wider commissioning trends for some years. Without further intervention, it is likely that existing trends of larger contracts using primarily private sector prime providers (that hold the contract but use smaller providers to deliver much of the services) will continue in the near future.Further government intervention or funding opportunities are expected to be limited. The Cabinet Office has issued guidance for government departments on grant making,21 but beyond this there is currently little indication of it adopting a more strategic funding approach for the voluntary sector aimed at addressing long term needs. Most of the largest funding opportunities announced in 2016 have focused on specific sectors, such as modern slavery, domestic abuse, armed forces, emergency services and women’s charities. The Office for Civil Society has been focusing the majority of its funding on a small number of projects, primarily the National Citizen Service and the development of social impact bonds. These funding approaches are not expected to change in the next few years. 36

109

47

68

62

63

100

100

100

100

100

100

Fundraising trading

£25K–£100K £100K–£500K £500K–£1M

Fundraising trading Fundraising trading

Charitable trading Charitable trading Charitable trading

Government grants Government grants Government grants

Government contracts Government contracts Government contracts

100 102

100 104

125

100

142100

144100

161100

Sources of income for income bands £25k–£100k, £100k–£500k and £500k–£1m, cumulative change, 2008/09 to 2012/13 (2008/09 = 100)

Source: NCVO


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Economic drivers dashboard

Issue Change since last year Outlook for charities

Summary

Growth forecast Revised down Lower growth means government borrowing more, and maintaining existing commitments to reduce public spending.

Inflation Set to rise sharply Knock on effects for welfare, spending power, recurring donations.

Interest rates Lowered and likely to stay low Charities are net savers, and so should not expect meaningful returns on savings in the near future as rates are expected to stay low.

Pensions Volatile investment markets following referendum

Low interest rates, volatile gilts market, possibility of introduction of social pension funds and defined benefit scheme reforms.

Welfare and low income households

Minor concessions, but most cuts going ahead

Rollback on pay to stay policy and lower universal credit withdrawal rate provide small comfort, but low income households still badly affected by last year’s cuts. Social care funding gap. Growing demand for charity services.

Public and departmental spending

Planned cuts unchanged but extended

All extra spending investment-focused. The budgets of most key commissioning departments for the voluntary sector will continue to fall in line with Spending Review. Health is the exception, but affected by fastest growing demand. NHS has large funding gap.

Local authorities Social care funding gap has grown, business rates reforms not in place

Local authorities under pressure from social care funding gap and will have little funding available for non-statutory services.

European funding

Funding guaranteed only for funding streams/programmes in the national interest

European funding already signed off is guaranteed, but size and nature of future ESF funding streams are uncertain. Programmes need to pass national interest test to be guaranteed funding beyond Brexit.

Employment and wage growth

Employment stable but substantial downgrade to wage prospects

Growth of ‘gig economy’. Average wage growth and disposable household income to stagnate.

Sector income Similar trends and outlook, but possibly higher demand for charity services

Smaller charities continue to be badly affected, but are adapting via earned income, consortia and mergers. Government funding highly targeted on specific sectors.

Alternative funding sources

Similar trends and outlook Crowdfunding continues to grow quickly, but is still small overall. The Access Foundation has begun to award funds to make social investment more accessible for small charities.

Legend postive outlook for charities concerning outlook for charities, or mixed depending on size or sector

very concerning outlook for most charities


21

References:4. OBR Economic and fiscal outlook – November 20165. IFS Autumn Statement 2016 analysis – opening remarks6. Contains public sector information licensed under the Open

Government Licence v3.0.7. LGA Autumn Statement Submission, October 20168. LGA press release9. ADASS Budget Survey 201610. NHS Five Year Forward View, May 201611. Resolution Foundation Missing the Target, December 201412. ONS Labour Force Survey13. Resolution Foundation Secret Agents, December 2016

14. Guardian article, November 201615. Joseph Rowntree Foundation, Monitoring poverty and social

exclusion 201616. NCVO UK Civil Society Almanac 201617. NCVO Navigating Change, February 201618. See footnote 4.19. Lloyds Bank Foundation Commissioning in Crisis, December

201620. DCMS Press Release, December 201621. Cabinet Office Grants Standards, December 2016


22

SOCIAL DRIVERS

Continued demographic pressuresIn the UK, as well as in the rest of the world, the population is ageing. The United Nations has said that ‘virtually every country in the world is experiencing growth in the number and proportion of older persons in their population,’22 which is leading to one of the most significant social transformations of the 21st century – with implications for nearly all society. The focus has often been on the growing demand for health and social care services, and the challenges this raises for public spending. The Government Office for Science ran a project on the future of an ageing population,23 which highlighted a number of other priority areas that need to be considered, including work and housing (see table). The voluntary sector has a great deal of knowledge and expertise to contribute to discussions about demographic change: not only on the challenges and solutions, but also the potential benefits. Voluntary organisations will also need to think about how it will affect their own workforce and the involvement of volunteers.

Work • Supporting people to lead longer working lives • Adapting workplaces • Re-skilling opportunities throughout people’s careers

Lifelong learning • Addressing barriers to later-life learning • Specific focus on technological and financial skills throughout life

Housing • Ensuring housing needs of older people • Thinking ‘beyond the building’ to include the neighbourhood and community • Preparing for the impact of variable home ownership rates

Families • Understanding the impact of increasingly diverse family types • Responding to smaller family units and where more generations are alive simultaneously • Considering policies’ effects on the whole life course, and understanding the dependencies

between generations

Health and care • Adapting health and care systems to meet changing demand • Supporting family and other unpaid carers • Capitalising on the opportunities from new technologies

Connectivity • Responding to the transport needs of different age groups • Successfully designing the built environment • Addressing barriers to technology use

Source: Government Office for Science


23

Brexit and a divided societySocial and political commentators, journalists and researchers have reflected on the many deep divisions the results highlighted and have tried to offer some explanation as to why voters were more or less likely to support Brexit. A report by the Joseph Rowntree Foundation24 concluded that voters with a low income and low educational level were more likely than others to endorse Brexit, and this was more likely to be the case if they lived in local areas that provided them with few opportunities. So while individual inequalities played a significant role, geographical differences were also key. The results of the referendum drew attention to long-standing divisions: previous editions of The Road Ahead have referred to them and it is likely that they will continue to affect the country for a considerable time. In that sense, these divisions are not a new issue for the voluntary sector; for many years they have been shaping the work of organisations that support the most marginalised and disenfranchised communities, and will continue to do so. However, the referendum has made these divisions more prominent and given the nation a wake-up call. Many will be looking at the sector to see how they can be addressed and healed.

Britain’s decreasing social mobility In its 2016 annual report the Social Mobility Commission identified 65 parts of the country as being ‘social mobility coldspots’ – those with the poorest education and employment prospects. They also found that only three of those 65 areas voted to remain in the EU, highlighting how the lack of prospects in areas may have informed people’s voting decision. The report indicates that people born in the 1960s, 1970s and early 1980s have lower incomes than their predecessors had at the same age, and that those born in the 1980s are the first since the war not to start their working life with higher incomes than their immediate predecessors. In the context of the widening gap between older and younger people, tensions between generations could increase. Poor social mobility may contribute to a sense of injustice and resentment, and could have severe implications for the nation’s social cohesion. Coupled with the divisions that the referendum brought to the surface, this could be a considerable challenge in future years. Voluntary organisations and volunteering are well placed to bring people together and build bridges, which can help strengthen social cohesion. The need to do this may be increasing, and voluntary organisations will have to work closely with a range of other organisations and institutions (in both the public and private sectors) to help tackle issues around fairness and inequality.

Voluntary organisations and volunteering are well placed to bring people together and build bridges, which can help strengthen social cohesion.


24

The complexity of people’s attitudes, beliefs and identitiesPeople’s views and beliefs clearly matter. For example, the Lord Ashcroft Polls25 following the referendum found that those who voted to leave the EU were far more likely to think that globalisation and multiculturalism are a ‘force for ill’ than a ‘force for good’. However, understanding how views and beliefs are shaped and what drives them is often difficult because people’s identities are often complex. For instance, the British Social Attitudes26 Survey found that despite a long-term decline in the size of the working class, the proportion of the public who identify themselves as working class has remained stable over time. Class identity appears to be more closely linked to people’s upbringing than what they have achieved or experienced, with almost half of those in professional and managerial jobs still describing themselves as working class. The social class with which people identify influences their attitudes towards a range of social issues.

Those with a sense of working class identity are more likely to see society as divided between a large disadvantaged group and a small privileged elite, and are less liberal and less pro-immigrant. Because voluntary organisations are embedded in communities – often at the local level – it is widely recognised that they are close to the concerns of their beneficiaries and users, and that they provide a voice for them. More than ever they will need to ensure that they offer spaces for discussion and debate where people can express different views, and a platform for positive change and action that give them a greater sense of agency.


25

Contrasting views on the main issues facing BritainBefore the EU referendum, the June 2016 edition of the Ipsos Mori Issues Index27 showed that immigration (48%), NHS (37%) and Europe/EU (32%) were considered the three biggest issues facing Britain by those surveyed. Immigration was the top concern for all age groups and social grades, with the exception of those belonging to ABC1 social grades28 and aged between 35 and 64. Concern for migration was particularly high for people aged 65 and over, and those from social grade C2. In the most recent edition of the Index published in November 201629 the three main issues are identical, but the relative rankings have changed: Europe/EU/Brexit (39%), immigration (35%) and NHS (32%). But concern for immigration remains the biggest issue for people from C2DE social grades and is higher amongst people who are older (over 55). Concerns over immigration were one of the most significant drivers behind the results of the EU referendum: one third (33%) of those who voted leave said the main reason was that leaving ‘offered the best chance for the UK to regain control over immigration and its own borders’.30 Yet, analysis of the latest wave of the European Values Survey31 demonstrates that public opinion on immigration can be more tentative or nuanced. For example, it is not just about people saying they are for or against immigration; they also express opinions on the criteria they think should be applied when deciding who to let in the country.

Issues facing Britain: November 2017 What do you see as the most important issues facing Britain today?

EU/Europe/BrexitImmigration/immigrantsNHS/hospitals/healthcareEconomyHousingEducation/schoolsPoverty/inequalityUnemploymentDefence/foreign affairs/terrorismCrime/law and order/ASB

Top mentions %

0 5 10 20 25 30 403515

39

35

32

26

18

17

14

14

13

11

Base: 973 British adults 18+, 4-24 November 2016 Source: Ipsos MORI


26

The much-publicised increase in race and religious hate crimes across the country following the vote is deeply worrying, and highlights the need to improve understanding of what shapes racist behaviour. Perceptions of threat and fear are thought to play an important part and may be heightened in areas that are more vulnerable economically and where cultural distance between communities is greater. If Brexit does not lead to a fundamental change in immigration levels, this could leave some people, particularly leave voters, disappointed and angry. Even though the latest figures published by the Home Office32 show that the number of hate crime incidents has fallen from the post-referendum spike, the sector will need to continue working to combat prejudice and discrimination, and to support victims. At the same time as combatting unacceptable behaviour, voluntary organisations will also want to find ways of reaching out to the disillusioned and those who feel they have been ignored by the ‘elite’.

Trust in government and charities under threat?Research conducted by NatCen33 found that people on lower incomes are less likely to feel they have overall control over their lives, and have consistently lower levels of trust in public officials and MPs.The 16th Edelman Trust Barometer34 highlighted large differences in how much people trust institutions such as government, business, the media and charities. The wealthier and more educated sub-group of those surveyed had trust levels of 57% in all institutions, while the rest of the population recorded a score of 40%. Trust in government among those with an annual income of over £100,000 was 54%, compared to only 26% among those with an annual income of less than £15,000. The ‘trust gap’ between the two income groups was wider for business (32 percentage points) but less pronounced for the media (12 percentage points) and charities (10 percentage points).

Public trust in charities has dropped from 6.7 out of 10 in 2014 to 5.7 in 2016

The latest figures from the Charity Commission35 indicate that public trust in charities has dropped from 6.7 out of 10 in 2014 to 5.7 in 2016. Yet in the same survey, the vast majority of the general public report believing charities play an important role in society (93%), and almost two-thirds agree that most charities are trustworthy and act in the public interest (61%). However these proportions have both gone down in the last two years (by 3 and 10 percentage points respectively). Overall, the public are more likely to trust small charities (57%) over large ones (34%), and charities that operate in the UK only (61%) over those that operate internationally (31%). It is possible that the decline in trust, in addition to the stagnation of household incomes, may have a negative impact on charitable donations, and that the impact may be different for different types and sizes of charities. Paradoxically, trust is stronger among younger people, but it is commonly older people who are inclined to give more to charities; this is an example of how the relationship between trust in charities and the likelihood of donating is not yet well understood.


27

Why do you think your trust and confidence in charities has decreased?Top 10 responses (%)

Media stories about a charity/ charities (generally)Media coverage about how charities spend donationsDon’t trust them/ I don’t know where the money goesThey use pressurising techniquesToo much money is spent on advertising/ wages/…The expenses scandal (generally)Don’t know if charity bags are a charityToo many of them nowSomeone I know experiencing a charity’s servicesThey need to become more efficient

0 5 10 20 25 30 3515

33

32

21

18

15

8

7

5

4

3

Base: All respondents whose trust and confidence in charities has decreased (359) Source: Populus/Charity Commission


28

References:22. World Population Ageing Report, United Nations, 2015 23. The Future of an Ageing Population, Government Office for

Science, 2016 24. Joseph Rowntree Foundation, Brexit vote explained: poverty,

low skills and lack of opportunities, 31 August 2016 25. Lord Ashcroft Polls, How the United Kingdom voted on

Thursday… and why, 24 June 201626. British Social Attitudes Report 3327. Ipsos Mori Issues Index, June 201628. ABC1 is used to refer to the middle class, C2 to the skilled

working class, and C2DE to the working class (NRS social grades classification)

29. Ipsos Mori Issues Index, November 201630. Lord Ashcroft Polls, How the United Kingdom voted on

Thursday… and why, 24 June 2016 31. European attitudes to immigration, British Academy,

20 September 2016 32. Hate Crime, England and Wales 2015/16, Home Office

Statistical Bulletin 11/16, 13 October 2016 33. Social and political attitudes of people on low incomes,

NatCen, 30 August 2016 34. 2016 Edelman Trust Barometer 35. Public trust and confidence in charities 2016, Charity

Commission


29

TECHNOLOGICAL DRIVERS

Closing the digital gapOnly recently the House of Lords select committee on charities heard from top executives of Google and Twitter that although some charities had successfully used technology to fulfil their goals, many are still failing to see the relevance of technology for their own organisation. Although the voluntary sector may be lagging behind other sectors, there are encouraging signs: the Lloyds Bank UK Business Digital Index 201636 shows that charities have seen an increase in their overall digital maturity, rising by six points in the last 12 months. However, almost half (49%) still lack all five Basic Digital Skills37 (managing information, communicating, transacting, creating and problem solving), and four out of five (78%) are investing no money in digital skills.

There is a clear need to spread digital skills and literacy across the sector. The ability of voluntary organisations to use digital technology is partly linked to their ability to employ people with digital skills. However, it is also a broader leadership and governance issue, and requires having a digital strategy that isn’t separate from the organisational strategy. This is challenging for organisations, particularly small ones that are struggling with funding. They will need to draw in trustees and volunteers who can contribute specialist skills and expertise.

The ability of voluntary organisations to use digital technology is partly linked to their ability to employ people with digital skills.


30

Building digital trustAccording to a recent Microsoft study,38 one of the features shared by successful digital organisations is that they are ‘data-obsessive’ and use data extensively to inform decision making. But to be data driven an organisation needs to have specialist skills and be able to manage the risks associated with digital technologies, both of which are still difficult for many voluntary organisations. Digital risks can be addressed by putting in place the right security measures to ensure privacy and the best data protection, but a key challenge is knowing what these are. Organisations will have to comply with a tougher enforcement regime by the Information Commissioner’s Office, and prepare for the arrival of the General Data Protection Regulation (GDPR) in 2018. Organisations also need to have the highest ethical standards to build and maintain trust (the ‘cornerstone of the digital economy’39). To increase digital trust, organisations need to offer services and products with users’ best interests in mind, designed ethically and securely from the start. In the context of the wider debate around public trust in charities, organisations will need to consider how their digital strategy and initiatives may influence, positively or negatively, people’s attitudes and perceptions, and will need to be open and transparent with users and supporters about how their data is being used.

People-centred innovationThe key message of the latest edition of the yearly Accenture Technology Vision report40 is that organisations will have to engage more with digital technologies by focusing on people. This doesn’t necessarily mean that organisations need to use more technology, but rather that they use technology to listen more carefully to beneficiaries, supporters, partners and employees, and gain a deeper understanding of their needs, behaviours and attitudes. Collecting and analysing data can improve how organisations profile and target donors and users, and help them develop new services. Applying design principles and methods, alongside good data analytics, can help identify opportunities for innovation and improve user experience and impact. Many digital social enterprises are familiar with design thinking, but it is still not widely used in the voluntary sector, partly because it involves changing an organisation’s decision making and governance processes to allow for best practice in agile development based on flexibility and continuous improvement. Nevertheless, it is likely to attract more attention among charities because it provides a constructive way of finding creative solutions to problems by engaging and listening to stakeholders.

What is design thinking?‘Design thinking involves observing and engaging with beneficiaries and other stakeholders to understand their explicit and implicit needs. Drawing on insights from that discovery process, design thinkers refine and reframe the problem that they aim to solve. Next they develop targeted solutions and create prototypes to test those solutions among users. The testing of prototypes is an iterative process that challenges assumptions, enables learning, and rapidly surfaces new solutions.’Stanford Social Innovation Review


31

The art of connecting One of the main benefits of digital technologies for the voluntary sector is strengthening relationships with existing stakeholders and reaching new audiences. Organisations are using a range of technologies to mobilise supporters around a common cause or interest, have open conversations, and share experiences and knowledge. Some technologies are having an obvious effect on the fundraising landscape, including crowdfunding and text donations. In the coming years, it will be worth keeping an eye on further developments in a few areas.• Contactless donations: donations made through a

device fitted with contactless payment technology (eg Mary’s Meals, Blue Cross and Sue Ryder).

• Micro-donations: donations made by rounding up card payments and donating the change to charity (eg Pennies Foundation).

• Social media integration: allowing people to donate securely using social media and social payment platforms (eg #DONATE via Twitter and PayPal).

• Virtual reality: used to raise awareness or as a storytelling device to encourage people to empathise and donate (eg Charity: Water and Amnesty International UK).

Beyond fundraising, charities are making use of digital channels to deliver services and offer multiple support options, such as online self-assessments, mobile apps and live web chats. • Be My Eyes: an app for the blind and visually impaired

that connects people in need of visual aid with sighted users through live video.

• TellMAMA: a project by Faith Matters providing support to victims of anti-Islamic hate that can be contacted via WhatsApp, allowing users to send audio, video and images as well as text.

Charities are also starting to explore how virtual reality can be used to raise awareness and for learning purposes (eg National Autistic Society, Alzheimer’s Research UK and the Samaritans).

Charities are also starting to explore how virtual reality can be used to raise awareness and for learning purposes.


32

The good, the bad and the ugly While the benefits of digital technologies are often discussed, it is more unusual to dwell on some of their more negative effects. Last year’s edition of The Road Ahead mentioned the risks associated with cyberbalkanisation, the ‘segregation of the Internet into smaller groups with similar interests, to a degree that they show a narrow-minded approach to outsiders or those with contradictory views’.41 Search engines and algorithms used by the internet create a ‘filter bubble’ that stops users from engaging with new and diverging opinions. Clearly there is a danger that the way companies and organisations profile their stakeholders using data and shape their communications could reinforce this. Some organisations may want to develop new tactics to break out of the filter bubble, but it will depend on what they are trying to achieve.Events in recent months have highlighted that the internet and social media are not always a force for good. 2016 saw online trolling reach unprecedented levels, and ‘post-truth’ was named word of the year by Oxford Dictionaries, partly because of the extensive use of social media to spread ‘fake news’ online. The implications for voluntary organisations are two-fold: they need to be able to support the people who are being targeted, and learn to manage trolls and misinformation when they are themselves the target.

The rise of automation? In the 2016 Hinton lecture42 ‘White Heat: Why technology changes everything’, Anthony Jenkins reflected on the impact of new technologies on financial services, predicting future changes to be on an unprecedented scale with the development of technologies such as artificial intelligence and machine learning.43 He talked about the rise of automation and quoted research from McKinsey44 which estimated that as much as 45% of people’s work activities can be automated using current technology. According to the research, only a very small number of occupations (less than 5%) can be entirely automated. However, about 60% could have a significant portion of their activities automated (30% or more). While manufacturing, catering and hospitality, and retail are the sectors most susceptible to automation, across all sectors (including the voluntary sector) there are activities where the potential for automation is high such as data collection and processing tasks. Because the work of most voluntary organisations involves a large number of activities that depend on face-to-face relationships and are more difficult to predict, they are less susceptible to automation. However, more automation may affect back-office roles. This could allow organisations to redirect people’s time towards higher value tasks, but automation is still a difficult area and very likely to remain out of reach for many in the sector.


33

References:36. UK Business Digital Index 2016, Lloyds Bank 37. See p.10 of the UK Business Digital Index 2016 report for

more information on definitions and methodology 38. Digital Transformation: the Age of Innocence, Inertia or

Innovation?, Microsoft 201639. People First: the Primary of People in a Digital Age,

Accenture 2016 40. People First: the Primary of People in a Digital Age,

Accenture 201641. The segregation of the Internet into smaller groups with

similar interests, to a degree that they show a narrow-minded approach to outsiders or those with contradictory views www.techopedia.com/definition/28087/cyberbalkanization

42. Hinton lecture 2016, NCVO 44. Four fundamentals of workplace automation,

McKinsey Quarterly, November 2015

http://www.techopedia.com/definition/28087/cyberbalkanization

http://www.techopedia.com/definition/28087/cyberbalkanization


34

We would like to thank our colleagues for their contribution to this report.

Joy Dobbs Megan Griffith GrayGreg Lamyman Nick Ockenden Chloe StablesAidan WarnerKarl Wilding

elizabeth chamberlain - ncvo · 2017-03-07 · colleagues at ncvo. our analysis sets out the major...

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