Shotgun wedding of funding boards leads charities to seek guarantees

Tessa Jowell’s announcement last week that she intends to push
ahead with plans to merge lottery distributors the New
Opportunities Fund and the Community Fund has been greeted in the
voluntary sector with dismay.

The secretary of state for culture, media and sport argues that a
merger would modernise delivery of lottery funding by providing a
more “responsive and streamlined source of funding and support for
communities” and by tackling disadvantage and promoting social
inclusion.

In a climate of falling lottery ticket sales, Jowell says there is
significant overlap between the Community Fund and the New
Opportunities Fund and that a single body would increase efficiency
and allow “better co-ordination of funding to the voluntary and
community sector”.

But the voluntary sector is not convinced. Groups and organisations
are concerned about the impact of a merger on three key issues:
funding levels, independence and the “principle of additionality”
which ensures that grant-making is additional to, not instead of,
existing public spending.

According to last year’s Review of Lottery Funding “the
lottery was set up to fund some of the things which would not be
funded by government, but were recognised as being important”.

Charities were identified as one of the five original good causes
and, in 1994, the Community Fund’s forerunner, the National Lottery
Charities Board, was set up to distribute grants to this sector.

The Community Fund’s annual report 2001-2 reveals that, in its
first seven years, the fund gave £2.3bn to 49,000 charities
and community groups. It awards grants “mainly to help meet the
needs of those at greatest disadvantage in society and also to
improve the quality of life in the community” and has a popular
regional structure that gives it a closeness to communities.

Although it is a non-departmental public body forced to operate
under policy directions set out by the Department of Culture, Media
and Sport, the Community Fund is seen as independent of government
control and its policy directions are very general in content. Last
year’s high-profile stand-off between the Home Office and the board
over a grant to an asylum support group only served to confirm its
independent status.

The New Opportunities Fund was set up in 1999 to replace the
millennium lottery distributor and take over responsibility for
providing funding for health, education and environment
projects.

It receives one-third of the total lottery money for all the good
causes, compared with the 16.7 per cent that is allocated to the
Community Fund. Forty per cent of the New Opportunities Fund budget
goes to the voluntary sector. However, its policy directions from
the culture department are far more specific, including commitment
dates and funding targets for healthy living centres, child care
places, computer training for teachers, cancer prevention and
treatment, and green spaces and sustainable communities.

And it is here that the main problem lies. The New Opportunities
Fund’s relationship with the government is seen by many to be too
cosy and to undermine the principle of additionality.

The voluntary sector is concerned that a merger with the fund would
put the Community Fund’s grant-making processes under similar close
controls and see its money siphoned off to fund government
programmes.

Attempts by Jowell to reassure the sector that the “distinctive
identities” of the funds would not be lost in a merger and “the
proportion of charitable funding would not diminish” have been
welcomed, but more concrete guarantees are needed before the
argument can be won.

“What we are looking for are further reassurances from the
government,” a spokesperson for the National Council for Voluntary
Organisations says. “We are looking for some sort of ring-fencing
to make sure the merger doesn’t result in a decrease of funding for
charities and voluntary organisations.”

Andrew Fellows, policy and development officer at the National
Association of Councils for Voluntary Service, says: “Our position
is that it’s still not a good idea but, if it’s going to happen,
there need to be some guarantees laid down.”

He says that a letter sent to its 280 members encouraging lobbying
resulted in at least 40 of them writing directly to the heads of
the two funds expressing their disappointment at the plans and
stressing the need for safeguards.

Fellows says: “One of the good things about the Community Fund is
that it’s not steered by politicians and they are not afraid of
giving grants to what might be deemed unpopular causes. It can give
grants to asylum seekers and poor people and not be afraid of doing
that.

“There is a concern among our members that some of that
independence could be lost.”

Echoing these fears, a spokesperson for the Committee to Defend
Asylum Seekers warns that a merger will result in organisations
dealing with asylum seekers becoming increasingly constrained in
their work.

He adds that the National Coalition of Anti-Deportation Campaigns,
whose Community Fund grant home secretary David Blunkett attempted
to block last year, is totally reliant on lottery funding and would
have had to close down had Blunkett been successful.

But the Directory of Social Change argues that the sector would be
wrong to compromise its beliefs and independence for money.
Researcher Luke FitzHerbert believes voluntary organisations should
take a stand and refuse to become “contracted agents for government
programmes”.

“In the short term, arrangements will be fine,” FitzHerbert
predicts, “but in the long-term, it brings the system of charitable
funding closer to government ‘co-ordination’.

“Voluntary organisations that value their independence should be
wary of Greeks bearing gifts – especially when those Greeks are in
government jobs.”

FitzHerbert believes charities should not be afraid to find other
sources of funding and allow lottery money to be distributed to the
same causes by someone else.

New Opportunities Fund chairperson Baroness Jill Pitkeathley says
any such action on the part of the voluntary sector would be
unnecessary. She denies allegations that the fund undermines or
breaches the additionality principle, and therefore sees no problem
with the sector’s involvement.

“The government didn’t spend money on these things before,” she
says. “For example, the PE and sport initiative. These new and
modernised facilities wouldn’t be funded if it wasn’t for something
like the lottery. That’s not to say that the government won’t see
the sense of it after funding has finished and take up the funding.
But that’s what the voluntary sector has always done. A lot of
voluntary sector funding can be used to show the way.”

The Community Fund’s chief executive, Richard Buxton, says the
fund’s board is still not agreed on whether a merger is the right
option, but that Jowell’s reassurances have made the proposal more
attractive.

“If we can build in all the guarantees that the voluntary sector is
requesting, the potential for the voluntary sector would be
excellent. It would be opening up the totality of funding streams,”
Buxton says.

He would not back any deal that would create a new body with the
New Opportunities Fund’s strict policies, and says there would be
no change to the existing commitment to all sectors of the
community, including the so-called unpopular causes. “Inevitably,
any new body is gong to continue to make controversial grants,” he
insists.

Like many before who have been “consulted” by the current
government on change, the voluntary sector now finds itself forced
out of the “opposition” camp and seeking refuge in the “damage
limitation” camp, working through its list of required
guarantees.

Although the board of the Community Fund will not vote on the
proposals until May, most in the voluntary sector now consider the
merger a done deal.

A white paper is in the pipeline and, even if the Community Fund’s
board is not convinced by Jowell’s verbal reassurances, a negative
vote would be unlikely to put an end to her plans.

As a spokesperson for the culture department says: “If there was a
need to override the wishes of one body, then we would need primary
legislation. But one would hope we won’t need that.”