Thrive’s Nick Venning looks at the controversial issue of public sector contracting and the impact that this is having on the voluntary sector.

One of the most significant trends of the last decade has been the increasing government leverage of the voluntary sector to deliver public services previously provided directly by government departments.

Today, according to figures from the National Council for Voluntary Organisations (NCVO), over 60 per cent of voluntary sector income comes from state sources and more than half of this is for contracted services rather than grants. Looking at this another way, the state gives more to charity than do corporate donors and members of the public.

This sounds like a really good news story and many charities see it as incremental income that has helped them to grow. Furthermore, it can be argued that in many cases the voluntary sector organisations are closer to the problems being addressed and much more able to deliver a solution than any government department would ever be.

Nobody should underestimate the drive and effectiveness of grassroots social entrepreneurialism but it’s not all good news and, in my view, the trend hides some extremely undesirable facts.

Firstly, contracting has led to the politicisation of many charities and voluntary organisations in the sense that they risk losing this income stream unless they carry out the policy of the government of the day. In short, they cease to be independent and can even lose sight of the cause for which they were originally founded.

The disingenuous policy of annualising contract renewals makes it almost impossible for many charities to plan any alternative course. It’s all too easy for a charity to become dependent on, say, a local authority income stream only to find it taken away the following year.

Government, of course, just sees this as “strategic alignment” of the voluntary sector in a drive for economic efficiency.

Many such contracts focus on the means of delivery and not necessarily the outcomes; the means is often more important than the ends. Worse still, some government bodies and local authorities tend to let their own need for political correctness become more important than the need they are trying to fill.

Second, according to the Charity Commission, only 12 per cent of charities undertaking this sort of contracted work reported that the funding provided fully covered the cost of providing the services concerned. And that’s before the inevitable overheads involved in government contracting are taken into account.

This means that the Government are using the voluntary sector, often unpaid workers like you and me, to deliver their services on the cheap. Or, since governments are actually only custodians of our money, voluntary organisations are effectively subsidising the British taxpayer.

Most of this has been going on behind closed doors and unbeknown to the giving public; the rooms where these deals are brokered may not be filled with smoke any more but there’s plenty of fog to keep us in the dark.

However, there is one case that is undeniable. Since June 2006, there have been two Government “raids” on the National Lottery for funds to support the spiralling costs of the Olympic Games in London in 2012. The loss to the good causes for whom National Lottery proceeds were originally intended runs into hundreds of millions of pounds.

So, what do we need to change?

In my view, it is essential that we reverse the trend of ever-increasing contracting of voluntary sector organisations to undertake public services.

That is not to say that the government should not provide funds to the voluntary sector. Precisely the opposite; I have no problem with the government (aka the British taxpayer) providing grant funding to charities but the “strings attached” and often politicised contracting agenda is unacceptable.

Voluntary sector organisations are often the best vehicle to deliver certain social services. They do this through innovation and grassroots connectivity, not by aping government departments in a manner that is the inevitable result of the contracting approach.

In fact, there are numerous examples of grassroots social entrepreneurs solving problems where the organs of the state continuously fail to do so. !

If we have to have contracting, let’s do so with less bureaucracy, less audit and contract periods that allow the charities and voluntary organisations to plan their programmes beyond the limited horizons of political expediency.

I accept that the taxpayer has the right to know that his/her funds are being used effectively; let’s deploy a simple outcomes-based commissioning approach and stop micro-managing.

Finally, let’s allow charities to contract on a level playing field with government departments or private companies and stop this coercive bullying view that government knows best. If the charities are smart enough to make a surplus on the contract? Fine; let them invest it in themselves and what they do best.

As for the Lottery? That’s easy. Hands off.