OPINION: HOT ISSUE - Should organisations make a profit from service provision?

Voluntary organisations are increasingly competing with private-sector companies for public-service contracts. At present businesses include a profit margin when putting forward bids whereas charities are hesitant to do this. However, they could include a surplus and use the money to support their work.

Elisabeth Hoodless, executive director, CSV


Retained surpluses, or contingency funds are essential to every enterprise.

They fund research and development, help support new concepts, manage risk and can cover unforeseen losses. The voluntary sector's needs are no different from any other enterprise. The Irish government recognises this reality by funding housing associations 125 per cent of their costs. If government is prepared to include 20 per cent profit margins for the companies helping to run the London Underground, why should voluntary agencies be treated differently for helping to run the New Deal? Both involve major risks. The existing public finance initiatives under negotiation hold out hope of progress because not-for-profit agencies are able to compete on equal terms with the private sector. The time has come for equal opportunities and an end to discrimination.

Hannah Lynes, special projects officer, Help the Hospices


Modern hospice care has been pioneered by the voluntary sector and the majority of services are still provided by charities.

It has always been part of the hospice philosophy that care should be free to users so as not to favour patients with the resources to pay.

As the NHS gradually takes on responsi-bility for the health care provided by hospices (palliative care), the NHS principle that patients should not be charged for public health care will ensure that hospice care continues to be free.

For hospices, there is no question of attempting to make a profit by providing public services. In fact, at present hospices make a substantial loss through the public services they provide because although the NHS accepts full responsibility for them, it does not pay the full costs of providing services. Most hospices are funded through a grant which is unrelated to service levels and doesn't even cover the costs of employing their doctors and nurses. It is our hope and a key campaigning goal that hospices may break even one day for providing public services.

Profit is not in our field of vision.

John Knight, head of policy, Leonard Cheshire


It would be wrong for charities to make profits from the delivery of contracted services. If charities made profits, it would take away the practical and moral aspects that differentiate voluntary-sector providers from the public and corporate sectors. For example, financial and political independence, the added value of volunteers and the capacity to innovate would be compromised, if not lost. However, charities must receive the full costs from purchasers for delivering contracted services since those that don't have to make up any shortfall from voluntary income. This is indefensible. Costs should legitimately include things such as the recovery of capital investment, such as building new premises from which to deliver contracted services, and an element for contingency, e.g. replacing a roof blown off by the wind. The only "dividends

charities owe are to their beneficiaries. Any small surpluses made from delivering contracted services will be reinvested in services solely for users benefit and in line with the charity's aims and objectives. The concept of profit is unthinkable.

Michelle Mitchell, head of public affairs, Age Concern England


I don't see any reason why charities shouldn't make a surplus out of providing public services but, in contrast to the private sector, it must not be the main driver. The word profit is misleading, though. In the private sector, this may be the excess which is distributed among shareholders or paid out in bonuses to directors. However, a charity ploughs this money back into furthering its aims and objectives. In Age Concern's case, we help improve the lives of older people. A charity may also use a surplus to establish a larger range of services that it cannot get funding for.

However, it is not essential for charities to make a profit out of public services. In the case of some Age Concerns, where local authorities do not pay enough for the day services they provide, it is impossible to make a profit. If a service is under contract then it should at least break even. If the price includes a surplus while remaining competitive, then this seems entirely legitimate.

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