The not-for-profit legal advice sector is heading for a £32m deficit this financial year, according to research by the Community Justice Fund (CJF).
The CJF said all of the charities featured in the research reported “significant problems” in recruiting and retaining staff.
“This was particularly true at mid and senior levels where salaries just can’t compete with other sectors but even where market salaries are able to be offered, the short-term nature of funding means charities are not able to offer long- or even medium-term job security.
“The lack of funding means that advice charities just can’t build reserves and therefore resilience.
“Many lack the core unrestricted funding that they need to pay management costs and to invest in operating costs. Most are struggling to help their staff with cost-of-living pressures.”
The CJF was set up in May 2020 to support not-for-profit legal advice providers through the pandemic. Since then, it has handed out over £15m to 179 specialist advice organisations.
Following an analysis of financial data from the organisations at the end of 2020, at the start of this year 30 agencies that had received grants were contacted to obtain, on an anonymous basis, “candid data on their financial situation”.
The 23 which responded said they were facing a total deficit between them of £2.2m in 2023-4 on total budgeted expenditure of just over £12m. This represented a collective deficit of 18%.
Having estimated the total turnover of the not-for-profit advice sector at £175m, the CJF said this extrapolated to a total deficit of around £32m.
Previous research by the CJF, carried out in 2021, estimated that the cost of specialist casework varied between £450 and £1,500 per case, with an average of £510.
If, taking into account recent demand for services and inflation, the average was increased to £700 per case, a deficit of £32m would represent the loss of over 45,000 clients from the advice sector.
“To make things worse, most agencies when asked what additional funding they’d need to deliver against all current plans, especially anticipating the increased cost of meeting demand, said that they’d need an average of 15% extra funding on top of that needed to plug the deficit.
“Across the entire sector this extra 15% would amount to £26.25m! This is just to meet current demand and deliver current plans. It makes no allowance for the likely increase in demand over the coming years.”
The CJF warned that some agencies could only manage the funding gap by cutting services and making redundancies.
“Some have made it clear that the lack of core and inflation-linked funding means that it is harder and harder to recruit and retain not just casework and advice staff, but the management and other core staff needed to run effective services.
“Along with everyone else, charities are seeing all of their expenses increase. Across the board, agencies are highlighting the struggle to build reserves and therefore resilience.
“Many are having to dip into the reserves they have just to sustain services this year. This means they will deplete their safety net further, if indeed they have one at all.
“This year managers we have spoken to have made clear that the prospect of redundancies, the lack of certainty regarding funding and the impact that they know this has on their communities and those that need help is having an impact on their own mental health and general well-being.”