It’s payback time

The voluntary sector is delivering <2009>more key public
services on behalf of central and local government. It provides
housing, mental health and disability services, often very well and
under difficult circumstances.

Yet for many years the government has been short-changing the
voluntary sector, according to a report out this week.(1)

The report from the Association of Chief Executives of Voluntary
Organisations (Acevo) says health and social care services have
been commissioned from the voluntary sector with insecure
short-term contracts and inefficient and bureaucratic

The private sector has gained preferential treatment from the
government with many private finance initiatives to build hospitals
and provide social care services, while reaping the profits. Until
now, the government has failed to respond to evidence that a
voluntary finance initiative (VFI), where the charity sector is
given long-term contracts, will provide a similar range and quality
of services without having to build in a profit margin.

But this is likely to change with key government figures such as
Alan Milburn and Gordon Brown supporting VFI because they know that
the voluntary sector provides services that are highly responsive
to users’ needs.

This could mean voluntary sector services no longer having to
close because they receive only short-term funding. Yet, say
critics, urgent action is needed because councils are placing the
financial risk of delivering services entirely on the shoulders of
the voluntary sector without any guarantee that charities will
recover the full cost of the service they have provided.

“In principle, central government is almost there,” says Mike
Saw, chief executive of disability charity John Grooms. He says the
main barrier to more secure funding is having leverage at the local
level with primary care trusts and local authorities. “Local
government has an endless debate with central government about
resources and how to spend them, and we are piggy in the middle,”
he says.

This has led, says the Acevo report, to the inefficient use of
funds or resources, and has exposed vulnerable users to risk
“through inappropriate provision and service closures”.

The report also shows that poor funding arrangements are almost
universal. From a survey of 100 charity chief executive officers,
92 of them had at least one public service contract of one year,
when three to five years is considered the minimum time needed to
have an impact.
Significantly, 86 said problems with the current funding regimes
were adversely affecting the service they offer to users. And 81
said funding regimes hindered their organisations’ ability to plan
for the future.

Ed Mayo, director of the National Consumer Council and chair of
the Acevo Commission of Inquiry into Surer Funding, says many
voluntary sector providers are struggling under current contracts.
“They have virtually been hobbled by the funding regime,” he

“We uncovered a genuine catalogue of horrors that are designed
to meet the short-term needs of funders rather than the long-term
interests of service users. The contracts have created endemic

Saw agrees, saying that John Grooms wastes too much time and
money on renegotiating short-term contracts for long-term services.
“We have to renegotiate service contacts on a yearly basis for
clients who will be with us for many years, perhaps up to 10 to 15
years,” says Saw. “Members of staff can spend up to a third of
their time on this. And then there is the cost of lawyers and then
we have to negotiate not with one commissioner but with about 40

Turning Point’s chief executive, Victor Adebowale, says there
should be standardised contracts to cut out this unnecessary waste.
“It makes it almost impossible to plan and invest in service
delivery properly. It is also more costly for commissioners to
spend time and money on short-term plans.”

Some contracts, critics argue, are so short-sighted that they
undermine the needs and wishes of service users. As a result, for
example, the contracts that charity Marie Curie has with a number
of PCTs to provide home care for people with terminal illnesses
have ended up costing the government.

This is because Marie Curie receives payments only for the
patients it visits and has to claw back the money from the PCT. So
it cannot afford to recruit more than a small core of permanent
staff. Instead it relies on temporary agency staff to cover extra
demand – and they are not always available. Consequently, some
requests for care at night for patients cannot be met.

“Marie Curie’s clawback regime is completely inappropriate,”
says Mayo. “The charity cannot sustain the right number of staff to
provide an essential night-time service for people suffering from
severe illnesses.”

The result is “economic madness”, says Steve Bubb, chief
executive of Acevo. Patients have to spend a night in hospital,
costing the NHS 50 per cent more than if they had stayed where they
wanted to be – at home.

For example, he says, councils will also often arrange contracts
for 100 social care places in voluntary sector residential units,
but will only pay for the people they send. The financial risk is
shouldered by the voluntary service provider, which has to recruit
staff for a possible 100 clients, but is then paid for perhaps only
50 places.

Mayo makes it clear that the need for better financing does not
arise from pleading for special treatment, but from good economics
and accounting.

He stresses that values are important in the debate too. “The
voluntary sector is dealing with areas where there has been market
failure, where private firms won’t go because they can’t make a

The report says many private sector companies “wouldn’t get out
of bed in the morning” for the kind of arrangements the voluntary
sector is working under.

The Acevo report includes a VFI framework that maps out what
needs to happen for the voluntary sector service provider to
receive a better deal from government. Ultimately it would bring a
better deal for users too. Milburn was at the report’s launch to
give it government backing.

The framework sets out a kitemark scheme where the public and
voluntary sectors share the risk of service delivery and agree
between them the most effective length of  contracts. Commissioners
also need to pay for full-cost recovery. There are too many cases,
says Bubb, where charities are not paid the full cost of the

Relationships are already improving in some places, with some of
the larger voluntary sector providers, such as Rethink and Turning
Point, brokering 10-year VFI contracts with local authorities.

Eddie Greenwood, director of clinical services at Rethink,
helped negotiate a 10-year contract for the provision of a
community-based residential unit for long-stay mental health
patients with Derbyshire Council. He says: “The patients needed
high levels of care and specialist support, which we had the
expertise to provide. Yet this kind of care with the special
building environment needed a long-term contract. It also allowed
us to negotiate a better deal on the lease on the property we
needed. The contract is still quality monitored and reviewed and we
ensure we provide the necessary level of enhanced care and

Bubb believes that the UK is on the verge of a revolution in the
way health and social care will be delivered. While the private
sector has a role, the incentive for providing services will shift
away from the profit motive and back to the provision of quality
service for no profit. He says: “The not-for-profit provision of
health and social care is going to be wider. Services for users
will be
higher quality, more economical and more efficient.”

(1)  Surer Funding: The Acevo Commission of Inquiry Report,
Association of Chief Executives of Voluntary Organisations,

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