Ever since its creation, the coalition has expressed high hopes for its engagement with the voluntary sector (VS). The Coalition Agreement promised to improve services “through much greater involvement of independent and voluntary providers.” In July 2011 the Open Public Services white paper pledged to ensure that “a diverse range of providers can deliver the public services people want” by creating “a truly level playing field between the public, private and voluntary sectors.”
Almost a year on, there is a long way to go if this ambition is to be achieved. In particular, the government has found it difficult to match rhetoric and reality on the role of the VS and the barriers facing VS providers. We have seen two recent signs of this. First, the Centre for Social Justice gave the coalition two out of 10 for its dealings with the VS in its scorecard – an annual appraisal of ministers’ performance in tackling the drivers of social breakdown. Second, the Department for Work & Pensions’ Work Programme, intended to harness both businesses and the VS to support people into employment, has been dogged by criticism of its treatment of VS providers.
It’s important that we learn why the government has struggled to engage charities in service delivery, and the Work Programme provides a good illustration of some of the issues. Work and pensions minister Iain Duncan Smith has repeatedly averred that the VS lies at the programme’s heart. However, the prime contracts have overwhelmingly been awarded to private companies, leaving the VS to enter into subcontracting relationships with the primes. Even among subcontractors, VS involvement is well below Francis Maude’s forecast of 35-40 per cent; a report by the Centre for Economic and Social Inclusion found that the VS makes up less than 20 per cent of the supply chain.
Why has the Work Programme failed to engage the voluntary sector as successfully as ministers would like? First, the prime contracts are far too large for all but the biggest charities. Fewer than three per cent of charities turn over more than £1m per year, and 85 per cent turn over less than £100,000. Consequently, large contracts are out of the range of the vast majority of voluntary organisations, and this must be taken into account when attempting to contract with the sector.
Second, the government has failed to ensure that prime providers properly manage their relationships with VS subcontractors. The Introduction of the Work Programme, a National Audit Office report published in January, found that a number of primes “treated subcontractors unfairly,” and our own survey of VS subcontractors identified serious issues. About a third of these charities felt that their role as set out in the prime contract did not match their actual position in the programme – they had simply been used as ‘bid candy’ to make primes’ bids more attractive. Many respondents also reported poor communication from prime providers, including inaccurate predictions of referral volumes which damaged capacity-planning, staff-management and delivery. Indeed, 77 out of 372 respondents had received no referrals whatsoever from their prime.
There is also deep concern over the level of risk that the VS is being asked to assume. The Work Programme’s payment-by-results model asks providers to bear a degree of financial risk. However, it should be obvious that a small local charity cannot be expected to shoulder the same level of financial risk as a multi-million-pound private company. Consequently, part of the rationale for the supply chain structure of the Work Programme was to enable larger primes to accept some of the risk that small subcontractors are unable to take on – but our survey shows that only 18 per cent of charities felt their prime had cushioned the payment profile they offered to their subcontracting partners. Consequently, many charities have either decided against being involved in the programme – despite their expertise in the field of welfare-to-work – or have been forced to pull out of it. The problem contributed to the collapse of one provider, Groundwork South West, with the loss of 150 jobs.
I hope that the experience of the Work Programme will serve as a lesson to other public bodies looking to contract with the VS, as it illustrates why the government has found it difficult to contract with charities as much as it would like. The sector brings many unique qualities to service delivery, including unparalleled connections with local communities, profound understanding of beneficiaries’ needs, and the ability to leverage the time, passion and energy of committed volunteers as well as paid staff. At the same time, voluntary organisations face unique circumstances and pressures which contracting partners must take into account when designing programmes. Get that right, and we will be that much closer to a truly level playing field.
Stephen Bubb is chief executive of the Association for Chief Executives of Charitable Organisations (ACEVO)