Charities can now provide statutory services as well as pools and leisure centres.
A landmark ruling by the Charity Commission has recently added a new and controversial twist to the familiar debate about the extent to which the voluntary sector should be involved in the delivery of public services.
Dealing with an appeal from two leisure trusts established by local authorities in Wigan and Trafford, the commission ruled that charities can now deliver services that a public authority has a statutory duty to provide (Third Sector, 23 February).
Until now, charities have been allowed only to supplement the provision of a statutory service, or provide the whole of a service where the authority had a discretion as to the level of provision.
New and blurred horizons
This opens a whole new window of opportunity for charities. Within local authorities, charities are now permitted to provide far more than sports facilities - such as local swimming pools - which have always been a discretionary service. The ruling now enables them to run libraries, cemeteries or even a borough's entire education service.
For a case considered 'landmark', the commission has issued the news remarkably slowly. It decided the appeal as long ago as April 2004 and announced it - without any sort of fanfare - at an open board meeting in January. So understated was the release two weeks ago that one sector umbrella body had to retract its own press statement after failing to spot its full significance.
Francesca Quint, a barrister and committee member at the Charity Law Association, believes the an-nouncement calls into question the Charity Commission's insistence that it is independent of government. She believes the Government's desire to make use of charities in public service delivery may have put political pressure on the Charity Commission.
She says the decision is incorrect in law because it goes against the strong principle that charitable funds should not be wasted by being used to relieve government spending. "I think it's questionable that a charity that is not set up to relieve the taxpayer may nevertheless apply its funds to that purpose," she says.
Whether newly created charitable bodies such as those in Wigan and Trafford can be truly independent has been queried, though the Charity Commission stresses that independence and public benefit are the key criteria in decisions on charitable status. In these cases, the commission was persuaded by the rigorous trustee selection process and clauses on managing potential conflicts of interest in the constitution documents.
But Luke FitzHerbert of the Directory of Social Change is not so sure.
"Can a charity funded by a local authority to carry out its statutory purpose still be independent as the law requires?" he asks. "Is it genuinely free to run the library in a way the authority might not like - or is it a shadow freedom?"
FitzHerbert worries that the reputation of the sector will suffer. "This is about the value of an independent voluntary sector," he argues. "The reason it attracts the level of volunteering it does is that it is seen as free from government. The charity brand could be damaged by this decision, to the potential disadvantage of beneficiaries."
There are also potential workforce difficulties. Employees at the time a service is transferred to a charity are protected by EU regulations, but employees taken on after that are often treated less well.
"They end up with a two-tier workforce," says a spokesman for public services union Unison, who points out that disparities in pay and pensions can lead to a disgruntled workforce.
Another issue is that local authorities have a notoriously poor record on funding. Acevo and the NCVO agree that tough negotiation and strong independent governance will be crucial in ensuring proper service delivery.
Acevo policy head Nick Aldridge says: "This is a genuine opportunity. What we have here is a local authority contracting out a service that it has to provide. There's an obligation on it to make sure it's delivered to a high standard. This should encourage it to ensure that it has funding in place to deliver that."
Aldridge hopes that service-providing charities will be tough enough to reject unsound council contracts. "The key is that they can negotiate and say 'no' to the local authority that created them," he says. "Uncertain funding means uncertain provision. If funding is cut, or overly bureaucratic or risky, the service is going to suffer."
Belinda Pratten, policy officer at the NCVO, says that independence is also vital to ensure full-cost recovery. But she is optimistic that hived-off services can be independent of the authority from which they derive.
As she says: "It may be their origin, but it won't be their future."