OPINION: Funding must be incentivised

Lisa Harker, chair of the Daycare Trust

The best thing about Futurebuilders is that it was designed by the sector for the sector. Plans for the new fund were developed following work by a series of task groups convened by the Treasury and then shaped by responses to a consultation document. The government has drawn on the experience of voluntary organisations to develop a new way to improve capacity to deliver public services.

It's good for the sector to be on the proactive side of the funding debate for once. Too often those in voluntary organisations have been heard to whinge about what they haven't got, rather than being in a position to try to reshape what they have.

But this new-found confidence must not be allowed to fade. Creative thinking is required to improve the way the sector is funded. Ultimately, the system of grant funding, on which so much of the sector still depends, needs to change. A system that offers short-term support, involves lengthy negotiation, high transaction costs and rarely encourages innovation is neither efficient nor effective. Nor is it sufficiently responsive to be able to encourage excellence. Grant funding rarely carries an incentive for organisations to deliver more than just enough - just as below-average performance seldom attracts a financial penalty. If the sector's entrepreneurial zeal and excellence is to be encouraged, the way that grant funding works will have to change.

Naturally few within the sector are brave enough to challenge such a significant source of income for the sector when the alternatives still remain unclear. But cap-in-hand dependency ultimately does not serve the sector well.

The bigger players - those charities with higher levels of investment and self-generated income - have begun to openly discuss new forms of funding. Voluntary sector leaders - under the Acevo banner - recently voiced ideas about a different approach to funding that would address some of the current flaws. Described as a 'Voluntary Finance Initiative', it would be a shame if such innovative thinking were to be tainted by associations with the much-derided Private Finance Initiative. It's an idea worthy of serious consideration.

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