Think tank says Labour proposal to ring-fence some contracts for charities is misconceived

NPC says that if contracts are offered exclusively to the voluntary sector, some decisions will be made on factors other than quality

The Labour Party’s proposal to ring-fence a proportion of commissioning contracts exclusively for voluntary sector organisations is misconceived, according to the think tank NPC.

In its response to a Labour consultation that is designed to feed into the party’s policies for the voluntary sector, NPC says that if some contracts are offered exclusively to the charity sector there is a risk that some decisions would be made on the basis of factors other than quality. The move would not address the underlying problems that often result in poor services, its response says.

The shadow social enterprise minister Chi Onwurah said in July that the Labour Party would reserve some public service delivery contracts for social enterprises if it gained power at the next election.

According to NPC, a better solution would be for future governments to redesign contracts to attract more competitive bids from the charity sector.

This would mean having contracts of longer duration, offering commissioners and interested parties more time to communicate during the pre-procurement phase and a reworking of payment-by-results contracts so that charity subcontractors are not burdened with the greatest risk for the least stable income.

NPC proposes that commissioners be given targets to award at least 10 per cent of new prime provider contracts to charities, which would create a benchmark for comparisons of the performance of the charity sector with providers from other sectors. Commissioners would be required to publish their progress towards this target every year and would be accountable to the Public Accounts Committee, it says.

"With today’s tight finances, the trend of commissioning services from third parties is only likely to grow," said Dan Corry, chief executive of NPC. "The crucial thing is to make sure this is done smartly so that charities get a fair crack at winning them. I’m not convinced that ring-fencing contracts for charities is the best way to achieve this when the problem so often lies with the way that contracts are designed. Any meaningful changes will need to start there."

NCVO submission

The submission to the Labour Party consultation from the National Council for Voluntary Organisations calls for any future Labour government to avoid the use of large-scale contracts for public service delivery.

It says a more stringent requirement should be placed on public bodies to consult the public and providers about the design of public services and to ensure that voluntary organisations have fair access to grant and contract opportunities.

It says that companies and voluntary organisations that wish to pay employees the living wage should not be disadvantaged by the bidding processes.

The NCVO also calls for simplification of the Gift Aid Small Donations Scheme, which allows charities to claim a Gift Aid-like payment on small cash donations of up to £5,000 a year without individual paperwork. The NCVO wants the scheme to be opened up to all charities that are registered for Gift Aid and an end to the requirement that charities must claim £1 in Gift Aid for every £10 of donations claimed under the GASDS.

It asks for more support for small charities, such as improving and promoting existing tax reliefs and ensuring that no unnecessary regulatory burdens are placed upon them.

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