The moral and ethical debate over the voluntary sector’s acceptance of public money for services. Mark Ivory guides

Large charities are undoubtedly the winners as the government pushes for more voluntary sector involvement in public service delivery. But for smaller organisations the going is getting tough, writes Mark Ivory

Two weeks ago the Bereavement Service, a small south London charity offering counselling to people who have lost loved ones often through suicide or murder, closed its doors for the last time. Like thousands of other small charities, it survived on an annual grant from its local primary care trust and, again like many others, it suddenly found the grant ended without any consultation about the impact on its service users.

The charity’s £25,000 grant will now be among those diverted into a £500,000 contract with the South West London and St George’s Mental Health Trust to provide cognitive behavioural therapy (CBT) for anyone assessed as having a mental health problem. Will it help most of the Bereavement Service’s former clients? Not in the slightest.

The Bereavement Service’s experience is one of many examples of small charities that have found the going tough as the government pushes more voluntary organisations into public service delivery.

A government review of the third sector has been launched to decide the role of charities in social and economic regeneration – it marks a “new phase in the relationship between government and the third sector”. But the nature of that relationship – and the suspicion that charities are being exploited by government – has led to an outbreak of soul-searching.

A recent Charity Commission survey found that only 12 per cent of voluntary organisations are always fully reimbursed for the cost of public service contracts, while just 26 per cent said they were free to make decisions without pressure to conform to their public sector funders’ wishes.(1)

The findings prompted the commission’s chair, Dame Suzi Leather, to point out the “massive discrepancy” between the aims of the government’s Compact agreement with the voluntary sector and the reality. Of charity trustees, she said: “For their own sake, as well as the sake of their charity, I would urge them to view independence as absolute, non-negotiable and sacrosanct.”

Although only 2 per cent of public spending goes on contracts with the voluntary sector, this disguises the vast sums gobbled up by the big charities. Recent figures show statutory income for the top 1,000 charities growing at a rate of 4 per cent a year, with annual revenues of £5.7bn – all but £400m of which goes to the top 500. Charities such as NCH, Barnardo’s and Mencap all have incomes of more than £150m, most of which flows from statutory sources.

Earlier this year, a report from think-tank Civitas argued that, in effect, a few large charities have become an arm of the state.(2) It is a view with which Barnardo’s UK director of operations Chris Hanvey has some sympathy, while denying that it is true of his charity.

“There’s a real concern about how far you go in taking the queen’s shilling before you lose your independence,” he says. “We’re lucky in that we have a fair amount of public donations so that we can determine the level of our involvement in contracts. Not all voluntary organisations are in that position.”

The sheer size of public service contracts often places them beyond the reach of small charities, and Hanvey argues that the contracts jungle will become even more dangerous for these charities as they try – and fail – to compete with the big beasts.

In the case of the Bereavement Service, says former chief executive Clare Gummett, the beast turned out to be an NHS mental health trust with no expertise in bereavement but fully in tune with the fashion for CBT initiated by the government. “It was badly handled from the start,” says Gummett. “The people who commission the services are not the ones who know what people need. CBT is not the answer for everybody and our closure alone means losing the services of 67 volunteers.”

The Directory of Social Change, which has consistently opposed what it sees as the state’s domination of the third sector, insists it is not the government’s place to decide the future role of charities.

Ben Wittenberg, director of policy and research at the DSC and author of its recent report on the subject,(3) says the government’s obsession with the top-flight charities has skewed its perception of the sector as a whole. “If it is going to have policies on the voluntary sector, they need to be about all 190,000 charities that make it up, not just a few of them.

“There’s less statutory money going to small groups which often rely on grants, yet they’re not able to access other funding because they’re not set up to win the big contracts. And why should they be? It’s not about winning contracts. It’s about what’s best for your beneficiaries.”

Like many small charities, Respond gets a significant proportion of its funding in the form of section 64 grants from the Department of Health, though these have declined from more than half to a fifth of its income in the past 10 years. At the same time the charity, which works with people with learning difficulties who are the victims or perpetrators of abuse, has increased the amount it gets from charging public bodies for its projects to nearly 40 per cent of its total income. Respond director Richard Curen feels he has no choice but to build up the charity’s public service provision, and knows that will involve joining the race for contracts.

“We’ve provided public services in an unstrategic way before now and we haven’t gone out touting for work,” Curen says. “But we should be out there talking to statutory organisations about what we can provide and trying to compete on cost with our rivals. I’m not really sure we’re up to that.”

He admits that the business acumen and economies of scale boasted by the big charities are a formidable challenge, but he says he has to take them on. “The government is asking us to do this work and if we’re unable to answer the call I’m fearful of the consequences. If it says contracts rather than grants are the way forward, it is possible we would be unable to provide core services and might even have to close.”

At the opposite end of the spectrum NCH is going through its own strategic review to ensure that it stays true to its mission, given that more than 80 per cent of its income is dependent on contracts.

Chief executive Clare Tickell admits there is a risk that small charities will be swept aside. But big charities can offer their support by speaking up when a funder fails to observe the Compact, or by subcontracting to smaller charities when they can bring specialist skills to bear. She also points to the role of the new Compact commissioner in protecting the interests of small groups.

Tickell says her freedom to take a stand for service users is vital, citing as an example NCH’s prominence in the Every Disabled Child Matters campaign. “Our independence depends on our ability to provide services, but also means that we’re here for children and can be critical of government and commissioners where necessary,” she says.

“If we’re doing what we were set up to do, we have to have fire in our belly, passion for our work, and the ability to speak out for our service users.”

Further information
(1) Stand and Deliver: The Future for Charities Providing Public Services, Charity Commission, 2007,
(2) Who Cares?, Civitas, 2007,
(3) The Interplay between State, Private Sector and Voluntary Activity: A Vision for the Future, Directory of Social Change, 2007,

Third sector review

Related article
Voluntary sector: special report

This article appeared in the 12 April issue under the headline “Bigger but better”

This weeks other feature articles:

Dealing with violent service users. Jim Wild on how a national strategy is needed

Staff tell us their contrasting tales of working in the voluntary sector viz a viz the statutory sector

The challenges involved in GPs commissioning social services

The Department of Health wants a radical shake-up of commissioning health and social care services. Barbara Allen and Elizabeth Wade assess the potential of its new framework