How money moves in Wales

There are big debates right now about the constitutional future of Wales, and how money moves goes to the heart of how a nation should work – with a healthy democracy, successful economy and sustainable public services.

Where money comes from, where it goes, who decides that, and who benefits from it forms the basis of many of our policy discussions in Wales. For example, there are lively debates in and around the Welsh Government and Senedd about:

• Post-Brexit EU funding that has not yet filtered through the Welsh budget to its full extent. 
• Levelling Up and UK Shared Prosperity funding and the possibility of it being devolved to Wales.
• Dormant assets and how they could be used. 
• Consequential for Wales, and what money might be available beyond the £23.7billion pot in the Consolidated Fund. 
• Taxes, business rates, and Investment Zones. 

The list goes on. 

There are also questions around the money that moves out of Wales – HS2 and the Crown Estate being two examples that inspire particularly heated debate and controversy.

Yet, whilst Wales has a wealth of natural resources, a rich history, and a track record of progressive policies and legislation such as the Wellbeing of Future Generations Act, we are also facing multiple, interacting crises, which present a huge challenge to our nation. 

These issues get people of all political and socio-economic backgrounds fired up. Regardless of the exact mechanisms, there is a general agreement that Wales should be resourced properly to deal with today’s challenges. 

Most charities in Wales have an income of less than £1million. And yet, the social value generated by these organisations is enormous.

History also shows that those closest to communities have the expertise, the lived and learned experience to make decisions in the best interests of the people they know and serve. This applies as much to Government and public sector as it does to small charities, rooted in their communities.

Small But Vital

Whilst times are hard, and money is tight, small and local charities are increasingly relied upon by the public sector to provide vital services. 

We know from independent research commissioned by the Foundation, ‘Value of Small’ and ‘Value of Small in a Big Crisis’, small charities have a deep connection to and understanding of the communities they support. They play a vital role in helping the growing number of people facing hardship. Their distinctiveness, trustworthiness, and adaptability make them especially well-placed to respond to crisis.

Data from WCVA’s Voluntary Sector Data Hub shows that most charities in Wales have an income of less than £1million. In fact, around half of them have an income of less than £10,000 per year. And yet, the social value generated by these organisations is enormous, even if it is sometimes difficult for small charities to demonstrate that against the kind of metrics used by commissioning bodies.

But, without adequate funding, there is a danger that vital services may be lost. Welsh Government’s updated Funding Code of Practice will hopefully go some way towards encouraging more consistent good practice when it comes to public sector funding. However, to really transform practice we need a shift in power-dynamics between public sector commissioners and the charities they rely on.

Opportunity for change 

So how can the public sector and the third sector do more without more money?

We are seeing lots of policy reform in Wales and changes to public sector budgets. At this time of change and within a challenging fiscal environment, effective collaboration and future-focused, strategic commissioning and procurement are essential to the successful delivery of the Government’s agenda. Flexibility, proportionality, cross-sector learning, and relationships will be key to minimising duplication and encouraging efficiency in the system. 

To do this right, we need to bring lived and learned experience into decision-making. The new Future Generations commissioner’s priorities have a strong focus on how the public sector could work more effectively with small and medium enterprises, and this chimes with Welsh Government’s procurement reform. However, it is important to note the consider the differing financial and cultural realities of not-for-profit work, and aspects such as how the work is resourced and delivered.  Small and local charities, the people closest to communities, should play a key role in shaping guidance and practice – and holding relevant bodies to account if they are not working as well as they should. Small charities increasingly involve service users and others with lived experience in their governance and decision-making.  National and local government must do the same.

‘People should have a say about things in their lives.’

The Social Partnerships and Public Procurement (Wales) Act (2023) presents a unique opportunity for this generation of leaders to do things differently, and to start the seventh Senedd as they mean to go on – truly engaging with those closest to communities as equal partners.  As the Act makes clear, procurement is one of the key levers to secure the economic, social, environmental, and cultural well-being of the nation.  And the move away from the strict approach of the most ‘economically advantageous tender’ to the much more objective ‘most advantageous tender’ is crucial.

Cranfield Trust’s (2022) survey of Welsh charities found that nearly 90 per cent of charity leaders did not have time to be both strategic and operational. Likewise, being offered contracts that don’t cover core costs, or the true cost of service delivery not only impacts on quality but adds significantly to stress in the sector.

People working for or accessing services from small charities must be key voices to listen to as part of this new approach. This is again where dialogue and understanding come in. Whatever language we use as charities, as funders, as civil servants, as commissioners, whether we say: ‘the difference we make’, ‘additionality’, ‘wellbeing impacts’, or ‘social value’ … what we are trying to articulate and understand is what work is worth commissioning.

As Lloyds Bank Foundation’s 2018-22 Lessons for Funder Practice report showed, short-termism in funding leads to perpetual firefighting and treading water. This not only impacts services, but stifles innovation. Cranfield Trust’s (2022) survey of Welsh charities found that nearly 90 per cent of charity leaders did not have time to be both strategic and operational. Likewise, being offered contracts that don’t cover core costs, or the true cost of service delivery not only impacts on quality but adds significantly to stress in the sector. As one of our charity partners describes it: “[we’re] expected to make silk purses out of sow’s ears”. This expectation is one of the things the Act needs to change.

Helping ensure all voices are heard

Making commissioning more efficient and sustainable is necessary to achieve these aims of saving the public sector money and reducing stress on the third sector. Lloyds Bank Foundation is actively working with small charities in Wales through our longstanding funding and development support programmes. We also host the Welsh Small Charities Forum, linking with Third Sector Support Wales, CVCs, and other funders to better communicate the value that small and local charities offer the public sector and raise awareness of what they define as good practice.

As Welsh Government progresses with procurement reform, decision-makers will have to grapple with how they determine what the ‘most advantageous tender’ really is in practice. The Welsh Small Charities Forum is now bringing together third sector stakeholders to try to help shape the guidance for the Social Partnerships and Public Procurement Act currently being worked on by Welsh Government.  

The forum is also compiling recommendations for commissioning good practice, which we will publish shortly. I won’t anticipate all the recommendations just yet, but it is clearly essential that the additionality that commissioning small and local charities can pass on to the communities they serve are fully factored into decisions.  The value of the contract must also reflect the full cost of any service commissioned, including inflation uplifts to ensure charities aren’t left subsidising public services from donations and reserves.  We hope the Welsh Government will endorse these and our other recommendations in the guidance.  

There are enormous pressures on Welsh Government and other public sector stakeholders.  Whoever is chosen to be First Minister in a few weeks’ time and whatever happens in the forthcoming UK General Election, those pressures are unlikely to change in the short-term at least.  And so civil society in Wales needs to seize this opportunity of the Procurement Act to secure changes that work for small charities and the communities they serve too. As Lorrisa Roberts, charity leader of Advance Brighter Futures in Wrexham said recently:

‘The best time to plant a tree was 10 years ago; the next best time is now.’

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