Working with government: An alternative way

A model similar to local public service agreements could pave the way to greater funding harmony between charities and government, says Simon Bottery of Citizens Advice.

Another month, another speech about whether the voluntary sector should deliver government services. The government's eagerness, expressed with the greatest of force in the Treasury's cross-cutting review, is driven by the recognition that the sector has public trust, credibility and - crucially - the professional expertise to deliver on contracts. Other benefits cited are the innovation in the sector and its ability to get closer to the user of services. There is also the often-raised potential to reduce grant dependency - having more charities pay their way, rather than relying entirely on 'handouts' from the state.

This has divided the voluntary sector. To many, government contracts are a way of life and they see the potential for more of the same. But to others, it is supping with the devil, threatening independence and with it the sector's time-honoured right to bite the hand that feeds it.

In the middle are those who see potential in service delivery but who struggle to see how much of the work they carry out could be drafted into a contract for delivery of specific services. For these charities, too, any potential for service delivery needs to be seen as complementary to grants, not a replacement for them.

Perhaps, though, we're missing a trick, one that has become increasingly important in the funding relationship between local and national government.

Let's call it a voluntary sector public service agreement. VPSA's big sisters in local government, local public service agreements, have already begun to reshape and refocus the local government sector. Under LPSAs, national government gives additional grants to local authorities that hit targets in specific, agreed areas - for example, cutting the number of child road deaths. The areas of work and targets are negotiated between the different tiers and the local authority is a voluntary partner. And the most recent round of LPSAs are relatively flexible, emphasising local priorities rather than attempting to shoehorn local authorities into delivering on centrally set targets.

VPSAs would work the same way by supplementing, but not replacing, grants.

Individual charities would identify where the work they're doing fits in with delivery of government PSAs. Charities would negotiate targets with national government for delivery of charitable work that helps meet those PSAs. In return, government would provide funding 'bonuses' when targets were met. For example, a charity working in health education might negotiate a VPSA with the Department of Health relating to drug addiction. The targets might include 1,000 of its clients reducing their dependency on drugs within a 12-month period. In return, and in addition to the grant it receives, it would be paid a 'bonus' by the DoH, perhaps related to the cost of drug dependency to the NHS. A charity working with adults suffering from mental illness might agree a VPSA relating to the number of people it helps back into work. The bonus wouldn't replace a grant, but add to it on delivery of agreed targets.

VPSAs could also work at local level. Charities could negotiate and agree specific VPSAs with local authorities and be rewarded for delivering outcomes that fit into priorities outlined in community strategies. Alternatively, they might simply be rewarded for helping deliver the local authority's own LPSAs, with a share of the additional grant received by the local authority.

Clearly there are issues. Charities would need to safeguard against bending their mission simply to deliver bonuses - though pretty much all the ways of funding the voluntary sector involve this risk, so we should have experience of managing it. And VPSAs would need to remain just that - voluntary.

We would also have to guard against local or national government applying a reduction in grant corresponding to the size of a bonus. But again, these are risks we face in other forms of income.

The biggest challenge for the voluntary sector would be the need to report outcomes, not outputs. This has benefits: government is paying for results, not stipulating the methods used to achieve them, so charities should have more freedom in terms of delivery. But it would take thought and research to identify the results of our work rather than simply outline the processes we use. Again, there's plenty of work underway on this.

VPSAs would offer big advantages. They would let the voluntary sector decide how and if it wants to help deliver outcomes in which government also has an interest. They would allow the sector to retain independence and decide on its own work programme, but also to see financial returns for areas of work that happen to be congruent with government interest.

VPSAs wouldn't take over from grants or replace contracts. But they could provide - dare I say it? - a 'third way' of funding the voluntary sector, one that enabled the sector and local and national governments to discuss and agree the contribution of the sector to shared objectives, and with cash attached. What could be wrong with that?

Simon Bottery is director of communications at Citizens Advice. Third Sector welcomes your responses. Email

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