Public sector commissioners ‘driving out charity innovation’

1 Nov 17

Commissioners of public services are making governance for charities more difficult and potentially “driving out innovation” from the sector.

This was the view of Lord Michael Bichard, former civil servant and cross-bench life peer, given at CIPFA’s governance summit on working across public bodies and the third sector today.

“Governance is important and it is being made more difficult by the way commissioners in the statutory sector are operating,” Bichard said.

He added: “Many excellent public service initiatives have grown out of the charitable sector - it is in an innovative sector.

“If what we do is to define not just the outcomes from the charitable sector but the way of delivering outcomes, then we drive out the possibility of charities innovating and we lose sight of the long-term and they [charities] become more risk-averse,” he said.

He warned that commissioners in the public sector often lacked the strategic partnerships with the charities needed to get the most out of the third sector, including what he described as charity’s “flexibility, public trust and innovation”.

This process was being driven by commissioners seeking standardised short-term contracts for narrowly defined service definitions, which he said “can often be at the expense of innovation”, because of the lack of time charities were given between contracts.

He said a “genuine partnership” was needed between the statutory and non-statutory, although he recognised achieving this “has continued to prove very difficult”.

Bichard stated that many of the issues which affect these partnerships and overall governance in charities related to how services were commissioned.

Grant funding has significantly reduced from around £6bn in 2003 to around £2.2bn in 2013 and there has been a major shift to contracts.

Bichard said this has benefited larger charities while smaller ones have suffered a 40% loss in income between 2008 and 2014 because they lack the capacity to compete for contracts, which are often short-term.

This leads to charities chasing contracts of one or two years “merely to survive” – which makes it hard to plan for financial sustainability.

These tendering processes every year or two adds “unbelievable complicated” bureaucracy for small organisations like charities.

Payment by results was another cause for concern, Bichard said: “It is often poorly designed, often transfers the financial risk to the weaker partner [charities].”

Evidencing performance is difficult for charities with few support staff and for those who help clients with complex needs, he explained.

He also noted that these payments can be late, which forces charities to go into their reserves.

Another failure highlighted by Bichard there was a lack of collaboration between public and third sector partners in how services should run.

He described this as “black hole” in public service reform as service providers are forced to provide services they consider flawed.

Bichard said: “Public sector commissioners should be expected to have regard for the sustainability of the charities they commission … we need to understand better the needs of the charities and the demands placed upon them.”

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