England & Wales Finance

Beating the Cuts – with a little help from your friends


Image: Impetus

Jenny North is Director of Policy & Strategy at Impetus – The Private Equity Foundation 

The unprecedented cuts facing local authorities have generated much thought and discussion on how local leaders should best respond – not least from LGIU in their recent Connected Localism collection. There has also been focus on outstanding examples of local government attempting to innovate and genuinely do more with less.

Of course, cuts to local authority budgets result in cuts to partner organisations. At Impetus – The Private Equity Foundation, we support ambitious charities with effective interventions to scale up what they do and become sustainable. In our new report, Beating the Cuts, we look in detail at two of the organisations, Teens & Toddlers and Street League, which we felt had responded impressively to cuts in local and national government funding. Both charities have turned around from significant deficits and uncertain futures in 2010 to diversified funding streams and more people reached today.

So, without underplaying the damage cuts can do, we know that charities can turn crisis into opportunity – if they respond in the right way. Key lessons emerging from the report include the need to identify and focus on the elements of your service which are most effective at producing valuable outcomes, and the importance of paying attention to the shifting priorities of commissioners, so that your offer to them reflects these.

But it also became clear, during our research, that recommendations were emerging for commissioners too. How commissioners respond to cuts in their budgets will be a determining factor in whether charities emerge from this period stronger in their ability to deliver public services, or as shadows of their former selves.

Our recommendations include:

  • Commission for cost-effectiveness, not cost – and that might mean commissioning fewer activities, or for fewer people. For both Teens and Toddlers and Street League, more intensive interventions have proven much better value in terms of cost per outcome than apparently cheaper “light touch” approaches.
  • Make Payment By Results easier to handle. Many charities have the capacity and willingness to be paid by results. But the legal complexity of PBR contracts and the difficulty of funding PBR are significant barriers, especially for smaller charities.
  • No salami-slicing! Well-managed charities have already cut their costs. There is little or no fat to cut, so commissioners cannot realistically expect simply to impose an across-the-board percentage cut in funding and achieve the same results as before. Funders again need to consider which is the most cost-effective activity for them to commission and which activities should be cut (rather than done more cheaply).

Finally, it’s crucial that local commissioners talk to the charities with whom they work (by sharing our report, for a start). Informal and formal conversations help organisations prepare for what’s coming, and can be the first steps to co-creating services designed for the budgets you have.  Attempting to squeeze old services out of less money won’t work for commissioners or charities – only finding new ways to deliver will allow Local Authorities to cut their costs without abandoning the most vulnerable. Working with their partners in the voluntary sector can help to unlock this innovation.