After Kids Company, Things Can Only Get Worse For Charities

The Kids Company horror story has focussed our attention on charities, and not in a good way. But it also highlights a more worrying trend–one that we've been talking about here at The Pier for a while now.
The notion of David Cameron's so-called Big Society–that charities, volunteers and the public sector can work together to help the most vulnerable people in the country–has foundered against a couple of stark economic barriers. Firstly, as government cuts to the council purse bite ever deeper, there's less and less money available for publicly run services. The assumption is made that charities will pick up the shortfall, especially in areas where councils have no legal remit to provide help.
But charities themselves are facing an economic meltdown. The top five UK charities, including Save The Children and the RSPCA, have reported a 5% drop in donations in the last five years. Meanwhile, they've seen cuts to government grants rise by 11%. In other words, they are being asked to do more with 16% less.
The difference becomes most obvious when you look at charities dealing specifically with vunerable young people, like Kids Company. That part of the Third Sector saw government funding drop by 18% in the same period, generally because they're an easy cut from stressed local council budgets. Charity heads are starting to wonder whether it's worth even bidding for government contracts any more. In a report for the Guardian, Cathy Evans, the head of Children England, laid out the stark reality:

“It’s really not adding up any more. Some organisations have remoulded themselves so are very fit to tender and even they are not seeing enough value in the contracts to make it worthwhile delivering them. This market model is running up to the buffers because there is no profit left.”

Note two important words there: profit and value. Charities are businesses, like it or not. They have to pay the bills and their staff. They have running costs, which include fundraising so they're able to keep the lights on. Sure, they need to make a profit, which gets rolled into p[erating costs for the following year or new and bigger projects to help the peopple under their care. You cannot run a charity without money, and anyone who thinks otherwise is deluded. Our View: charities are more successful and more able to do their job when they have the right people for the job, and these highly skilled people do not come cheaply.
To make matters worse, donations are also dropping off a cliff. This is thanks in part to the toxic image charities have gained over the past few years. People have come to view essential fundraising activities like street team and phone work as a nuisance, and charities themselves as spendthrift, paying over the odds for premises and staff. There is a lot of talk in comments under articles on charities about "value for money" and "bang for your buck". In other words, people want charities to behave like businesses, but refuse to connect with the fact that businesses need money to deliver. Meanwhile, an increasing number of small operations are shuttering, putting their caseloads back in the lap of a public sector that's unable or unwilling to cope.
Here is the vicious cycle, as simply as I can put it. Charities need money to operate. That money comes either from donations or grants. When grants dwindle, they have to do more fundraising. The public get sick of constantly being asked to donate, and drop their contributions. The money vanishes. The charity closes.
David Cameron came to power with a credo of "compassionate Conservatism." If this is what he meant, he can keep it.