FINANCE NEWS: Public service deal renegotiated

Mathew Little

Disability care charity Leonard Cheshire has succeeded in reducing the 'subsidy' it pays to meet the full cost of inadequately funded local authority contracts by £4.2 million.

The diversion of some of its voluntary income to publicly funded work has been cut from £6.7 million a year to £1.5 million in the past two years. The charity says it is on course to break even on its contracts with the public sector by the end of 2003.

The issue of donated income being used for services that should be fully funded by statutory bodies has long been a source of resentment among charities. Last year's Treasury review of the voluntary sector's role in public services promised "full cost recovery" for all public sector contracts.

But Leonard Cheshire decided to take action itself and renegotiate its financial relationship with local councils.

"We haven't charged in and argued with local authorities," said director-general Bryan Dutton.

"Legislation says that all disabled people are entitled to a needs assessment.

This is a model accepted by 200 local authorities. If the local authority says it can't meet our budget by, for example, £200, we say, 'which individual needs do you not want us to provide for?'. This tends to lead negotiations to a suitable conclusion."

But the process of assessment has involved thousands of hours of the charity's employees' time.

The charity had a break-even target of April 2004, but also wanted to maintain a "small working margin" in order to cover unexpected costs.

"That is just good business practice," said Dutton. "We are not trying to make a profit."

He said that the charity would be able to develop new and innovative forms of working because of the gradual "liberation" of the £6.7 million subsidy.

See Editorial, p17.

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