Oct 29, 2026 · Comments ↓

How funding turned charities from partners into competitors

Charities are asked for something new every year, marked down for keeping reserves and pushed to compete. After 35 years in the sector, here's what that costs.

I’ve worked in and around mental health charities for 35 years, and every one of them was a grassroots charity. Over that time I’ve watched collaboration between charities turn into competition. They now compete with each other for the same money, and a lot of the reason is the way they’re funded.

Show us it’s new

I’ve been part of hundreds of funding applications. The questions were nearly always the same. Is it new? Is it innovative? Is anyone else already doing it? And here’s twelve months.

Hardly anyone funds the thing you already do that works. So you dress the existing service up as a new project to get it through. The money stops, and it turns out the project was the staff all along. Short-term contracts become normal for people doing some of the hardest jobs there are, and the people they support lose the worker they’d just started to trust.

In the comments on one of my LinkedIn posts, Michelle Benson, who has worked on the funder side, said it has a name: Top Hat Funding. I’d never heard it called that. It says a lot that it needs one.

Some funders have changed. The Robertson Trust’s Large Grants can be unrestricted, and typically run for three years. That’s the boring core money that keeps the lights on and the staff in post, and it’s why charities respect them. But in my experience, it’s still the exception.

”Duplication” isn’t what it sounds like

“Service duplication” is one of the phrases that does the most damage. It gets used as if two services with a similar name do the same thing. They don’t.

A peer support group run by people who’ve been through it isn’t the same as a service run by a large national charity, even when a funder’s form puts them in the same box. Who runs it, who it’s for and how it works all change what people get from it.

NCVO collected charities’ experiences in England in its 2021 report, Rebalancing the Relationship. User-led organisations described larger organisations moving into “advocacy, peer support, recovery and involvement”, work they’d spent 30 years building. One said projects they had designed were retendered to larger providers and went back to “more traditional and non-challenging versions of provision”. That’s not removing duplication. It’s replacing one thing with a different thing and calling it the same.

When collaboration is just competition by another name

Funders and commissioners now often ask for partnership. On paper, that’s collaboration. In practice it can be one more box to tick.

The same NCVO report found small charities being named in bigger organisations’ bids as “bid candy”, then getting little or no money once the contract was won. It found charities stretching into work outside their purpose to stay afloat, including a mental health organisation bidding for legal advice contracts. And one charity summed up why trust is so hard to build: “Partnerships for one piece of work may be undermined by competition for another piece of work.”

Underneath a lot of it is self-preservation. That isn’t because the people running charities are bad people. It’s because the system rewards it. It asks charities to build trust with organisations they might have to beat in the next funding round.

Reserves count against you

In the same LinkedIn thread, Barry Mitchell made the point that a charity with a healthy reserve can slip down the list for grants. If that’s how funders judge it, charities learn to run without one.

Papyrus, the young people’s suicide prevention charity, went into administration on 7 September. Its staff were made redundant the morning they found out, and its HOPELINE247 helpline stopped the same day. The administrators gave the reason as “inadequate income available to meet the level of demand”.

Its own 2023 annual report said: “people do not give to charities for those charities to build up massive reserves, and although we have a healthy level of reserves to protect ourselves, we do have an ambitious physical expansion plan in place”. Its reserves policy said the general reserve was there to be spent. By March 2025 the general reserve was £28,598, down from £1.65m a year earlier.

That was the trustees’ decision, and they own it. But they made it in a sector that treats growth as the only story worth telling a funder, and a reserve as something to apologise for. I wrote earlier this month that the big mental health charities should be broken up and the money split across communities. That’s one side of it. The other is a culture that tells every charity, big or small, that standing still is failing.

The market got into the charity

Richard Murphy has written about how the neoliberal era rested on the idea that each person is on their own, and that their fate is their own doing. He’s writing about politics, not charities. But I’ve watched the same idea work its way into the sector over my whole career.

Charities were meant to be the part of society that didn’t run like a market. Now many are run like small businesses competing for contracts, judged on growth, measured on whatever fits on a monitoring form. The caring part, the bit that made them worth funding in the first place, is treated as if it comes free. I’ve written before about what that does to care work.

None of this is a shock to anyone who’s worked in the sector. That’s the problem. We’ve got so used to it that the conversation doesn’t happen.

What would change it

Fund core costs, for more than a year at a time. Stop asking charities to invent something new to keep doing something that works. Judge “duplication” by what people actually get, not by the name on the form. And stop marking charities down for keeping enough in the bank to survive a bad year.

We know what works. Fund it, and keep funding it.

If you'd like to support this blog, you can buy me a coffee.

Buy me a coffee on Ko-fi

Comments

Loading comments…

Comments appear once I've read them. I'll put up the ones that are about the post and are useful, interesting, supportive or constructive. Anything else won't go up. Your email is never shown or shared.