Word on the street, by Alex Klaushofer

6 Jul 06
The government is on a new charm offensive with the voluntary sector. But will all the reviews and initiatives allay charities' suspicions that ministers are looking for public services on the cheap? Alex Klaushofer investigates

07 July 2006

The government is on a new charm offensive with the voluntary sector. But will all the reviews and initiatives allay charities' suspicions that ministers are looking for public services on the cheap? Alex Klaushofer investigates

Four ministers and the PM himself – it was an impressive turnout for a single event by anyone's standards. The government was out in force at last month's 'three sector summit', determined to show its commitment to getting the voluntary sector fully aboard its public sector reform programme.

Tony Blair talked of 'removing the barriers'; third sector minister Ed Miliband, six weeks into the job, spoke warmly of the need to 'deliver in partnership'. One by one, the line-up, which included local government minister Phil Woolas, Work and Pensions Secretary John Hutton and care services minister Ivan Lewis, presented the audience with a dazzling array of pledges and initiatives. These included giving the sector a part in the state's traditional role of providing disabled people with wheelchairs and other equipment, and launching a cross-government action plan to improve commissioning arrangements.

The conference might prove to be a turning point in the relationship between the government and the voluntary sector. It was organised by the Future Services Network, a coalition formed in April by the Association of Chief Executives of Voluntary Organisations, the CBI business lobby and the National Consumer Council to put the user at the heart of the mixed public service economy.

Ministers have also been busy over the past few months, launching schemes to make life easier for charities. A new Office of the Third Sector was established in the Cabinet Office, and the Treasury is conducting an unprecedented government consultation with the voluntary sector as part of a study that will feed into next year's Comprehensive Spending Review. In September, a commissioner for the Compact – the agreement between government and the voluntary and community sector in England to improve their relationship – will set up shop in Birmingham. Backed by a staff of 20, the commissioner will promote good practice in dealings between charities and the state.

The measures are designed to address a host of long-standing difficulties that have impeded charities from flourishing as service providers. Bugbears include short-term funding, which makes it difficult for organisations to plan for the future, contracts that place the burden of risk on them and – the queen of voluntary sector gripes – the failure of the statutory sector to pay the full cost of the services that they commission. Attempts to address the problems are hardly new: the Compact has been in place since 1998, while the principle of full cost recovery was endorsed in a cross-cutting review in 2002.

But pledges from the top to treat the voluntary sector better have not had much effect. Last year, the National Audit Office found that there had been little progress on making full cost recovery widespread and that more needed to be done to improve funding practice. Its conclusions fed into an inquiry by the Public Accounts Committee, whose report in March this year identified 'a lack of expertise, experience and understanding of the sector across government departments'. The lack of progress has become so widely documented and discussed that even Home Office minister Hazel Blears admitted to charity chiefs a year ago that politicians had been 'talking the rhetoric' about a greater role for the not-for-profit sector for as long as she could remember.

But, this time, the government seems to be saying, it really means it. Some of those at whom the message is aimed can't help but feel encouraged. 'It's almost been a light bulb moment for government,' says Stephen Bubb who, as Acevo's chief executive, has been in and out of meetings with those at the top over the past six months. But he points out that real results, particularly in longer-term contracting and expanding the role of the sector in service delivery, will need to follow soon if charities are to be convinced that the government means business. 'This is the bottom line – we know what the issues are,' he says.

And there is a long way to go. A National Council for Voluntary Organisations survey of 100 charities, conducted in the six weeks before the 'three sector summit', provides a snapshot of the situation. More than half the charities and community groups surveyed had not had their funding agreed by the beginning of the financial year. Over 40% of those that had managed to secure their funding had not been paid on time, forcing both groups to finance services out of their own reserves.

'High-level political support is really useful, but it needs to translate into real practice,' says NCVO's director of public policy Campbell Robb, who is also advising the government on its third sector review. 'We want to see how the government is going to implement some of these things, because we've been here before. We need more drive to make them work, particularly at local level.'

Some of the barriers to change are cultural and institutional, rather than structural and financial. PAC chair Edward Leigh says: 'I'm not sure that officials, given the complexity of the voluntary sector, have the means to deliver a sea-change.'

Many charities agree. 'Talking to officials about full cost recovery, very few have got any idea what we're talking about,' complained one charity representative at the NCVO annual do in February, where David Miliband talked of the critical importance of the sector. 'Tell me about it,' responded the then Home Office official with responsibility for the third sector, Richard Clarke, with cheerful empathy. He described his own attempts to get the issue taken seriously by his boss.

Even right at the top, understanding of what matters to the sector is patchy: in an NCVO press conference designed to show the new Cabinet secretary's commitment to the voluntary sector last autumn, a question about full cost recovery to Sir Gus O'Donnell elicited a blank look and the vaguest of answers. Five minutes later, an official passed him a hastily put together but more on-message response.

But, even assuming that the message is finally getting through in Whitehall, the biggest gap between rhetoric and reality is to be found at the local level. Last year, Sue Ryder Care, a charity that provides neurological and palliative care, had a £7m shortfall due to below-cost contracts. Public affairs manager Dan Beety says: 'The reality on the ground is that the message doesn't seem to be getting through to local commissioning – and that's where the deals are made. We say, “care costs this amount”, and they say: “we can't afford to pay that”.

'We're offering cutting-edge, modern specialist health care to the statutory sector, but we're being funded on a system based on Victorian philanthropy. That means that we won't develop at the pace the government wants us to.'

Halford Hewitt, director of homeless charity Ipswich Housing Action Group, has similar experiences. The combination of rising costs and static grants mean that his two Supporting People contracts – which make up 56% of the organisation's £675,000 annual budget – are now costing it money. 'We're actually showing a loss on our SP contracts now,' he says. 'It's becoming increasingly unsustainable.'

Most people he deals with haven't even heard of the Compact, he says. Recently he sent a copy to his commissioners in Suffolk County Council. 'The response was: “It's not on my list of things that I have to take note of”,' he says. 'Until it becomes a requirement for local authorities, they ain't going to do it.

'There's a real gap between what's happening strategically and what's happening on the ground. I don't know how long it will take for that gap to be bridged – it's a cultural thing.'

Local charity bosses such as Hewitt might take some comfort from the new political will to improve things. Among his clutch of initiatives for local government, Woolas announced the launch of a central-local government-third sector engagement board. The board, which will be jointly chaired by the minister and a senior figure from local government, will seek to improve financial relationships in procurement and grant giving. It already has its eye on the Supporting People programme. Woolas and Local Government Association chair Sandy Bruce-Lockhart are also making noises about the need for local government to pass on the benefits of three-year funding when commissioning charities. But, as Woolas admitted in an interview with Public Finance last week, central government can only do so much.

In the wake of the conference, Hewitt is launching his own local campaign to bring about change, writing to contacts citing the latest ministerial injunctions about how to treat the voluntary sector. But he is gloomy about the prospects. 'I don't think local authorities will start to get it quickly enough for my business not to continue to exist,' he says, adding that the political rhetoric only goes so far. 'It's good to hear, but I'm actually more worried than I was before. If the prime minister can say it should happen and it doesn't, what's going to change?'

His reaction reflects a danger inherent in the government's latest courtship of the voluntary sector: making fresh promises increases the appetite for change. Listening to them, Britain's charities and not-for-profit bodies are becoming clearer about what they need to respond to the government's call for greater involvement in public services action.

'We're not providing cut-price services. We need to be treated as equal partners,' says Su Sayer, chief executive of the learning disabilities charity United Response. 'This action plan – it can't be just words. It must make it happen.'

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