NEWSMAKER: Fed up of funding the state - John Knight, Head of external policy, Leonard Cheshire

STOVIN HAYTER

Service providing charities that deliver contract services to local authorities are in big trouble - so much so that the very existence of some of the smaller ones is threatened.

John Knight uses the example of Rose Cottle, the 102-year-old woman who went to Downing Street a few weeks ago to protest her imminent eviction from a north London old people's home that is about to be closed, to make the point. "The owners say the fees they get from local authorities for looking after old people are not enough to make the home viable,

says Knight. Many charities are in a similar position, except they don't have the option that a private company would have of walking away from a deal that could ruin them.

Knight, as head of external policy for one of the biggest service providing charities, the Leonard Cheshire, is in a better position than most to know about the squeeze on voluntary sector finances. "Increasingly, local authorities are unable to cover the full cost of what it costs us to provide public services. But we won't walk away from those contracts. It would go against everything we stand for, so we have to make up the shortfall somehow.

"Leonard Cheshire spent nearly £5 million of voluntary income last year supporting state contracts, effectively subsidising state services,

he says. That's around a third of the organisation's voluntary income. It cares for 19,000 disabled people a year in 150 locations around the UK.

Of its £105 million turnover last year, 85 per cent was earned from local authorities and the health service.

He has grown tired of behind-the-scenes lobbying, and has been making an increasing number of public statements on the issue. "For many years we had been adopting a careful one-on-one debate with civil servants.

But when nearly a third of your voluntary income is going on supporting state services, you have to do something more demonstrative.

"There's a real time bomb here,

he warns. "It's a problem for the sector, not just for Leonard Cheshire. Scope, United Response and others are all in the same situation.

"At the moment it is largely a hidden issue. It is only a matter of time until some charities have to start seriously cutting back on services, and they can't do that in secret. People are going to start asking why.

The situation is being viewed with growing dismay both by the Charity Commission and by organisations such as the Charities Aid Foundation. "When a person puts a pound in the tin they expect it to be used for charitable purposes. When all this comes out, will they still be as keen to donate?

he asks.

It would be wrong to condemn local authorities, Knight points out. "They're caught in the middle. The trail leads back to central government and its inadequate provision for social services."

He emphasises, however, that there are signs of hope. "I think there is a realisation in the Treasury that if we're going to be equal partners with the public sector in providing services, we must get full-cost funding.

Knight is on the steering committee for the Treasury's Cross-Cutting Review of the Voluntary and Community Sector, due to be finalised sometime in April.

Another bugbear of Knight's is the increasing regulation coming out of central government. Leonard Cheshire provides 100 residential services and all will be affected by the Care Standards Act, which is due to come into force in April. "We think the Act is the best thing to have hit the social care sector in decades. But it is going to cost many millions in capital costs to meet the standards. Voluntary organisations don't have the same access to funding streams that for-profit companies do.

"If charities don't get funding to meet the new standards, some of the smaller ones may well go out of business, just as some small for-profit providers will, and that is of no use to the sector, the government or disabled people."

Knight acknowledges that voluntary organisations could do a lot more to explore options such as partnership funding to help meet the care standards, for instance, in conjunction with housing associations. "But the Government must realise that some projects will need grant aid, simply because they are not attractive to banks or to other providers."

The sector could also do more to strengthen its case in how it presents itself to the Government and to the public. "Voluntary organisations are not always the most efficient providers of services. But the sector can make a lot more of the fact that it does provide added value compared with local government or for-profit companies."

Leonard Cheshire, for instance, has 50 years of experience providing complicated support services. It uses voluntary income to complement and enrich the basic state-funded services (although that is being eroded in the current situation). But probably the biggest added value comes from the involvement of volunteers - Leonard Cheshire has around 4,000.

"They provide the extras. They drive the mini-buses, and do all the little things that make the world go round for disabled people,

he says.

The voluntary sector needs to be far more articulate and succinct in how it describes the added value that it provides. "It can be defined, and it is something that people want. The sector has a very long history of providing high-quality, user-focused services, and that is our added value."

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