He added that the sector's increasing reliance on statutory funding could further compromise its independence.
"With close to 40 per cent of voluntary sector income now statutory, the space between being sidelined as oppositional and being co-opted into prisoner-insider status is an increasingly uneasy one," he said.
Etherington predicted that traditional methods of campaigning would become increasingly ineffective and questioned whether high-profile demonstrations such as the Countryside Alliance march had any real effect.
He said: "A public rally may work as background noise, in that it can help make the political environment more receptive to a particular campaigning aim, but it is a mistake to conflate demonstrating and campaigning."
Etherington also argued that it was not enough for NGOs to try to make the moral case and claimed that too many regarded "media attention as success, rather than as a means to a political end".
He added that too many campaigns were hindered by the nature of the relations between campaigners and fundraisers, which he claimed "still tend to be characterised by mistrust".