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Public sector provision: is the voluntary sector the answer?

Mary Chadwick spells out the issues.

In many ways this is a golden age for the third sector. It is hard to think of any other modern Government has given so much commitment both implicitly and explicitly to the voluntary and community sector. Secondments from the sector into Government have helped policy development, while there have been a range of Government reviews and initiatives together with a welcome increase of funding to help build infrastructure within the sector. And a review of charity law led to the introduction of a Charities Bill, which fell with the dissolution of the last Parliament, but has now been reintroduced.

Government support for mutual and community alternatives to the private sector has been also shown in the thought given to alternative structures, such as the new Community Interest Company, designed to produce a legal structure that will meet the needs of the growing social enterprise sector.

The voluntary and community sector is undoubtedly growing, but in an environment of hybrid structures, cross-sectoral overlaps and blurred boundaries. In rural areas, as the old privately owned village shop closes this is increasingly being replaced by a new community store, often established in the form of a local cooperative. In purely commercial terms village shops are often unviable, but the community store usually relies in large part on voluntary workers, with perhaps a paid manager to ensure that the shop stocks what people want to buy and makes a profit. This hybrid (over 200 currently exist in England) reduces social exclusion, especially for the car-less older citizen, and encourages social cohesion as a place for communal interaction and the encouragement of volunteer labour is also a proven route to paid employment. And all this is achieved without public subsidy.

Here in Hackney, the council direct labour team takes away my ordinary household waste, while Ealing Community Transport, one of the largest and most successful social enterprises, collects my green recycling box and compost.

Voluntary and private sector organisations engage in a range of ways, ranging from the purely philanthropic, through staff volunteering and secondment (often as part of management development) into fully commercial collaborations. Branded credit cards and affinity-based marketing, such as insurance products, are valuable income generators for some charities. And who can argue with deals that are money-spinners, that also open possibilities for groups formerly excluded from access to, for example, affordable insurance?

There is a moving away from the old philanthropic method of funding through gifts of money into one based on financing, whether through contracts for services delivered, or loans through collaborative bidding. This puts pressure on organisations to become more businesslike in their approach.

The grant making trusts and charitable foundations too are increasingly looking for charities to measure the outcomes of the work they do for the money they receive. The furthest end of the spectrum is the venture philanthropist: a person who invests in a cause or charity using methodologies allied to the venture capital industry: the independence of the organisation must thereafter be questioned.

Of course it’s easy to be cynical about motivations. Some of the political momentum is undoubtedly led by the Blairite agenda to widen diversity in public sector delivery. The social inclusion agenda is also undoubtedly part of this. And the potential market for the delivery of public services is huge: one recent report estimated that private and voluntary bodies could deliver some £60 billion of public services by 2006/07. (Report by Kable Ltd, quoted in FT 18 April 2005).

I have watched the changes over the past few years with great interest. I am passionate about the possibilities, through the growth of social enterprise, in recreating some of the richness of the mutual organisations driven out by Thatcherism. I am broadly supportive of the Government agenda here, but see the huge risks and also worry about the governance and accountability of the structures being created. And, I am worried about whether third sector organisations have the professional skills and capital in order to fulfil their mission in an increasingly complex set of demands.

Yet the major practical question that arises is whether the third sector is able to deliver in this bright future world that beckons alluringly? Would the sector be robust enough to compete with the assault from the private sector if the political landscape changes and wafts the Conservative party into office in 2009 or even 2013?

The third sector is subject to increasing pressures to behave in a more businesslike way, yet there are acknowledged widespread skills shortage within the sector, driven both by the buoyant labour market and also the requirement for new skills. And the third sector’s lack of professionalism can lead to costly outcomes. For example, it was recently reported that while voluntary sector staff account for 2% of the national workforce, they are responsible for 6% of employment tribunal cases.

Clearly, there is increasing legal demand upon trustees, who bear the legal liability for the conduct of a charity. Again, there is a huge shortage of those with both the time and talents to undertake this weighty supervisory role. To what extent is the concept of trusteeship anachronistic in an era when some charities are large complex organisations delivering a range of services under contract?

And there is the role of the Charity Commission. The last Charities Bill, a major overhaul, fell when Parliament was dissolved prior to the last General Election. It has been reintroduced during the current session and is slowly moving through its Parliamentary stages. The goal for the Commission is to move towards a modern regulatory role, yet I am far from sure that the sector is in any position to cope with the weight of regulation to which banks and other sectors are accustomed. Will the reformed Charity Commission have the resources to effect change in a long established charity that does not seem to do very much yet survives because of its large endowments?

Where current trustees select and appoint new trustees, what mechanisms exist to ensure that the tax breaks for these organisations result in any true public benefit?

The growth in the number of organisations registered as charities can on one level be regarded as a flourishing of the voluntary spirit. Yet, as the Charity Commission itself acknowledges, this is a fragmented market. At one end there is the small intensely local charity founded around the vision of a particular individual, kept afloat by the commitment of a small group of dedicated volunteers, and raising money through a never ending treadmill of bring and buy sales, raffles and sponsored walks. In this future world is it realistic for the small community charity or social enterprise to compete effectively with a large private sector company or indeed a major national charity? Such tensions already exist within Housing Associations, with the drive by the Housing Corporation encouraging the growth of behemoths. The trend to merger can lead to dominance in a marketplace, and several smaller cancer charities have expressed disquiet about the dominant role now held by Cancer Research UK, the result of a merger in 2002 between the Imperial Cancer Research Fund and the Cancer Research Campaign.

These days the largest funder of the voluntary sector is the statutory sector at 37%. To what extent does this growing trend affect the independence of the sector? Most commentators deny that this negatively affects the independence of the sector. But, at last year’s Labour Party Conference, Polly Toynbee at a fringe meeting said that her colleagues were aware of charities which now prefer to keep their heads below the parapet rather than risk the cut off of Government funding streams.

A third major issue is that of stakeholder engagement. To whom are community organisations in reality accountable? If a development trust acquires land or property from a council do any real mechanisms exist to ensure that they act in the interest of their community? How do they know what their community is? How many organisations elect trustees in a way that ensures representation? At least my local council knows that there is a robust re-election mechanism every four years.

These are real risks that lie ahead.

Mary Chadwick is a former banker who now works in the third sector. Her website is: www.primetimers.org.uk