Analysis: Is contracting a threat to the sector's independence?

As two reports on sector independence reach different conclusions, Pete Alcock, director of the Third Sector Research Centre, says a different kind of charity is emerging,

Peter Alcock

This week, two reports have been published in different corners of the sector. Each examined similar subjects and evidence but drew different conclusions.

Independence Under Threat: The Voluntary Sector In 2013, the second of four reports over five years by the Panel on the Independence of the Voluntary Sector, says that in the past 12 months the government has "directly threatened" the independence of the sector.

It says the threat is the result of measures that stifle the sector's voice - the gagging of Work Programme contractors, advice to local authorities not to fund some campaigning charities and the government's failure to obey its own Compact commitments. The report points out that local and central government are major funders of charities, providing 38 per cent of sector income, and are therefore able to wield enormous power over the sector.

Is the Third Sector Being Overwhelmed by the State and the Market?, the latest discussion paper from the Third Sector Research Centre as part of its Future Dialogues programme, also looks at whether the state is becoming too dominant and is dictating to the sector.

This report also highlights the extent of government funding, but says only 14 per cent of charities identify the state as their main funder, and only 36 per cent receive any state funds at all. It suggests that a split is emerging between charities that rely on donations and volunteers and a growing sub-sector set up to win government deals.

Even the latter group, the report suggests, can often handle conflicts of interest that arise and still speak out on behalf of their beneficiaries - suggesting that the former group is likely to be relatively unaffected.

The independence panel also recognises the rise of specialist service delivery organisations, but sees this as a potential problem, suggesting a "loss of identity" for the sector, driven by the creation of "hybrid" not-for-profit models, including social enterprises and spin-outs from the state. It suggests the need for a debate about "what constitutes a charity".

Pete Alcock, director of the Third Sector Research Centre, says that this issue of identity is one of the most discussed themes in the Future Dialogues programme. Some people, he says, have debated whether a new name or label would better fit not-for-profits set up mainly to deliver state services.

But he believes the sector has always been an alliance of very different types of organisations and that splits have been part of the sector for a long time.

"There's certainly a greater focus on delivering services under contract, particularly through payment by results," Alcock says. "We're seeing the need for the sector to develop large contracting organisations to compete with the likes of Serco, and these will look quite different from traditional charities."

But Alcock believes the identity of traditional voluntary organisations will not be threatened by this, and that a new group of organisations will grow up beside them.

The independence panel, by contrast, is concerned that the rise in contracting has led to a reduction in grant income - a charity-specific funding stream - and sees this as a major threat to the sector's independence.

It says that many charities are now treated by the state as "a mere arm of the state - a delivery agent or subcontractor without an independent voice", and that the removal of grants is a major problem, particularly for charities representing and supporting disadvantaged groups, which it says often rely on grant funding to survive.

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