Editorial: Adjusting to the contract culture

The government should cushion charities against payment by results, says Stephen Cook

Stephen Cook, editor
Stephen Cook, editor

Those twin bugbears of the voluntary sector, the Work Programme and payment by results, have been back in the news.

The former was the subject of a survey by the National Council for Voluntary Organisations and the latter was one of the main topics at a session of the Panel on the Independence of the Voluntary Sector.

The NCVO survey, emanating from its useful special interest group of participants in the Work Programme, found that seven out of 10 sector subcontractors felt their contracts were at risk of failure and that half of them were subsidising the work out of their own reserves.

And Clive Martin of Clinks, the umbrella group for charities working in criminal justice, told the independence panel that most charities did not have the cash flow or the reserves to cope with the payment-by-results regime in many government contracts. Some charities had gone out of business not, he said, because they had lost contracts but because they had won them.

Martin also told the panel that some large charities said in public that they were content with payment by results but admitted in private that it was not a model that worked for them. They put on a compliant face, he said, in order to seem forward-thinking and dynamic rather than old-fashioned and unfit for purpose.

So it was timely that the Charities Aid Foundation published a discussion paper last week about how the government could make it easier for charities to handle payment by results. One of its suggestions is that contracts could include an up-front payment as well as payments that come later when the work has proved effective.

The government has already pledged to bring in a £20m 'outcomes fund' to help local authorities use social impact bonds to finance projects designed to save the state money by tackling intractable social problems. But it should go further and make it easier for charities that have the right skills to bid for such ground-breaking programmes. Social impact bonds need all the help they can get.

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