Focus: Finance and Governance - Outlook - Beware of officials bearing contracts

Charles Nall, corporate services director at The Children's Society

The Government has stated that it wishes to see more not-for-profit involvement in the delivery of services.

On the face of it, this is because charities are innovative, beneficiary-centred organisations. The reality, as many charities know, is that arms of government seek lowest cost, not best value: a transferred service can remove final-salary pensions and obtain subsidies from charitable funds. Is this a route worth pursuing?

As services shift to the voluntary sector, the scrutiny of regulators and watchdogs follows. Best practice studies, industry recommendations and politically (rather than beneficiary) driven goals appear.

As practice becomes standardised, economies of scale emerge and are demanded by the Treasury. The industry consolidates - look at housing associations under the influence of the Housing Corporation's regime.

Does any of this matter? If the focus on beneficiaries can be maintained along with the capacity to innovate rapidly, then the answer is that consolidation does not matter, however much charities might protest that they are distinctive.

More effective and efficient services to greater numbers of beneficiaries sounds like nirvana.

The difficulty comes when beneficiary focus and innovation is stymied.

The NHS was once made up of many independent charitable, private - and some public - institutions. Now many would agree that the NHS has become an unwieldy behemoth in which genuine innovation has slowed. For instance, a company that has created a sterilising system proven to eliminate MRSA finds that its most promising market is the US.

As the drive to conscript the voluntary sector to service provision gathers pace, charities need to question whether the emerging market for government services is for them or whether a new breed of contracting businesses, perhaps constituted as trading arms of charities, is needed.

If you go down that route, do make sure that you have planned for the costs of closing that business: government can be fickle. And government needs to question whether drawing in charities will ultimately destroy not only charities' ability to innovate, but also the social capital that charities' community roots and independence represent.

The risk is that too many people say this is tomorrow's problem. Sod's Law, the law of unintended consequences, applies to charities taking on government services. After all, the essence of charity is that the help supplied is free at the point of need. I'm sure I've heard politicians use that phrase about a once-charitable service before.

KEY POINTS

- The Government says it wishes to see more charities involved in public service provision, but the sector needs to ask if this is a good idea

- Charities must question whether the emerging market for services is for them or for a new breed of contracting businesses.

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