To its political admirers, the voluntary sector's talent for innovation has become an article of faith. The adjective "innovative" appears 22 times in the Government's Third Sector Review, published in July. The sector's perceived gift for finding new solutions to intractable problems is at the root of its appeal to Prime Minister Gordon Brown and his Tory opponent David Cameron alike. But new research suggests that this ministerial chorus of praise for charities' innovative genius is not only cliche - it is also disingenuous.
Earlier this year, academics from Edinburgh, Aston and Birmingham universities repeated a 1994 study that examined innovation by social care charities. Their findings, to be published in December, will claim that innovative activity, defined as working with a new client group or providing new services, has declined by half.
Whereas nearly 38 per cent of the voluntary organisations surveyed in 1994 were engaged in innovative activity, now only 19 per cent are. By contrast, developmental work - steadily making existing services better or more efficient - has risen from 14 per cent to 36 per cent. Searching for reasons for this dramatic shift, the researchers turned their gaze on the state. Their provisional conclusion is that "government funding regimes have shifted significantly between 1994 and 2006 so that innovation is no longer a core element".
Whereas both the Conservative government and local authorities in the early 90s placed innovation at the heart of their funding relationships with the sector, the emphasis has now changed. "Bluntly, local managers commissioning services from voluntary and community organisations have little interest in innovation," they argue in The Innovative Capacity of Voluntary Organisations and the Provision of Public Services. "Their concern is to meet the plethora of performance targets placed upon them by central government." Put simply, public sector commissioners have no interest in funding innovative work, and voluntary organisations have no interest in pursuing it because it is not funded.
Ben Hughes, chief executive of Bassac, an umbrella body for community groups, agrees that government funding now stifles voluntary sector innovation. "Government centrally, regionally and locally has become far more target-oriented, far more prescriptive, far more driven by a very rigid preoccupation with quality systems," he says. "All of which runs counter to developing new thinking, to new approaches to meeting old needs, to developing new methods of delivery. Although the rhetoric says they are interested in innovation, the reality of the funding regime is not in that mould."
Hughes argues that the Government's public service delivery agenda compels charities not only to work towards pre-ordained outcomes, but also to tailor their projects so they dovetail with existing structures of delivery. "It's more than targets," he says. "The targets come with very strong conditions attached to the way things can be delivered. They don't want people to develop completely new structures and systems that might not fit with local authority structures. They're requiring the sector to fit within an established government framework of operation and delivery."
In technical jargon, the sector has been 'mainstreamed'. Many of the innovative new services that the voluntary sector was developing a decade ago are now part of everyday public service delivery. Innovative services that were delivered locally have been integrated into the system by public sector commissioners. The problem is that, while the public sector has been productively fishing for voluntary sector innovations, it has neglected to replenish the stocks. Local authority grant schemes that once encouraged the sector to find its own solutions, have been superseded by outcome- oriented 'service level agreements'. Existing services that have proved their worth are funded, new services that haven't, are not.
Julian Corner, a former Home Office civil servant, who now heads Revolving Doors, a charity that works with offenders with mental health problems, understands the position of commissioners burdened with performance targets set by central government overlords.
"The public sector has to secure its bottom line," he says. "It has to provide proper, integrated systems, and I don't think anyone would argue with that. The problem is that once you have rigid systems that don't target unmet needs, it's vital that the voluntary sector has the capability to respond. It is in the interests of public sector commissioners always to have a pot of money that is set aside to be spent on the needs that local voluntary organisations are identifying on the ground. Otherwise, you have chronic unmet needs and we all end up paying for it through the emergency services or the criminal justice system."
Not that voluntary sector innovation has disappeared. Hughes insists it is wrong to think the sector has become so weak and passive that it's entirely at the whim of government. Innovation has continued, financed by other sources. Foundations such as the Tudor Trust and the Rank Foundation, for example, have funded a project by homelessness charity Groundswell that offers grants to homeless people to run their own projects, such as service- user groups. Up to £700 can be awarded and the application process has been made as simple as possible. The charity accepts that some money will be lost in projects that come to nothing, but points to the success stories - two projects that are now bigger than Groundswell itself.
"Putting loads of money in vulnerable people's hands - many people would shy away from that," says Athol Halle, chief executive of Groundswell. "A project like this would probably not get public funding. You are definitely taking a risk. But that's how you make a change; you trust people and back them."
But not all agree that public sector funding is smothering voluntary sector innovation. Matthew Horne is interim director of the Innovation Exchange, a three-year pilot funded by the Office of the Third Sector to encourage voluntary sector innovation in public services (see panel, previous page). "I don't think innovation is in decline," he says. "I think that in some sectors, such as disability services, we have seen quite a high level of innovation - but in others, like adult social care or education, there is less. So you can't generalise. There is also, as the report says, more incremental or development work. That's a perfectly legitimate and sensible activity - to incrementally improve the standard of the service you are contracted to deliver."
What Horne does accept is that conventional, routine forms of commissioning are not the best way to spot and make best use of innovative voluntary sector projects. "The problem is that commissioners of public services are often not experienced at commissioning from the third sector," he says. "And they are not experienced at commissioning innovative practice from any sector. At the same time, third sector organisations are not very experienced at marketing their innovative practice. There is a problem on both sides."
The Innovation Exchange is trying to nurture third sector innovation for the benefit of public services, but others see that agenda as part of the problem. "We have to put the brakes on the sector's delivery of mainstream public services," says Hughes. "Yes, the sector has an incredibly important and complementary role to the state in its delivery of primary public services, but it should not itself become the deliverer because it needs to be the scrutineer, the challenger and the champion for creativity in harnessing different approaches to achieve better outcomes."
Dr Celine Chew, lecturer in strategy and marketing at Cardiff Business School and one of the report's co-authors, argues that the voluntary sector needs a period of soul-searching to rediscover its mission. "The sector has no distinctive anchor in terms of self-definition; that's why it is moving the way the wind blows," she says. "It needs self-reflection and to be sure of its role in society. Because of government contracts it has become an agent of service delivery, but that's not its only role."
The Innovative Capacity of Voluntary Organisations and the Provision of Public Services: A Longitudinal Approach will be published in a special edition of Public Management Review in December.
A new way of sharing bright ideas
The Innovation Exchange is a £1.2m, three-year pilot project funded by the Office of the Third Sector to encourage the growth of innovative projects by third sector organisations.
Matthew Horne, interim director of the exchange, says that third sector innovation is not in decline, but it is patchy, local, small-scale and does not impact on the mainstream delivery of public services. The public sector is not experienced at commissioning innovative services from voluntary organisations, while the sector itself does not market its innovations well enough.
"The problem that the Innovation Exchange has been set up to tackle is this mismatch between the Government's aspiration for better public services and more third sector involvement and the conventional, routine form of commissioning that local authorities and central government can get trapped in," says Horne. Compounding this is a dearth of investment in innovation from other sources such as foundations or private philanthropists.
The Innovation Exchange is an attempt to bring together third sector innovators, public sector commissioners, social investors such as foundations, investment vehicles such as the Adventure Capital Fund and lottery distributors. The exchange will launch two Innovation Networks, which will each focus on tackling a specific social problem. They will each have up to 300 members. The vast majority of members will be innovators from third sector organisations who will offer their projects and ideas to a panel of investors and commissioners of public services.
The networks will encourage third sector members to share ideas. "At the moment, in some parts of the sector there is too much competition and not enough collaboration," says Horne. "The Innovation Exchange will try to balance the right amount of sharing good practice, but also recognises that organisations will be competing for investment or contracts."