Now is the time for a government match-funding scheme to unlock growth

It’s no secret that this Labour Government is in a difficult fiscal situation. The constant talk about ‘hard choices’, and recent uplift in defence spending, means that many are bracing for cuts to public services and government departments.

With the Government looking to make their budgets go further, and charities struggling to access funding, match-funding could be the answer.

These programmes work by government matching funds that are raised from other funders. For every £1 that an organisation raises from grants, foundations, or philanthropy, the government puts in £1. This means that both government money, and other funders’ money, go further.

This isn’t a new idea. NPC and others have been calling for this for a long time, but the current context has created the perfect opportunity to apply this approach.

Why match-funding?

1. Reducing Risk

Match-funding schemes reduce the cost and risk for both funders and government, as each side puts in less money than they would have to otherwise to enable service delivery. They also incentivise impact-minded philanthropists to focus giving on the areas or causes where their gift can make the biggest difference.

2. Making money go further

If you are a funder, match-funding makes your money go further. For every pound you put in, someone else puts some in too. That applies to both government and non-government funders, so is a clear win/win.

3. Government can influence where funding goes

For government, there’s the bonus of being able to direct and channel funding. By defining what is included in the match-funding scheme, government can shape where investment flows. They can choose to focus the scheme specific places or causes, drawing in funding that might otherwise go elsewhere. At the same time, match-funding doesn’t mean that funders and philanthropists who choose to focus elsewhere are any worse off.

4. Charities can secure funding with less work

For charities, it means less work to secure funding. Most charities have diverse income streams including grants, donations, and loans. Putting together the patchwork of funding to cover costs is hard work. For some charities, time spent fundraising means less time serving the people and communities that they exist to support.

Match-funding means that some of those sources of income grow, without having to put in more work. Given the difficult fundraising landscape, this could make a massive difference.

5. Evidence of impact

We also know that match-funding works. We saw during Covid how £20m from the DCMS Community Match fund was matched to £20m from funders in the Covid-19 Support Fund. This meant that almost 650 charities who needed support were able to access funding quickly.  This is a great example of how match-funding can enable charities to deliver essential support for communities in challenging times.

Outside of Covid, UK Aid Match used public donations to support charities to shape how the UK Government spent some of its aid funding. 4.5 million people donated, supporting almost 12 million people in 21 countries.

If this Government is serious about working in partnership with civil society to deliver its missions, then match-funding is a proven method for enabling this.

Does this just displace funding?

There’s an argument that these kinds of regional, targeted match-funds only move funding from one place or cause to another. There’s evidence to suggest that isn’t true, and that match-funding without capacity building only increases the size of existing donations, rather than attracting new funders (more on that below). Even if this is true, we know that England’s charities are distributed very unevenly. Shifting philanthropic funding to the places that need it most is no bad thing.

Match-funding should be used to tackle barriers to employment in deprived places

This Government has been very clear about its focus on economic growth, and welfare reforms announced recently include plans to help Disabled people and those with long-term conditions into work. Match-funding can be a way to deliver on this commitment to support people into work and drive growth. The way to do this is to match the fundraising of organisations that work to tackle barriers to employment in the places that need it most.

The things that stop people being able to work vary, and go beyond standard skills training and employment support. The number of people leaving work because of their health is growing by 300,000 every year. Things like mental health support and preventative healthcare, as well as more traditional employment support, could help more people get into work.

There should, of course, be scope for local variation. What people need will vary between places. Old industrial heartlands might need skills programmes to support people into new careers, while some communities might need addiction support. Match-funding allows for that variability. As long as the work meets the criteria, then a government would double their funding. Part of this criteria should be meeting specific local needs.

There are lots of different ways that you pick the places to run this kind of scheme. You could look at the Index of Multiple Deprivation, use unemployment statistics, or some other metric. Fundamentally, this is about supporting the places that need it most.

We don’t know what the recently announced £1bn package of support to help Disabled people and people with long-term conditions into work will involve, but this is a clear opportunity to use match-funding. Using even a small portion of this package to create a place-based match-fund could make a huge difference in places that really need it, drawing in extra funding from elsewhere to deliver support to people who find it the most challenging to access the labour market.

What would charities need to access the funding?

The answer to this question will vary between places. But any scheme like this will need to come with some funding for capacity-building.

In places where there’s little charity infrastructure, local organisations will need support to both find new funders and scale up their work. There’s some evidence to suggest that match-funding mostly works to increase the size of existing funding, but that capacity building is needed to attract new funders.

To really make the most of this type of scheme, there should also be a co-ordinator role funded within each area involved in the programme. This role, working closely with the local authority’s local growth team, would focus on securing external investment for charities and local enterprises. This should include identifying and working with philanthropists, but also include wider social investment and co-investment in local social enterprises.

What next?

As we approach the Spending Review, we will keep calling for this.

For a government with tight budgets, this funding approach makes sense. We know that there is interest in this and other models of blended finance from politicians and officials.

If this is taken forward (and we hope that it is), it is essential that civil society and local communities have a say in the criteria and how this is designed. Done properly, a matched-funding scheme could be transformative for the economy, government, charities, and communities.