In the right hands... by Stephen Bubb

2 Feb 06
Voluntary organisations can reach parts that monolithic public services can't even get close to. And the government is waking up to their importance in areas such as employment services and welfare to work. But there's a way to go, says Stephen Bubb

03 February 2006

Voluntary organisations can reach parts that monolithic public services can't even get close to. And the government is waking up to their importance in areas such as employment services and welfare to work. But there's a way to go, says Stephen Bubb

Justin is a 24-year-old black man. He drifted out of school and into a life of crime. He ended up in prison for two years. But this is a success story. Justin realised he had to get a grip of his life and took advantage of a great prison education programme run by a voluntary organisation.

On coming out of prison, he thought the probation service would support him in getting his life together. What he needed was a job and a home. He quickly discovered that this was not what he was going to get from probation. Fortunately, the Prince's Trust placed him on one of their specialist programmes and he is now successfully in employment.

This example shows the real and unique potential of the country's third sector (charities, not-for-profit and social enterprises). The current debate on public service reform has essentially missed the role that the third sector can play in providing a community and user focus.

There are signs that the government and the main opposition party are beginning to recognise the opportunities an expanded third sector can offer. In a presentation to the prime minister on January 31, the Association of Chief Executives of Voluntary Organisations outlined the opportunities for a greater role in health, education, children's services, prisons and probation, employment and welfare.

Of course, the third sector has been delivering public services in these areas for centuries, for children and old people, the deprived and dispossessed.

Why has the current public service reform debate been so dominated by producer interest? Why do opponents of change insist on arguing that this is 'privatisation'? Surely no-one is arguing that organisational interests should be put before those of users and citizens.

The current debate needs to be turned on its head. What is in the best interests of consumers of public services? What form of delivery will best enhance community cohesion and citizen involvement? The country's third sector is large and growing. Figures from the London School of Economics demonstrate that it employs almost 1.5 million staff, the full-time equivalent of 1.7 million. It has an annual turnover of £30bn. The single largest source of income for the country's charities now comes through state contracts and grants.

But this growing role in service provision still amounts to less than 2% of public spending.

Third sector organisations have grown in strength and professionalism. The sector ranges from small but effective community organisations to multimillion-pound organisations employing thousands of staff. Some 40% of members of Acevo previously came from the private sector and 30% from the public sector.

Yet the sector still suffers from the view that it is small scale, largely volunteer run, and operating at the margins. We are no longer about jam-making and raffles. However, this stereotype underlies much of the interaction that takes place between the public and third sector.

The National Audit Office published a report in 2005 that examined funding and contracting relationships between state organisations and the sector. It revealed that little progress had been made on reforming funding practices. Part of the problem lay in 'a general suspicion and lack of trust, together with a tendency to underrate the sector's professionalism and ability to deliver public services'.

So what is the potential? Third sector organisations have a strong user and community focus. Many have grown out of the concerns and commitments of service users. For example, many mental health charities were formed out of despair at the inability of the state to provide effective services, and users and their carers remain closely involved.

Third sector organisations are almost always more 'joined-up' than public sector bodies. We know that people in deprived areas require more than a job opportunity, and we provide a holistic approach that tackles multiple problems such as housing, literacy, drug and alcohol abuse.

Third sector bodies have a high level of public trust and provide social capital through their engagement of communities, donors and volunteers. They have driven much of the innovation in public service delivery. Importantly, they are able to engage where others can't. The hardest-to-help groups are most effectively supported through third sector, not state, bodies.

One good example is welfare reform in Australia. In the past seven years, the third sector there has grown from small-scale provision to providing almost 50% of the entire jobs and training service. While the state retains the important role of providing the jobs portal and benefit determination, the actual employment and training service is provided through a contested market. One of the main players is Mission Australia, which provides around 10% of the country's jobs service. It has grown from small beginnings in the nineteenth century to a multimillion-dollar business.

In October, I asked the chief executive of Mission Australia to come to talk to government ministers about the potential for reform in the UK. He told then Cabinet Office minister John Hutton now work and pensions secretary how the introduction of choice and contestability had driven down costs and increased job placements and customer satisfaction. Within five years, successful job outcomes increased by 70% and total costs fell from A$3.2bn to A$1.9bn.

There are clear parallels for the UK, which Hutton's recently published welfare reform green paper shows. Unemployment is low but in contrast, the number of people on incapacity benefit has risen sharply and now stands at 2.7 million. 'Worklessness' is heavily concentrated in deprived areas. Many people living in these areas have multiple disadvantages and few aspirations. They pose particular challenges that third sector organisations, through their joined-up nature, are often better placed to tackle than the state JobcentrePlus service.

The green paper proposes an expanded third sector role in the Pathways to Work schemes and in providing personal advisers. Indeed, it acknowledges that voluntary sector job placement schemes are more successful than JobcentrePlus. So the government clearly envisages the sector playing a bigger role in delivery. This is welcome.

However, there are still barriers. Organisations providing services for central or local government and the health service are faced with a poor funding and contracting regime. Contracts are short-term (usually one year) and high-risk. There are bureaucratic monitoring and reporting procedures that focus on process and inputs, not outcomes for users. The contracts are rarely based on the full cost of the service provided.

In November 2004, Acevo published the results of its Surer Funding Commission of Inquiry. This found that contracts were usually based on a 'lose, lose, lose' principle. The contracts involve a waste of taxpayers' money, make it difficult for organisations to work effectively, and harm the quality of service provided to the end user. There are obvious efficiency gains to be made by reform.

Acevo proposed a Surer Funding Framework for all future contracts to ensure: they are usually for longer than a year; their pricing structure is based on full cost recovery; risks are shared appropriately between the contracting bodies; and regulation is proportionate rather than bureaucratic.

Why not contract on a ten or 15-year basis where there are long-term problems to solve? Such a contract would open up access to capital markets for our organisations and enable us to provide more services.

Our message to the prime minister was simple build on the unique nature of the third sector's service delivery, radically reform our contracting regime and set out an action plan for an increased role. The prime minister in turn was clear that public service reform is still top of the government's agenda and that the third sector has a vital role to play in that.

Stephen Bubb is the chief executive of the Association of Chief Executives of Voluntary Organisations


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