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What it says on the tin, by Tash Shifrin

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25 November 2005

Voluntary sector bodies are not just talking about public service provision. They're successfully delivering it. So why is the government so slow to back up the Third Sector with long-term contracts? Tash Shifrin investigates

A charity, the dictionary tells us, is 'an institution or organisation set up to provide help, money etc to those in need'. But the lexicographers have a bit of catching up to do: many of Britain's charities have an agenda that goes some way beyond this.

They want to run public services – schools, health services, jobcentres, even correctional services – and they are prepared to wade into one of the most contentious debates in social policy to argue their case.

The government's plans for reform of public services have long been controversial, but the stakes are now higher than ever. Even as Tony Blair's parliamentary majority crumbled in the vote on the terror bill, it was clear that angry Labour backbenchers would make the prime minister's cherished reform programme their next battleground.

A crucial question is whether and to what extent public services should be further opened up to a diversity of providers. Despite the traditional polarisation of debate between advocates of the public and private sectors, the voluntary sector will be keen to make its presence felt as a third option. Victor Adebowale, chief executive of social care charity Turning Point and a Labour peer, is not afraid to use the term 'third way', albeit with a knowing chuckle.

The charities' argument is that they have the expertise and flexibility to deliver cost-effective but also innovative services and, unlike the private sector, they are driven by the needs of their clients rather than profits. There could be a political advantage for the government too: charities, with their reassuringly cuddly, trustworthy public image, might prove more palatable to sceptical backbenchers than the 'fat cat' corporations.

Adebowale, whose charity is almost entirely funded through contracts to provide social care services, has been urging greater and more effective use of the voluntary sector for public services for years. He is one of a number of leading charity chief executives who believe that, despite many policy initiatives, implementation has lagged behind.

This is why, parallel with the political debate over reform, charity chiefs, ministers and civil servants are beginning to focus on ways and means. One forum for this will be the commissioning task force set up by social care minister Liam Byrne, which had its first meeting last week. Chaired by Byrne and Mencap chief executive Jo Williams, the task force's aim is to break down the barriers to greater involvement of the voluntary sector in the provision of health and social care services.

Adebowale, along with Department of Health commercial director Ken Anderson, will co-chair a smaller sub-group to devise ways to improve commissioning, a process voluntary organisations believe works poorly for them in contrast with the private sector. The idea is to move beyond the short-term contracts that sometimes fail to even cover the cost of the service – arrangements that replicate the traditional annual grant round.

As Byrne told charity chiefs ahead of the meeting: 'The way we commission many services simply isn't working. We have to address the prohibitive costs involved in engaging with public procurement, we have to make full cost recovery a reality across the board and we have to address the tendency for short-term contracts and its effect in stifling both planning and investment in service development and the ability to generate capital to support service development.'

Adebowale says: 'I think local authorities in particular have always had a very strong relationship with the voluntary sector. What concerns me is the number of local authorities that simply refuse full cost recovery.' In too many cases, he says, councils also 'want to pore over my corporate budgets' – a level of scrutiny and monitoring that private companies are not expected to put up with.

Mencap's Williams is no stranger to the public sector, having been a social services director for many years. She too is passionate about the need to improve the commissioning arrangements, particularly in the NHS. 'The processes are wearing us down. All the checks and balances, all the rigmarole,' she says.

She believes that some of the problem is purchasers not realising how much charities can offer. 'The role of the commissioner has been around a long time now,' she points out. 'People are used to looking outside themselves as providers. But do they have enough information about who is in the marketplace and the quality of that?' 

Measures to put contracting with charities on a sounder basis will be crucial if reality is to catch up with government rhetoric. It was back in 2002 when the Treasury produced its cross-cutting review of the voluntary sector's role in services, under the keen eye of then chief secretary to the Treasury and Blairite high-flyer Paul Boateng.

The review included a series of pledges – not least that, by April 2006, government departments would ensure 'that the price for contracts reflects the full cost of the service, including the legitimate portion of overhead costs'. It also announced the creation of Futurebuilders, a £125m investment fund aimed at boosting the sector's capacity to deliver services.

At around the same time, the Cabinet Office produced its blueprint for wider charity law reform, Private action, public benefit. Responsibility for both areas of work eventually shifted to the Home Office.

The next flood of fine words came from Alan Milburn, who resigned as health secretary in 2003 only to pop up as Labour's election supremo and a regular on the conference circuit. He urged 'a level playing field' between private and voluntary sectors in contracting for public services and 'VFI alongside PFI' – a voluntary sector finance initiative to match the Private Finance Initiative. The 2005 Labour manifesto emerged sprinkled with references to the voluntary sector.

The policy documents and speeches have yet to be matched by concrete changes, however. Adebowale says 'the most progress' is being made in health and social care and at the Home Office. But he adds: 'The department where we need to start having some real purchase is the Treasury.'

It is 'scandalous' that there is no standard contract – like those used for PFI construction deals – for commissioning the sort of social care services his charity supplies, he says. 'The Treasury could be doing more to link together the threads and champion [this] in the same way it did with PFI.'

The Association of Chief Executives of Voluntary Organisations, which has been leading the charge for public service delivery – and first used the 'VFI' tag in its provocatively titled book, Replacing the state – is pressing for action. It seeks long-term contracts for public service delivery and secure funding – and is planning to work up a model that would also allow charities to take on PFI-style capital developments.

The voluntary sector has plenty of experience running public services: contracts now account for 37% of its income, says Acevo chief executive Stephen Bubb. 'But 1% of public spending on public services is spent in the sector – it's marginal. Our feeling is that the government hasn't really taken advantage [of the sector].'

Bubb can point to success stories like that of the RNID. The charity for deaf and hard of hearing people has transformed audiology services and made digital hearing aids available on the NHS by taking over negotiations with suppliers from the Department of Health and dramatically driving down prices.

But Acevo's members want to do more. They are targeting education, correctional services and employment services as areas where the government must open up to the voluntary sector – all areas also highlighted in the Labour manifesto.

Acevo is pressing for both the improved funding arrangements and the manifesto pledges to be implemented. These goals are linked, Bubb says. 'Full cost recovery is supposed to be implemented by April and so far no department has done that. You will not get a rollover of service delivery to the voluntary sector if the funding and contract conditions are not right.'

Talk to the ministers, and things are fine, he says. The problems come lower down. 'There seems to be a problem, a disconnect between the government and top civil servants, and the bulk of people in funding and procurement departments, who are still working from antique nineteenth-century funding manuals.'

The need to rectify this is urgent if the voluntary sector is to play the role outlined for it in the government's reform programme, Bubb says. But sort out the money and charities are ready to run schools and jobcentres.

Neil McIntosh, chief executive of the CfBT Education Trust, confirms that his charity wants to get involved in running the self-governing trust schools proposed in the recent education white paper. These are to be run not by local education authorities but by other providers – businesses, faith groups, parents' groups, charities. 'Certainly we will,' he says, adding that he knows of 'one or two other providers of non-elite independent schools' that are also interested.

CfBT has relevant experience, he says, having project-managed the introduction of the government's literacy and numeracy strategies and a fast-track programme for head teachers under contract, as well as running education in young offenders' institutions and for children excluded from school.

Other registered charities already run schools for children with various special needs and there are numerous 'alternative' schools, such as those following the Steiner philosophy, he points out. They could all be in the bidding.

Debbie Scott, chief executive of the Tomorrow's People charity, is also chair of the Employment Related Services Association – a joint voluntary and private sector umbrella body. Her charity has been helping unemployed people into work for 20 years – and doing it well, she stresses. An independent evaluation showed that 73% of the charity's clients were still in work a year after their initial placement.

'We believe we can improve and drive up performance. The market should be opened up to us and others – it's better for the client group and cost-effective for the country,' Scott says. Her vision would leave income support and a gateway service in the hands of the state, with employment services transferred wholesale to the private and voluntary sectors, as they have been in Australia.

She might be knocking at an open door. Although former work and pensions secretary David Blunkett denied that there was any plan for 'wholesale privatisation' of the JobCentre Plus scheme, a letter from DWP director of work and welfare strategy Jonathan Portes to minister for work Margaret Hodge, which was leaked to the PCS union, outlines plans to outsource swathes of the department's work.

But the Australian example highlights the pain as well as the gain for charities. Charity staff must notify the state-run income support service when clients fail to meet benefit system requirements – the trigger for harsh benefit sanctions.

That level of involvement with the state is just one aspect of the controversy surrounding public service delivery, both within and outside the voluntary sector.

The National Council for Voluntary Services has caught some flak for not rushing towards service delivery with the same zeal as Acevo. But it, too, represents the views of many charities – the famously diverse voluntary sector has myriad views on whether or how far to get involved. The NCVO is not opposed to charities providing public services, but cautions that some will not – and should not be made to – see it as part of their mission.

NCVO chief executive Stuart Etherington adds: 'Public service delivery should not be viewed as an end in itself but as a way for voluntary organisations to meet their goals and achieve benefits for their users,' he says. Maintaining a focus on campaigning and advocacy is 'equally important', he stresses. 

Richard Gutch, chief executive of the Futurebuilders fund, is also wary of the Australian employment example. 'Is it appropriate for voluntary organisations to decide who gets benefits? I'm not sure it is. I think that's essentially the role of government.'

Futurebuilders is working with organisations that bring something extra to public services, such as local community-based groups running innovative or specialised projects that could usefully be replicated elsewhere if only the organisation had the capacity and capital to expand. Futurebuilders aims to provide the necessary investment. Gutch cites an Asian welfare project and groups running breakfast and after-school clubs for children as examples.

'We're not particularly interested in investing in a service that has transferred from a public provider to a voluntary organisation. We don't see the point in that.'

Handing over public services to the voluntary sector is deeply controversial for other reasons too. Professor Allyson Pollock, head of the public health policy unit at University College London, says transferring services to charities is soft privatisation. 'It's all part of the increasing privatisation and marketisation of services. To make that appear more palatable to the public, it is offered to the voluntary sector.'

She warns that charities would do well to 'look at the history' of similar moves in the past. 'When the government began to privatise nursing and residential homes, they said they were going to give them to the voluntary sector,' she says. But in the end the charities were 'squeezed out' in competition with private firms.

Public sector staff and unions are likely to oppose transfer to either voluntary or private sector providers, most observers agree – a factor that could feed the rebellious mood on Labour's back benches.

But as the political debate goes on, so too will the practical discussions over making contracting work. How much remains to be done is illustrated by an Acevo survey of 100 charities involved in public service delivery last year. It found that 92% had contracts lasting one year or less.

That sort of funding is not much security for a school full of children. Neil McIntosh, despite his enthusiasm, is only too aware of the commitment involved. 'It's certainly not a short-term choice,' he says. 'You've got to be in it for the next 20 years.'

Third ways: the Getting Out to Work programme

Tomorrow's People is one of the charities that wants to provide jobcentre services. It already works in the field, running programmes such as Getting Out to Work, which helps ex-offenders aged 16 to 24 - a group that faces particular difficulties finding long-term employment.

A pilot scheme launched on Merseyside in July 2003 is funded by the National Probation Service, the European Social Fund and drinks company Diageo Great Britain.

Getting Out to Work advisers assess each client and draw up an individual action plan. They identify potential employers and 'sell' the client to them. Advisers help with interview skills, go with clients to interviews and do 'whatever is necessary' to help clients into work. Regular post-placement support and contact is provided throughout the client's first 12 months in their new job.

In its first year, Getting Out to Work placed 17% of clients into jobs - exceeding funders' objectives and regional averages - while others have secured training places. Re-offending rates for Getting Out to Work clients were 15-20% lower than the national average.

PFnov2005

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