DCMS Select Committee report on COVID-19 and charities

The Digital, Culture, Media and Sport (DCMS) Select Committee released its first report of session 2019-21 on 4 May 2020, titled The Covid-19 Crisis and Charities. The full text of the report can be found here.

This short briefing outlines the key points from the report and the Committee’s recommendations. We recommend reading the report in full if you can; otherwise this summary explains the conclusions the committee came to after hearing oral evidence.

Key themes

  • The organisational diversity of the sector

The report states that “the sheer diversity of the sector means that not all charities and voluntary organisations are being affected by COVID-19 in exactly the same ways, and not all are experiencing the same degree of hardship.” (p.5). This is an important point, and the report emphasises that a ‘one-size-fits-all’ approach will be insufficient to meet the diverse needs of the sector and retain the different services charities provide, during and beyond this pandemic. The breadth and scope of the work of charities is a point running through the report, and underpins the conclusions drawn in terms of measures to take and recommendations.

  • Insufficiency of the main fund

Although the £750m fund for charities announced by Chancellor Rishi Sunak on 8 April 2020 is welcome, the evidence heard by the committee demonstrates that this amount is not sufficient to meet the needs of the sector, and that there has been a lack of clarity around how it will be distributed. This has meant many essential charities may not be able to access support from this fund.

The report notes the Secretary of State Oliver Dowden’s comment during his remote evidence session where he stated “we cannot save every single business, and that would include not being able to save every single charity.” The report states that this response is concerning, as it ignores the “fundamental principles” on which charities are founded and does not take account of the distinctions between charities and businesses. Consequently, the report finds that further measures are necessary to respond to the specific needs of the sector.

The report raises concern about how the majority of this funding – £360m – will be distributed via conversations with and between government departments, and that there is a lack of clarity around eligibility criteria and application processes. There is also concern that organisations without relationships with government could lose out, despite still offering crucial services.

The report finds that existing packages of support (like furlough and business interruption loans) do not apply equally across sectors. The specific principles and structures of charities prevent fair access to the schemes, and there is a lack of understanding about the specific needs of the sector, and why this package alone will not be sufficient.

The report recommends that because some charities will not be eligible for the current funding and because some may experience issues further into the future after the crisis, that a further stabilisation fund is needed to support the sector through this time, especially given NCVO’s estimate that the sector would lose approximately £4bn in the first three months of lockdown alone.

  • Lack of flexibility in current measures

The report highlights that although measures such as the furlough scheme and business loans do help some charities, many organisations are not eligible to access this support because of its tailoring to the business sector (linked to the first point concerning the organisational diversity of charities and the need for a specific approach).

The report finds that a different approach is needed for charities in several areas, particularly the Coronavirus Job Retention Scheme. At present, charity staff can be furloughed and are then unable to volunteer for their own organisation, but could volunteer for another. This means many skilled charity workers are not contributing to an organisation they know well when their expertise could make all the difference without costing the government any more money. As Karl Wilding, CEO of NCVO said when giving evidence to the committee: “The problem is that the furloughing scheme, or laying staff off, means that you are standing down staff at exactly the time when you want them to step up.”

The paper notes that not allowing furloughed staff to volunteer for their own organisation is a valid measure to prevent businesses from actively benefiting from the pandemic; however, the founding of charities for the public benefit gives them a different position in this debate. Appropriate safeguards against fraud could mobilise large swathes of the sector to continue doing essential work, without costing the Government additional money.

The report also explores the Coronavirus Business Interruption Loan Scheme, which many charities were initially ineligible for because they do not obtain 50% of their income or more from trading. The Directory for Social Change found that just 7% of charities they surveyed qualified for it. Since then, the British Business Bank has amended the criteria to say that this criteria will not apply to charities, and this flexibility is welcomed. As the report states, “This approach indicates a willingness to flex the schemes to ensure charities can benefit” (p11). Nonetheless, many charities are still unwilling or unable to take on further debt, and using their reserves is not a feasible long-term resolution. The NCVO estimates that 25% of charities have no reserves; even those with healthy reserves will be concerned about spending them down too low to survive a potential second peak of the virus.

There is a need for adaptation of the current measures to meet the unique needs of the charity sector, which is well-recognised in this Committee report.

  • Role of the sector now and in the future

The report acknowledges that at present, charities are stepping up to respond to an increase in demand and to reach the most vulnerable and isolated individuals during the pandemic. It states:

“Some [organisations] are working directly alongside public services to fight Covid-19 or assist people with medical conditions who need to shield. Other charities, while not on the medical frontline, are providing advice and support to help people deal with its wider consequences and so find their services more important than ever.” (p.6)

As charities have been responding to this increase in need, the general public and businesses have stepped up to support the sector, and the Committee commends those who have donated and supported charities during this time. The bringing together of individuals and organisations behind causes they care about, and the role of the charity sector in facilitating connections to these causes, will be important to rebuild society. The response during the pandemic has shown that charities are valued and they matter to people.

However, not all charities are receiving the support they need in the present to be there for communities when the crisis abates. As the report states: “Going forward, small and local charities will be invaluable in nurturing this community spirit; yet these are also the charities likely to face the most immediate financial pressures” (p.6).

The report is clear that protection and support for organisations now is essential in order to secure the sector for the future after Covid-19, because charities play a unique and significant role in the fabric of society and public life. It states that “losing their services in either the short term or after the country emerges from this crisis will cause untold damage to individuals and communities. It cannot be allowed to happen” (p. 8).

Recommendations

The report has three key recommendations, which are on page 15 of the full document. They are summarised below.

  1. Reviewing the measures in place to support businesses, and ensuring they meet the needs of charities. This should specifically include a separate Job Retention Scheme for charities allowing furloughed employees to volunteer for their organisation; and a guarantee that six weeks’ notice will be given before the scheme ends so charities can plan for a return to normal. The ending of the scheme should also be phased to support charities without full capacity to immediately return to their normal arrangements.
  2. The DCMS Select Committee confirm that they support the sector’s call for a stabilisation fund to support the sector in the long term, and that this should be available to organisations who work outside of the frontline response to Covid-19.  The Committee also request an update, preferably by oral hearing, from the Secretary of State on this matter by 5 June.
  3. Clear and comprehensive guidance should be published outlining the criteria being used to allocate support to organisations from the £750m of support announced by the Treasury. This should include detail about eligibility criteria and application processes, and moving forward, this detail should be included with announcements about further funding support.

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