Paying the price for filling the coffers

The mathematics of modern funding means that many charities set up as philanthropic organisations are now reliant on Government contracts. The substantial cost is their independence

David Cameron?s brisk stride to the political centre ground over recent months has included one step that will surprise no one: he wants a bigger role for the voluntary sector in the provision of social services. In recent years Tony Blair and Gordon Brown have supported the same thing, while the Health Secretary, Patricia Hewitt, and her predecessor, John Reid, boast of the increasing role of the voluntary sector within the NHS.

It was Margaret Thatcher who gave the sector its biggest practical boost for 50 years. In 1993 the NHS and Community Care began the rapid withdrawal of local authorities as providers of social services by turning them largely into purchasers, with the ?independent? sector ? voluntary agencies and private businesses ? picking up the contracts.

This largely unremarked-on revolution now means that the overwhelming majority of the 1.4 million people employed in social care are not employed by social services departments but by a bewildering 25,000 employers. Some medium-to-large charities rely for the bulk of their income on central and local government grants, contracts or individual arrangements. For Barnardo?s the proportion is 78 per cent and the Methodist children?s charity NCH tops 90 per cent.

Does the sector want this kind of arrangement? The answer seems to be yes, judging by the fact that most people in the sector hardly ever suggest that it might be helpful at least to have a pause to consider where all this is leading.

The NCH chief executive, Clare Tickell, admits: ?One of the downsides of contracting is to be reactive, to react to what commissioners [those purchasing services] want. Our founding fathers and mothers were philanthropic, trying to meet a need they could see was not being met. The need now is to meet the challenge of the twenty-first-century version of that, because commissioning takes time. We have to see what needs there are and how they are going to be met and who is going to meet them. We need, then, to fund that and then point commissioners towards it.?

She also points to the mathematics of modern funding: ?I say to our fundraisers that proportionately they are providing us with fewer funds than they did historically, but they are now disproportionately important because they are the funds that help us to retain our independence.?

Catholic children?s agencies might be thought to avoid the pitfalls of contracting because they, unlike most charities, would appear to have a ready-made constituency. Terry Connor, director of the Catholic Children?s Society (Arundel and Brighton, Portsmouth and Southwark), takes pride in the fact that only 30 per cent of his ?4.5 million turnover comes from contracts.

?It is certainly helpful having a particular constituency of support but Mass attendance is dropping and Catholic schools are targeted by other (often national) charities such as Comic Relief, NSPCC and so on, which have huge marketing resources at their disposal. Catholic charities also suffer because the general public does not realise that their services are open to all and a stereotypical and often discriminatory view often prevails,? he says. ?The market on which contracts are based lacks morality? Agencies which chase contracts don?t influence service developments because it is usually Hobson?s choice with contracts ? sign it or someone else will ? and often someone else in the private sector is willing to cut corners for profit. There is no sentiment in the market ? if [a charity] loses contracts they are still left with the infrastructure they have built up to support the contracts. Supporters have little influence over the direction of a charity mainly funded through contracts.?

Robert Whelan, assistant director of the think tank Civitas, who has written extensively on voluntary organisations, says that voluntary agencies? reliance on public funding ?ends up with the Government defining what is regarded as charitable ? it is whatever Whitehall is prepared to pay for at the present time, given the political exigencies of the moment. Hence, constantly moving goalposts, and more and more time spent putting in applications for elusive funding. Work outside the parameters tends to get dropped.?

Mr Whelan would rather see a smaller sector making a better job of what it does take on. ?Of course,? he says, ?it couldn?t do everything it is doing at the moment, but maybe it would be better to just say that some areas of provision are definitely within the Government?s statutory responsibilities, and, therefore, shouldn?t involve the charitable sector at all.?

However Chris Hanvey, director of UK operations for Barnardo?s, believes such arguments might be overplayed: ?I don?t think there?s a fundamental objection [to contracting], just so long as voluntaries don?t compromise their ability to lobby against Government policy,? he insists. ?I think the role of the sector is to provide independent services, encouraging that innovation and experimentation which quite often and eventually becomes mainstream.?

Maggie Jones, chief executive of the umbrella group, the National Council for Voluntary Child Care Organisations, agrees. ?The key is the independence, of structure, thought and action, and the fact that charities get their priorities from a place other than this or any other government,? she says. ?We in the voluntary children?s services have the luxury of being able to pick our corner. We can campaign for the rights of disabled children, if that is our passion and mission, without really worrying about the impact on other children. The state can?t do that. I don?t think there is a principled objection to the children?s charities delivering services, as long as that?s not all we do; we mustn?t become the state.?

But the honeyed words of politicians mask some tough realities. A number of charities are now very worried about changes to the funding arrangements for the early-years Sure Start programme, which involve a shift of funds to, rather than away from, local authorities. This could mean that the money in anticipation of which they have set up pro-jects could be allocated elsewhere. One major charity is said to fear that it could be ?30 million worse off as a result of the changes.

In addition, many charities find it difficult to include in contracts their full costs, which means that their other funds are subsidising a public service, while contracts afford no long-term stability. Meanwhile increasingly fierce and competitive fund-raising poses real problems for many charities of whatever size that want to maintain their independence, because it becomes more difficult to raise money by rattling tins on street corners.

The more money there is for contracts for the larger charities, the less there is for grants for smaller ones, yet these, as the commentator Timothy Garton Ash has pointed out, are ?some of the most durably life-changing?.

Joyce Moseley, chief executive of Rainer, an organisation that works with young people, seems less worried than many about the present situation: ?I can?t see any other way unless you have a natural supporter group like, say, the Catholic societies, a very strong brand like NSPCC, you are associated with someone like Prince Charles and the Prince?s Trust, or you have a huge membership like the RSPCA or the National Trust.?

Even those charities taking many of the state?s shillings are still spending large sums on unmet needs, which are not on the agenda of local or central government, and on advocacy. The sector?s mantra is that its charities must stick to their mission, retain their independence, be free to innovate, be ready to advocate for those with whom they work, and, where necessary, offer criticism of those forces that make the lives of the people they help worse than they need be.

The dilemma about how much of this is possible when so many charities take so much public funding to implement Government policy is little discussed. It is a dilemma that seems to have bypassed the public utterances of Tony Blair, Gordon Brown and David Cameron. Again, relying on massive public subventions does beg the question of in what sense other than a legal one can some agencies can be defined as charities.

The merits of past arrangements, whereby charities would complement, specialise and innovate, are now all but forgotten. But innovation requires freedom, and the ability to advocate requires independence. These are narrow boundaries to be trod, but no one has yet devised a reliable map to find the safe way forward.

Terry Philpot is co-editor, with Chris Hanvey, of Sweet Charity: the role and workings of voluntary organisations.

Money-go-round
The total income of the UK?s 153,000 charities in 2001-02 was ?20 billion, of which 37 per cent came from public sector contracts. Some examples from social care in 2004-05 are:

NSPCC
Income: ?111,500,000
Proportion from public sector
contracts: 12 per cent

Rainer
Income: ?21, 217,000
Proportion from public sector
contracts: 82 per cent

Shaftesbury Society
Income: ?34,400, 000
Proportion from public sector
contracts: 79 per cent

Turning Point
Income: ?56,800,000
Proportion from public sector
contracts: 62.4 per cent