The voluntary and community sector (VCS) plays a significant and, we hope, growing role in public services. However, charities are being hit by the deep cuts affecting councils, which provide more than half of the VCS’s public funding. The front-loaded nature of the cuts compounds this difficult picture, and we have seen councils disproportionately passing on cuts to the local VCS. While NCVO has never asked for special treatment for our sector, disproportionate, unfair and non-strategic cuts – often with minimal consultation – will undermine its capacity to serve communities.
This challenging context is further compounded by a tough operating environment. Charities are liable for a number of tax charges, meaning the VAT increase has hit them hard, while the ending of transitional relief on Gift Aid – which compensated for the fall in basic rate tax – also had an impact. The recession saw a marked decline in both charitable giving and investment income.
All this comes at a time of growing demand. The rising number of people using our services is no cause for complaint – we are here to serve those in need. However, their requirements cannot be met without adequate investment, and there will be consequences if VCS bodies are forced to reduce their activity or even close their doors forever. It is essential these potential impacts on the sector are considered in Whitehall policy decisions.
Government clearly has a crucial role – through setting the right frameworks, configuring public service reforms in a way that enables civil society to play its part and, where appropriate, providing the right support. One crucial means of fostering good partnership working is the Compact: the agreement between the statutory sector and the VCS. It states: “An effective partnership will help to achieve the following outcomes: a strong, diverse and independent civil society; effective and transparent design and development of policies, programmes and public services; responsive and high quality programmes and services; clear arrangements for managing changes to programmes and services; and an equal and fair society”.
The Cabinet Office’s Office for Civil Society is making good progress in disseminating the importance of the Compact across central government, while Number 10 has established the Compact as one of its six cross-cutting priorities, confirming the government’s commitment. Full adoption into business plans and decision-making by all departments and councils would go a long way to ensuring the government meets its obligations.
Those who seek to reduce the role of the VCS to simply delivering services miss the point. Any analysis of our sector cannot be restricted to contracting, or its formal relationships with the state. Its role is much wider than this – our organisations identify need and work with people to shape the services they want. Recognising this full role is another essential element of a positive relationship.
Finally, there are a number of long-standing obstacles which need to be tackled urgently if the VCS is to fully deliver on its potential.
The concept of social value needs to be taken seriously and properly understood following the passing into law of Chris White’s Public Services (Social Value) Bill – which requires public procurers to consider the social consequences of decisions as well as the purely financial ones. Also of concern is the size of contracts, which are often too big for all but the largest providers.
We are pleased the government has acknowledged that while Payment by Results and competition have potential, neither of those are ends in themselves. A diverse market may help in driving improvement, but the right providers need to be involved for the right reasons.
Access to finance and cash flow is another major barrier preventing the VCS from taking on a greater role. Big Society Capital, the new ‘social investment’ bank, is a positive step towards remedying this, but will not be able to provide finance to the whole sector. There is an ongoing need for a range of grants, loans and contracts to make services sustainable.
Ultimately the destiny of charities lies in our own hands. There is much, however, that government can do to promote the growth of a vibrant, sustainable sector that will be here to serve our society for the long term.
James Allen is head of public services and partnerships at the National Council for Voluntary Organisations (NCVO) and head of Compact Voice