Charities are often chosen by the government and local councils to run public services on their behalf, such as children’s services or mental health services. This is because charities are generally seen as running expert, high-quality services.
Charities are awarded a contract to do this, and they normally have to compete for the contract with other charities and with private businesses, often big outsourcing companies.
Charities do this because they think they can run the services well and provide a higher quality and more caring service than other providers, and this is an important way of helping the people they are trying to serve.
The fees that charities get for running these services often only just about cover the cost of running the service. Sometimes charities even have to subsidise the service from their own money, but they do this if they think it’s important for the people they’re supporting. If charities do make any extra money from the contract, they reinvest it in their cause.
The vast majority of charities’ income from government is in the form of contracts for running services, but some charities get grants from the government instead or as well as contracts. Grants are money that the government or a council gives to a charity to support its work because they believe it is important. Grants are normally intended to support a certain part of a charity’s work, such as a local support service.
How much income do charities get from government?
- In 2013/14, charities received £15bn from government bodies, of which 81% was earned through contracts or other fees for services.
- The majority of the sector’s income from government comes from relationships with local government, with £7.4bn incoming from councils. Central government and the NHS accounted for £6.8bn, while the remaining £0.9bn came from the EU, international governments and international agencies like the UN.