The Government does not regard the third sector as a way to deliver public services "on the cheap", according to Angela Smith, Minister for the Third Sector.
Smith was speaking at a mass meeting organised by the Unite union at the Houses of Parliament yesterday.
The meeting was timed to coincide with the release of new research by the union showing that more than 90 per cent of voluntary sector staff feel their wellbeing and morale are being undermined by the financial crisis facing charities and the emphasis on giving them short-term, low-cost contracts.
Rachael Maskell, Unite's national officer for the community and not-for-profit sector, told the meeting that almost all of the 300 respondents to the survey had complained of stress and long hours.
"Things could be so much better," she said. "If workforce issues aren't brought centre-stage, the sector will be unsustainable in the long term."
Smith welcomed the report and agreed that it was important for the Government to understand the impact of contracting on the sector's workforce.
She contrasted the Labour Party's perception of the sector with that of the Conservatives, claiming that the Tories expected the sector to provide services more cheaply.
"Getting the balance right between the different sectors means not seeing the sector as organisations that could do things on the cheap," she said.
She also said discussions with Unite officials before the meeting had convinced her that some management practices in the third sector needed to be improved significantly. "Pressures can be coped with in much more union-friendly ways," she said.
Doug Nicholls, Unite's national secretary for community and youth workers and the industrial sector, said it was time for a major review of sector funding and an end to competition between voluntary organisations for the same contracts.
"Our organisations aren't built for competition and the market," he said. "They are built for caring and compassion."
Jim Dobbin, Labour MP for Heywood and Middleton in Greater Manchester, said the Government should legislate to ensure all contracts ran for five years.
Ben Kernighan, deputy chief executive of umbrella body the NCVO, called for more use of rolling contracts that could be automatically renewed every year.
"Far too often, decisions are made about the length of the contracts on the basis of the constraints on the funders and not what is appropriate for that kind of service," he said.