NEWS IN FOCUS: Review puts charities at 'heart' of public services - The Chancellor's £125 million funding boost has been designed to overcome the barriers to voluntary-service delivery. But will it work, asks Mathew Little

MATHEW LITTLE

Any lingering doubts that the Government intends a radical expansion of the voluntary sector's role in the delivery of public services were blown away by Chancellor Gordon Brown's largesse in last week's Comprehensive Spending Review.

A £125 million investment fund to overcome barriers to voluntary-sector service provision and increase the scope and scale of sector services was accompanied by an increase of £60 million in the Active Community Unit's three-year budget. This will enable the unit to carry through the recommendations of the Treasury's review of the sector's role in public services.

According to Paul Boateng, chief secretary to the Treasury, the sector is now "at the heart of this Government's modernisation and productivity agenda".

The Government says the investment fund is designed to remove "barriers

to voluntary-sector involvement in public services. For the sector, those barriers are clearly the under-funding of core costs and VAT.

But whether Treasury stance on VAT is shifting is unclear. It says it has looked "afresh

to determine if there are ways to reduce the VAT burden on the voluntary sector, but no concrete proposals have emerged. The investment fund may be the chosen way of mitigating tax without tackling it head-on, although negotiations are believed to be continuing between Customs & Excise and the sector about the issue. Third Sector understands that Andrew Smith, chief secretary to the Treasury until the recent reshuffle, has told sector leaders that some reform of VAT arrangements will happen.

However, the signs are more hopeful for core costs. Among the recommendations of the Treasury review (the review will not be published in full until September), is a promise that all government departments will reflect full core costs in their procurement policies.

The promised close involvement of the voluntary sector in deciding where the investment fund is spent will promote a flurry of ideas from service delivery organisations and umbrella bodies. According to NCVO, the most needy areas include improving the negotiation skills of charities so they can compete better with the public sector for contracts.

So if the Government is determined to outsource a large slice of service responsibilities to the voluntary sector, what kind of public services does it envisage organisations undertaking?

The full details of the Treasury review will not be released until the autumn but it is expected to assert that charities have a comparative advantage over other sectors in delivering services to excluded groups, such as drugs addicts or the homeless.

The sector's specialist skills in involving users, independence from public-sector management models, responsiveness and freedom from the stigma of official authority will be cited as examples of the added value that the sector brings. Where the service in question requires these attributes, voluntary organisations will be the preferred supplier.

Local authorities and health authorities are also to be told to consult closely with voluntary-sector representatives before they contract out any service.

According to Beth Egan, deputy director of think-tank the Social Market Foundation, Brown would like charities to become high-profile partners in his plans for public service reform because they don't attract the level of public criticism that profit-making contractors do.

The danger for charities lies in being so flattered by the Government's overtures that they start to take on services that are not in their interest.

In other words, they succumb to the so-called Martini syndrome "any time, any place, anywhere".

"I don't have a problem with charities getting involved in public services, I'm just concerned about the terms around which it happens,

says Egan.

"Charities could allow their mission to be distorted to fit in with the terms of the contract. They have to constantly remind themselves what they are here to do."

Egan suggests that the cost of charities taking on more public services may be too great. In the fields of child and elderly care, the existing players are busy enough without having to supply further services to the Government. The answer could be to create a new breed of not for profits, specifically set up to deliver public services.

To do this the Government needs to supply the same amount of help that it provides to small businesses through the Small Business Service and the DTI to the voluntary sector. "The only way to avoid mission drift is not to have a mission in the first place,

she says.

THE SPENDING REVIEW BENEFITS

Aside from the announcement of the £125 million investment and the first conclusions of the review of the sector and public services, the Comprehensive Spending Review also saw big increases in departmental budgets that will affect the work of charities.

The main points were:

- An increase in the budget of the Children's Fund from £150 million to £200 million a year until 2006. This includes a "Local Network Fund

of £70 million for the voluntary sector, set up to tackle poverty among young people.

- Sure Start, the government programme to improve opportunities for young children, is to be brought under an integrated budget for child care of £1.5 billion.

- The Neighbourhood Renewal Fund, which works in the 88 most deprived areas, is to see its budget increased to £525 million by 2005-6.

- The aid budget, administered by Clare Short's Department for International Development, is to increase from £3.3 billion to 4.9 billion by 2006, or 0.4 per cent of national income.

- The education budget is to increase from £45 billion this year to £58 billion in 2006.

- An extra £1.4 billion will be invested in affordable housing by 2005-6.

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