Martin Lewis calls for bailout for charities at risk of collapse due to Covid

Martin Lewis, the MoneySavingExpert founder who is giving away more than £10m of his fortune, has warned that many charities are at risk of collapse as a result of Covid-19 and has called for an urgent government bailout.

The financial adviser has funded a study into the sector, which faces, according to some estimates, a £10bn black hole in its balance sheet as charity shops remain shut and fundraising events continue to be cancelled.

Lewis highlighted the increased focus on health charities, such as the NHS-linked fundraising efforts by Captain Tom Moore, as contributing to an “existential risk to other charity sectors”.

“The huge rise in demand for services, especially for those in the areas of mental health, poverty relief and domestic abuse, is coupled with a substantial drop in their incomes, as donations dry up and charity shops close, leaving a possible £10bn shortfall for the UK charity sector,” he said.

“And while NHS-linked fundraising efforts, by Captain Tom, and others are rightly a cause for celebration, we must be careful to not just focus on this cause célèbre. With millions struggling financially, donations seem a finite resource. If the public focus and donations skew solely towards our NHS heroes, there is an existential risk to other charity sectors. Many of these also provide an essential safety net for millions, but without the benefit of state funding.”

The funding gap between income and expenditure among UK charities could reach £10bn, leading to 60,000 redundancies, according to estimates by Pro Bono Economics cited in the report by the thinktanks Demos and New Philanthropy Capital. This was based on a projected £6.7bn drop in income combined with a £3.4bn demand increase. New Philanthropy Capital also modelled the impact of the crisis on 27 of the largest service-delivery charities that suggested an annual shortfall of up to £200m.

The report calls for measures including doubling gift aid on donations and a new fund focused on helping charities to tackle the wider social impacts of the pandemic that will continue beyond 2021 – such as food banks, unemployment support and domestic abuse. It wants special consideration for Covid rules for charity shops when they are allowed to reopen.

“If charities have to cut services or even close down because of the funding and delivery challenges of the pandemic, it will be the most vulnerable who suffer,” said Polly Mackenzie, chief executive of Demos. “Those cuts would come just as the economic impacts of Covid-19 become hardest to navigate.”