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LCVS CEO Jeff Scales shares his thoughts on the recently published Government Spending Review (published 11 June 2025)
Finding the light for VCSE sector in the recent government spending review is not quite a needle in a haystack, but there’s no bunting to be seen. Best way to sum up is probably a long, deep sigh.
The focus is on efficiency for many of the departments which have relevance to the VCSE, so not an immediate austerity cut necessarily, but likely a forerunner for leaner budgets in the future. There will also be an increase in capital spend for many departments.
Recognising the symbiosis between the VCSE and local government, I welcome the award for them as a sign that maybe Councils aren’t being seen as the go-to place to cut, However, the increase is relatively small and there will still be a need for Councils to increase Council tax charges levied, likely to the max, for this to make any impact. There remains a need for funding formulae for health and local government to align more closely with levels of disadvantage in the future. Council expenditure on social care continues to rise and I would not be surprised to see further local government reorganisation triggered by Councils being unable to meet their expenditure commitments.
Government have committed to increasing funding for employment support, including providing personalised employment and health support for anyone on out of work benefits with a work-limiting health condition or disability. We also need to recognise the context of these increases being in parallel to very ambitious planned cuts to the welfare bill, which is of huge concern particularly for VCSE organisations which support disabled people and those with long-term limiting conditions. The demand for VCSE services is likely to increase exponentially if those who cannot work are deemed as no longer being eligible for state support.
Despite the significant increase for the Department of Health and Social Care, I remain deeply concerned about the large-scale cuts Integrated Care Boards are having to make and the impact of the abolition of NHS England on funding for VCSE delivered programmes. Within Liverpool there are strong relationships between VCSE organisations and health sector colleagues who recognise our value. It would be a set back to the wider government reform agenda if such immediate drastic cuts were to erode that. I also predict a lengthy period of scarce VCSE delivery opportunities as a result of the transitions which those institutions are having to make. I also want to express my support to our health sector colleagues at such a difficult time.
The Government continues the rhetoric of previous governments – the need for public sector service reform, a shift to prevention, and greater service integration. Also familiar is the intention to drive the further devolution of decision making and they identify northern combined authorities as being in line for new powers and investment (including Liverpool City Region CA). I welcome this but remain concerned about the focus of the investment. To maximise the benefits of “Local Growth”, the replacement for the Shared Prosperity Fund, we need to connect people experiencing disadvantage to the economic opportunities created. Funding the VCSE to provide these interventions is the most effective way to do this and I hope that the Liverpool City Region CA can be persuaded to invest in this way.
I also remain concerned about debt finance being seen as the main way to support the sector, recognising that this mostly isn’t suitable for organisations serving the needs of the most vulnerable. The government wants to move forward with plans to develop a social impact investment vehicle to support the tackling of complex social problems. In the past we have seen experiments such as the use of social impact bonds which I feel encouraged an outcome counting culture (we claim, we move on). These were often linked to prime contracting models which have previously been exploitative of the local VCSE. More fundamentally, funding the financial returns for investors pump priming the cost of delivery simply takes money away from front line service delivery at a time when it is most needed. The best way for commissioners to tackle complex social factors is to invest in relationships with organisations with that expertise – primarily the VCSE. The commissioning of services can then be more relational, mission driven, and creative.
This review also reinforces the government’s commitment to investing in digital, data and AI, both as a target growth industry and to support the modernisation of public service delivery. It is absolutely vital that such a transition recognises the risk of many community members being left behind and being excluded from access to services that rely upon. There needs to be recognition of the risk that some of the most vulnerable could fall through the gaps, and measures to offset this. Some people are always going to need to be able to engage with someone personally.
Another aspect of their investment plans is to invest in up to 350 deprived communities across the UK, to fund interventions including community cohesion, regeneration, and improving the public realm. There was then a subsequent announcement of 25 trailblazers which will each receive up to £20 million over the next decade, which included Speke East (and congratulations to them). I really hope that the VCSE sector benefits from a substantial proportion of that and that any capital investment goes towards assets which can be brought into long-term community ownership.
Other announcements which I believe could support the VCSE to grow its impact include:
- Community Help Partnerships: Local approaches bringing together a range of services providing better support for adults with complex needs in crisis and reaching vulnerable individuals earlier, before problems escalate
- Reforming the system that supports children and young people with Special Educational Needs and Disabilities (SEND)
- Additional funding to expand placement capacity for children in care to ensure that every child who cannot remain safely at home can live in a loving home
- A new National Youth Strategy alongside an allocation of Dormant Assets funding to build new youth centres or to invest in existing centres, although we remain concerned about the ongoing uncertainty of revenue funding for youth services
- An expansion to the eligibility for free school meals and an extension of provision to post 16 and early years environments. And a Crisis and Resilience Fund to support some of the poorest households so that their children do not go hungry outside of term time
- Continued investment in the Family Hubs Programme providing support to parents and carers to give children the best start in life
- £38 billion to the Affordable Homes Programme and funding via local authorities towards preventing homelessness
- Funding the Warm Homes Plan with a total of £13.2 billion to reduce bills, tackle fuel poverty, and accelerate to net zero (e.g. supporting the rollout of heat pumps, energy efficiency measures, and other low-carbon technologies).