Expert view: Why reinvention may be necessary

Small businesses complain that charities are treading on their toes.

Reform of public service delivery is engaging the private and charitable sectors. Private schools are challenged over their charitable status at a time when commercial groups are acquiring more schools.

Behind this blurring of sector boundaries is the idea that no one model of management and financial structure can uniquely deliver the most effective services. But the right ethos may ultimately avert unanticipated collateral damage.

Take those private schools. An ossified market has moved so far along the branch of rising costs that the branch is breaking. The public benefit (or cost) of charitable status is said to be greater than the charitable tax benefits. So why not abandon charitable status and hive off fee assistance?

To many, this would legitimise schooling by commercial bodies, freeing up the schools market. If fees were as low as the state expenditure per pupil - between £5,000 and £6,000 a year, say - imagine the scale of market growth. The best would have new professional opportunities to explore curricula and pedagogical methods. Three or four major strands of education philosophy and accompanying qualifications might emerge. This would be fit-for-purpose education, potentially without a charity in sight.

Why stop there? There is no reason to hold children's services in charities and local authorities. And healthcare? Charities exist only to reach those for whom there cannot be an effective customer and supplier, don't they?

Testing to the extreme has its uses. If the ultimate motivation of service providers is profits to shareholders, and the customers have limited comprehension, then things can go awry. Does anyone remember the financial services industry and endowment life policies, pensions, split capital trusts? The wrong ethos in financial services has destroyed faith in an industry that is fundamentally about moral benefit: providing financial dignity in times of need.

Charities aren't perfect, but nor are other mechanisms. Charities have one overriding, redeeming quality: they are focused on their beneficiaries first and foremost. That is not to propose that only charities can deliver charitable public benefits.

In fact, it leads to a challenge to charities: can some reinvent themselves amid changing circumstances so their ethos stays relevant? Where necessary, can charitable groups take the plunge, hire the best managers and deliver a competitive not-for-profit service where a different mechanism is warranted: charity by other means?

- Charles Nall is director of corporate services at the Children's Society and chair of the Charity Finance Directors' Group.

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