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Charities lose faith and hope as funding crisis leaves them with £2.3bn black hole

Charities are facing a multi-billion pound black hole in their finances as companies withdraw sponsorship and individuals cancel standing orders as the economic downturn bites, according to an authoritative study published today. A survey of 362 charities by PriceWaterhouseCoopers, the Institute of Fundraising and the Charity Finance Directors' Group reveals that charity incomes are expected to fall in real terms and costs to rise. PwC estimates that the shortfall could reach £2.3bn next year as the UK heads towards recession.The forecast is the clearest sign yet of the crisis facing the charitable sector as a result of the credit crunch and has been met with warnings that charity services - often aimed at helping victims of financial hardship - will be curtailed, and some may even collapse.The squeeze has already seen the value of corporate donations tumble. The British Red Cross was forced to cancel its winter gala ball beside the Thames this month as it could not find a corporate sponsor for an event which usually raises £500,000. Shelter, the housing charity, lost £400,000 in the space of six weeks this autumn when corporate sponsors, including the nationalised mortgage lender Bradford & Bingley, cancelled donations.Charity chief executives will now press ministers further to release a £500m emergency fund to help see them through the slump. "There is no doubt that over the coming year we will see charities fail," said Stephen Bubb, director of the Association of Chief Executives of Voluntary Organisations. "We need help to help the victims of this recession."Demand for services which deal with homelessness and mental illness has grown at the same time as a fifth of charities report increased cancellations of direct debits by individual donors - often a bedrock of income. Of the charities surveyed, 71% said they expected corporate donations to fall or stay static over the next year, and a fifth of those feared they could lose at least 15% of corporate income. Some reported declines of up to 50% already.After a decade of strong growth in revenues, the value of legacies and wills - which account for a third of the income of UK charities - has also plunged, and the charities' investment income has collapsed in line with the equity markets. According to the survey, the only growth looks set to come from charity shops, as bargain hunters turn to second hand goods. Even that is threatened by a lack of goods to sell, as some would-be donors try to raise extra cash by selling their bric-a-brac online.This afternoon a group of 27 charities which have lost £46m in investments in Icelandic banks will lobby a creditors meeting for the release of their frozen assets. Among them are Cats Protection and the children's hospice Naomi House, which together invested £16.9m with Kaupthing Singer & Friedlander."In all but a technicality the recession is upon us and the economic climate is looking bleak," said Keith Hickey, chief executive of the Charity Finance Directors Group. "The one certainty is that our beneficiaries will need us more than ever. We must respond to this demand by ensuring that our charities are strongly led and able to ensure that we make the maximum possible use of resources."The crunch has come at a difficult time for Shelter, which offers advice on mortgage problems, homelessness, keeping warm and coping with rent arrears. Banking donors, who account for a third of corporate donations across the sector, pulled the plug on sponsorship deals as a rise in repossessions precipitated a 20% increase in demand for services. It had already laid off 30 staff."If the situation worsens there will be an impact on our services," said Adam Sampson, Shelter's chief executive. "It is the speed with which it has happened which has made it very difficult to adjust. We have to plan for a significant proportion of our loyal donors not being able to afford their five pounds a month standing order payments."Donations from the rich and legacies have slumped, according to the survey. Of charities polled, 86% expected legacies to either decline further or remain static over the coming year."Giving from rich individuals, which had been flagged up as the next big thing, has gone down the pan," Mark Astarita, director of fundraising at British Red Cross, said. "The bulk of the value of legacies is in property and shares, and their value has plummeted. We have predicted a 20% decline next year." That would wipe more than £3m off the charity's £100m annual income.Overall, however, the British Red Cross, believes its income will grow modestly next year, largely from monthly direct debit donations gathered through face-to-face fundraising."It is going to be tough, but it is not all doom and gloom," he said. "We are watching our individual donations closely and there is no detectable change."Short of fundsWith more than two-thirds of charity bosses believing corporate donations will fall or stay static in the next year, charities which rely on this stream of income will be under pressure.The Money Advice Trust, which provides free advice for individuals struggling with debts, relied on corporate donations for 65% of its £7.3m annual income in 2006-07. Five high street banks each gave it more than £500,000 in that year, including Royal Bank of Scotland, now nationalised.The Prince's Trust depends on the commercial largesse for around a fifth of its £22.5m fundraising income.Breast Cancer Care depended on corporate donations for 52.6% of its income, Breakthrough Breast Cancer, for 16.6% and the Royal Opera House for 16.1%.The crisis-hit UK financial sector accounts for around one third of UK charities' income from corporate donors. Figures from financial information group Caritas Data show RBS gave £57m in cash and kind last year, Barclays £52.4m and HSBC £50.7m.Voluntary sectorRecessionCredit crunchCharitable givingguardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

At war level: India raises security status amid grief

The Indian government raised the country's security to a "war level" yesterday saying it had certain proof of a Pakistani link to the Mumbai attacks.The dramatic move prompted Pakistan to say it would end military operations against Islamist militants on the Afghan border, which are critical to the "war on terror", for an "unwanted conflict" with Delhi.With bodies being pulled from the Taj Mahal hotel, where gunmen had made their last stand after a rampage that left more than 170 dead, Sri Prakash Jaiswal, India's minister of state for home affairs, said the country's "intelligence will be increased to a war level, we are asking the state governments to increase security to a war level". The Press Trust of India, India's official news agency also reported that the government was considering suspending the four-year-old peace process with its neighbour.Pakistan's government has condemned the Mumbai assault as a "barbaric act of terrorism" and denied involvement by any "state institutions". But the group named by India, Lashkar-e-Taiba, has longstanding relationships with Pakistan's security establishment. The US and UK have been urging restraint since the Mumbai terror attacks and escalating tensions on the subcontinent are likely to top the agenda when Condoleezza Rice, the US secretary of state, meets David Miliband, the foreign secretary, today in London.The Indian minister said yesterday there was "no doubt that the terrorists had come from Pakistan ... We have evidence of their nationalities. We will reveal everything soon".Indian police say they have in custody one of the gunmen, a 21-year-old Pakistani, Ajmal Amir Kasab, and detailed accounts of an alleged confession given by him have been played out in the Indian media. Authorities have also recovered a satellite phone that appears to corroborate much of his testimony.A fresh confrontation between India and Pakistan would jeopardise attempts by western powers to persuade Pakistan to take on militants linked to the Taliban and al- Qaida in its tribal regions bordering Afghanistan, rather than pitting its forces against India. Pakistani defence sources said nearly 100,000 troops deployed on the western frontier with Afghanistan could be pulled back to deal with a more immediate threat. In India the government is struggling to contain public anger over the attacks with demonstrators taking to the streets to vent their anger over the inability to stop the killings. The wave violence unleashed claimed its first political casualty yesterday when India's home minister, Shivraj Patil, resigned as the government struggled under growing accusations of security failures. India's ruling Congress party, which faces a general election next year, has been attacked by opponents for being soft on terrorism, a potent charge given that India has suffered a major attack every month this year. The government said last night it would be urgently upgrading maritime and air security and looking to create a federal investigative agency.The peace process between India and Pakistan now appears in doubt. "There is a view in the government that India should suspend the peace process ... to show that it is not going to take lightly the deadly carnage in Mumbai," the Press Trust of India reported. It quoted sources as saying the government, "including Prime Minister Manmohan Singh, is very upset as it feels that Pakistan has not kept its promise made at the highest level to end terrorism directed at India".Lashkar-e-Taiba, which is fighting Indian control of the disputed Kashmir region, was behind a deadly 2001 assault on the Indian parliament that pushed New Delhi and Islamabad to the brink of war. It is believed at least 10 militants carried out the assault on Mumbai. Among the dead were 18 foreigners, including six Americans and a Briton.Mumbai terror attacksGlobal terrorismIndiaPakistanguardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds

No Doubt to return for 2009 tour

Reformed US pop group No Doubt reveal plans to tour in 2009 as they finish a new album