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In recent years, councils have significantly contracted out more social care to the private and voluntary sectors. It is now estimated that there are 35,000 charities delivering health and social care in England with a combined income of £12bn. Their innovation, local knowledge and value for money are making them more popular with commissioners.

Despite this trend, only 2 per cent of government expenditure on public service delivery is paid to charities. The government and voluntary sector would like to increase this but problems in the relationship need to be resolved first.

Charities can end up being exploited. Only one in 10 is always fully reimbursed for public contract costs. And short-term contracts and high levels of bureaucracy can increase their operating risks.

But the problems don't just lie with the commissioners. Charities, particularly smaller ones, need to improve their marketing and negotiating skills.

There are also issues to be resolved in the voluntary sector. Larger charities dominate public service delivery, squeezing opportunities for the others.

There's also a danger that, as they take on more statutory work, they will move away from their charitable aims. Mission drift and loss of independence could become important issues.

This growth in state-funding and the new breed of social enterprise have the potential to eclipse the campaigning role of charities. Many of the most neglected people in society have found representation through voluntary sector campaigning.

The government has taken steps to address some of these issues - the creation of a third sector commissioning task force and the appointment of a Compact commissioner to oversee the relationship are evidence of this.

It's the voluntary sector's dynamics that are perhaps more worrying. Equitable growth in this area will be achieved only if national and local charities work together more closely, with effective subcontracting of services. And trustees need to ensure that the campaigning voices of their organisations are not lost amid a flurry of contractual activity.

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Voluntary sector special report