How existing business measures are working for charities
Although charities are eligible to make use of many of the financial measures announced for business, these are proving to be of limited benefit for the majority of charities.
The coronavirus job retention scheme will only make a marginal difference to the fixed costs of most charities. The majority of charities deliver services and offer support which cannot simply be interrupted for a period of months. They must remain open to support the public, and therefore expenditure associated with them will continue. Furthermore, many organisations have already seen an increase in demand for their services as a result of coronavirus. This is likely to increase over the coming weeks.
As employers and service delivery organisations facing business interruption, charities should be eligible to benefit from the measures announced by the chancellor for businesses. We welcome the change to the rules of the coronavirus business interruption loans scheme (CBILS) removing the requirement for charities to generate more than 50% of turnover from trading activity. Based on our research, the majority of voluntary organisations would have been excluded from the scheme on those criteria. Furthermore, we welcome the inclusion of charities in the bounce back loan scheme.
However, many charities’ financial models preclude them from taking on additional debt at such a precarious time, with the interest rising to 2.5% after one year. It is crucial that charities are able to come out of the crisis in a position to play a full and active role in rebuilding society. Saddling organisations that do not generate profit with unsustainable debt accrued to see them through the crisis would hugely hamper their financial sustainability and ability to deliver public benefit when the country emerges from the pandemic. This is especially concerning as the government will only cover interest payments and fees after the initial 12 months of the loan.
A review of the measures and how they can be changed is urgently needed, to ensure they achieve their aim of providing financial support to businesses and charities.