Select Committee on Welsh Affairs Minutes of Evidence

Memorandum submitted by The Children's Society


1.   What are the reasons for the Society's current difficulty in raising sufficient funds to cover its operations? What efforts has the Society made to increase the amount of money raised?

  In March 1998 the Society had liquid reserves of £35.8 million and annual expenditure of £29.6 million. This was the result of the outstanding performance of equities over previous years. In its Annual Report for that year the Society announced that it would be using £12 million of its reserves to fund new work with children and young people and that it had developed a new fundraising strategy to raise additional funds.

  Net fundraising income has risen by 7.5 per cent a year over the intervening years but this was far short of the target which had been set.

  The strategy for increasing voluntary income has focused on two areas—new sources of income and reducing costs. The Society is the leading charity in promoting international adventure treks and was also one of the first to be involved in face-to-face fundraising approaching people on the street to support the charity. It has also cut its costs significantly in the past year with the result that the net delivery of fundraising income is projected to increase by 38 per cent in the two years up to March 2003.

2.   The Society has operated at a deficit over the last four years. When did it become apparent that action would need to be taken to address the deficit?

  The real risk that the Society would not meet its ambitions for long-term growth in voluntary income became clear in September 2000 when preliminary figures for the first half of the year were prepared. These showed disappointing results and the trustees approved savings of £2 million (only £50,000 of which related to Wales) which were implemented during that financial year. They also set up a monitoring group of trustees to work with the directors on identifying savings.

  Fundraising income grew sharply in the second half of 2000-01 and the trustees took the view that it was better to maintain projects in the light of this improved performance rather than to make premature closures. Further savings were made without any project closures but these savings have almost all been absorbed by inflation which costs the Society £1.2 million a year. This is because the Society's largest bill is for staff pay which is linked to the local authority pay scales and inflation awards.

  Fundraising growth slowed down earlier this year and, while growth is now at our long term target level (vindicating the earlier investment), this will not make up for the earlier years of slow growth. By July it was recognised that substantial further cuts could not be delayed any longer.

3.   What projects does the Society operate in Wales? What efforts are being made to find alternative sponsors for these projects after July 2002?

  List of projects attached.

  The Society has always made clear its commitments above all, to finding alternative agencies or sponsors to take over its projects and to ensuring that the children and young people involved have a continuing service. We have recruited additional expert business planning resources to ensure that this takes place. We are also active partners in the Task Force which has been set up by the Minister for Health and Social Services in the Welsh Assembly.

4.   When the decision to close the Society's operations in Wales was taken, what alternative options were considered?

  The trustees were asked to consider three main options:

    —  making all of the savings in England (this is dealt with in point 5);

    —  reducing the work in Wales by half. While this would avoid the sense of abandoning our work in Wales there were two difficulties. It would mean making a further £500,000 of savings in England (see point 5 below) and it would reduce the work in Wales to a token presence which would not be able to have the national impact which we had had so far; and

    —  closing all of the work in Wales.

5.   Why was the decision taken to close the Society's operations in Wales completely, rather than to downsize operations across England and Wales?

  The process of returning to a balanced budget from a peak deficit of £10.8 million has involved two programmes of closures—the present one and one in October 2000.

  In October 2000 the Society made savings of £2 million of which £1.45 million came from our work with children and young people in England and £50,000 from our work in Wales (The balance of £500,000 came from other areas).

  In the present programme the total savings are £6.4 million of which £5 million is in England and £1.4 million in Wales. In respect of our direct work with children and young people the savings are £2.4 million in England and £1.1 million in Wales.

  It is my considered view as Chief Executive, advised by my senior managers, that the total savings of £3.85 million over two years in our direct work in England are the maximum which can be made. To reduce the project base further in England would significantly harm our position as a national charity within England with a capacity to influence Parliament and Government Departments.

6.   Whom did the Society consult about the proposed closure?

  The options put to the trustees involved the likely redundancy of a large number of staff in England and Wales. As is accepted good practice the Society took the view that it could not consult external bodies about such a likelihood before staff themselves and their Trades Union were aware of this.

  Because of the Society's close links with the Anglican Church, the Archbishop of Wales was informed orally and the Archbishop of Canterbury was informed in writing of the possibility of this outcome. The information was given to the Archbishop of Wales in sufficient time for him to discuss this with his Bishops at one of their regular meetings and for him to make written representations to the trustees before they made their decision.

  The Society deeply regrets that decision it has had to take and welcomes the opportunity to work with members of the Task Force on options for the future. Nevertheless the reality remains that the Society has been subsidising its work on Wales from donations made in England and the core question becomes who is willing to take on these costs in order to maintain the work in its current form.

7.   For each of the last five years, what proportion of the Society's funds were raised in Wales?

  See attached annex.

8.   What provision is being made for the Society's staff in Wales who face redundancy?

  The Society recognises the MSF Trade Union and agreement has been reached on the process for dealing with possible redundancy within the Society's existing procedures which have been agreed with MSF.

  The Society has agreed to make redundancy payments which are more generous that the statutory scheme. All staff receive payments calculated in accordance with the statutory scheme but enhanced in three ways:

    —  all service is allowed to count towards the redundancy payment and is not limited to 20 years;

    —  the weekly wage is not limited to £240; and

    —  the ensuing calculation is enhanced by 50 per cent.

  Also temporary staff who have been employed for 12 months or more and all staff on standard contracts regardless of service will receive a minimum payment of one and a half or two and a quarter weeks depending on their age.

  The Society has procedures which gives the staff facing redundancy priority in applying for vacancies and all vacancies in the coming months will be scrutinised by senior managers to see if they should be reserved solely for staff facing redundancy.

  We also have a programme of support for staff facing redundancy helping them to look at their career plans, the choices they might make and how to prepare themselves for interviews.

Ian Sparks

Chief Executive

10 December 2001

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