Greg Clark, the shadow charities' minister, said the Office of the Third Sector had a poor record on defending the interests of the sector and that the Compact was "spineless".
He told MPs: "The Office of the Third Sector, which was a Conservative idea, was set up to be a strong voice and advocate for the third sector right across government. Now that it exists, it is too often ignored."
He claimed the office had failed to make progress on full cost recovery and long-term contracts and that the Compact was "toothless, spineless and increasingly useless when it comes to protecting local charities".
Phil Hope, minister for the third sector, accused Clark of being "negative about everything". He said the Government was committed to the Compact and there would be a December review to discuss progress. Full cost recovery had risen from 25 per cent of funding in 2002 to 42 per cent in 2005, he said, and Treasury ministers would soon be writing to departments to remind them of the Government's commitment to three-year contracts.
Hope referred to comments made two days earlier by David Cameron, the Tory leader, who accused the Government of "undermining the voluntary sector" at a speech at Chance UK, the charity for vulnerable children. He said Cameron's claim was "nonsense" and accused him of trying to turn the sector into a political football.