The Government has said the merger of two lottery fund distributors is to go ahead. But many questions remain over how it will be done.
Despite the soothing words of Culture Secretary Tessa Jowell last week, there are still significant concerns about the future independence of lottery funding for the voluntary sector following the proposed merger of the Community Fund and the New Opportunities Fund. And it seems that the board of the Community Fund is prepared to dig in its heels to prevent any rapid change.
In her speech, Jowell formally announced the planned merger of the two lottery distributors but said the Government would not exercise more control over funding to charities than it does at present. She added that the proportion of money going to charities would not fall under the changes.
But Community Fund board members are concerned that the Culture Secretary's promises could be reneged on further down the line. "We want answers to our questions in the form of concrete legislation because of the risk that a future Culture Secretary could take a different view to Jowell," says a Community Fund insider.
She adds that the Government was hoping the Jowell announcement would be accompanied by a joint statement from the two funds, agreeing to the merger. "The Government was trying to bounce us into a joint statement with the New Opportunities Fund, but we wouldn't play ball because of our concerns," she says.
The Community Fund and many in the voluntary sector accept that Jowell is speaking in good faith but there are concerns that she has not spelt out how the independence of grants will be maintained. This is a key issue because the Community Fund and New Opportunities Fund have different roles, given that the latter's grants are more closely linked to government priorities in health and education.
Jowell has also failed to deal with other conditions recently set out by the Community Fund, such as the need for a devolved approach to grant making and the supporting of disadvantaged communities.
Primary legislation is needed to formally complete a merger and that would take another two years to come into force. Given this, the Government is believed to favour setting up a "shadow" merged body in the interim.
But to do this, it would need the co-operation of current Community Fund board members, which appears uncertain in the short term unless the Government addresses some of their concerns in more detail.
In the longer term, there may also be problems for ministers. For example, Conservative MP John Whittingdale has already called the merger a "takeover" by the New Opportunities Fund and it is likely that in its passage through Parliament, future legislation could encounter opposition in the House of Lords.
Board members at the Community Fund are concerned that its ethos of independence and of funding innovative and sometimes controversial projects could be swamped by the more "government-friendly" culture of the New Opportunities Fund.
It was a vitriolic campaign in the Daily Mail against grants to controversial groups, such as the National Coalition of Anti-Deportation Campaigns, that has put pressure on Jowell to act.
The intervention of Home Secretary David Blunkett last autumn, supporting media criticisms of the Community Fund's grants, was regarded by many in the sector as an illustration of the Government's intention to hobble the Community Fund.
Jowell has denied, however, that the Daily Mail's campaign led to the merger decision, pointing instead to her department's review of the distributors and the need to rationalise the work of the two.
NCVO agrees that there could be a business case for bringing the distributors together. "There's a shrinking pot of money from the Lottery so we can see the argument for making savings by merging distributors," says a spokesman.
But the Government needs to provide more details on how these savings will be made and who will benefit, he adds.
Brian Lamb, communications director at RNID, says he can see the advantages of merger but that issues such as independence and guarantees that charity funding will not be reduced need to be clearly addressed.
With lottery receipts falling, he says, it no longer makes sense to have two large distributors working separately, each with their own strategies and staffing hierarchies. Putting the two together would create a bigger pot of money, which could result in a more effective use of funds across different areas of activity, he believes. He hopes the merger will also be accompanied by a simplified application form. Streamlining was one of the arguments used by Jowell, who said the merger would offer applicants "a single front door".
Luke FitzHerbert, senior researcher at the Directory of Social Change, says that change was on the cards well before the media campaign against the Community Fund. "Before the general election, Labour said it intended to make the lottery distributors conform to strategic goals rather than just making grants, so the merger decision is not unexpected."
But he said it was a regrettable move to bring the stream of charitable funding closer to government. "The Community Fund made grants at arm's length from the Government but that arm has now become withered," he says.
For her part, Jowell said that she would be consulting charities on the proposed changes. But there is some scepticism about this offer, given that one of her junior ministers told ACEVO in mid-February that no decision on merger would be announced before consultation with the sector. Speaking last month, ACEVO chief executive Stephen Bubb said he was concerned that losing the Community Fund meant losing a large independent source of funding for community organisations.
Citing research from the Community Fund that three-quarters of the public think lottery distribution should be completely independent, he called for a new, not-for-profit body that was truly independent. The advantage of this, says Bubb, was such a body would not be linked to the New Opportunities Fund, whose grants are closer to government policy.