Social enterprise - Third sector, fourth way

Voluntary groups have a new deal with government. But is there enough money behind it?

These should be heady days for the third sector. In the face of fail- ing public services, controversial public-private partnerships and expensive, unresponsive private delivery, Tony Blair's fourth way for public service delivery - through social enterprises, voluntary and community groups and charities - is rapidly becoming central to his public service agenda.

Third-sector service delivery is a dream come true for new Labour. Not only is it often cheaper, compared with the public and private sectors, but it brings added value such as public trust and access to excluded communities. So the Treasury has made £125m available, through the Futurebuilders Fund, to help charities and community groups prepare to provide public services. And, according to the Charities Aid Foundation, nearly half of all new income for the top 500 charities between 2001 and 2002 came from the government's coffers.

So why isn't the whole third sector jumping for joy at its new, prominent role in the social future of Britain? The problem is that old debate about independence. The government has signed a "compact" promising the sector proper consultation and guaranteeing its ability to criticise government policy without losing contracts. In practice, however, organisations have already become wallflowers for fear of losing state funds.

When the Home Office launched its £3m youth campaign on drugs "Talk to Frank", the major drugs charities - those receiving government cash - praised it. Only Transform, which does not get government funding, said the campaign was a wasted opportunity. Certain cycling organisations reveal the same trend. As one source put it: "The government has missed most of its targets on cycling, and they've not said anything about it. Ask anyone in private in the organisations and they'll say the strategy is awful, that the government is failing. But they won't say it in public."

Stuart Etherington, chief executive of the National Council for Voluntary Organisations, sees Blair's fourth way for public service delivery as a means for charities and voluntary groups to raise their profile and play a bigger role in society. He believes that by drawing up the compact with the government, and local compacts with local councils, the sector will be protected from losing its voice and independence.

Large organisations often have a firm brand and public reputation they can use to kick up a stink if the government does not play fair. But for many smaller organisations, whose contracts are with local authorities, it can be a case of comply or die, compact or no compact. Whereas ministers are used to having criticisms levelled at them and their policies, a local council officer is less so. Thus, if a community group is critical, it risks never winning another council contract. In many cases, that contract will be the organisation's only source of income.

"If the terms set by the public sector are that things are not negotiable, then there's no point in the voluntary organisation entering into these contracts," says Etherington. "I'd rather see them walking away from contracts, even if it's a life-or-death decision for the organisation." That's not easy for those whose work is not just their income, but their life.

Small community organisations just don't have a strong voice in the local partnerships that the government increasingly insists they join in order to receive funding.

Etherington has said voluntary organisations should not criticise policies they have helped to draw up. But many organisations, lacking both time and resources, do not want to be in these policy partnerships in the first place. And when they do participate, many feel that their interests are ignored anyway. The partnership of Pact, a small charity that runs advocacy and support centres for prisoners and their families, involves its chief executive, Myra Fulford, sitting around the table with prison governors who receive millions more in funding every year. "We're supposed to be the independent advocate in the partnership, but I'm always going to be the small party. It's never going to be a relationship of equals," Fulford says.

Community groups delivering public services are also weighed down by the government's restrictive targets and audit culture. They complain that their innovative and progressive approaches - the very things that Blair wants the voluntary sector to add to service delivery - have to be set aside in order to meet politically motivated targets set from the centre.

For many in both small and large organisations, the government is using the voluntary sector as a means of delivering services without giving anything significant in return. "There's a growing concern that the government's interest is about a very linear public service agenda, and not really about supporting local community groups as key participants in strengthening local communities," says Ben Hughes, chief executive of the British Association of Settlements and Social Action Centres, a network of community organisations.

The £125m fund is crumbs compared with the financial support and political access given to the business sector every year. The government is ploughing ahead with the merger of two Lottery distributors, the Community Fund and the New Opportunities Fund, even though the sector itself - the funds' main beneficiary - largely opposes the plan. And the minister for the voluntary sector, in what is still a junior post, has been changed four times in the past three years. All this is hardly the approach of a government that values the third sector as a necessary and active part of democratic society. The danger is that some groups become so beholden to government funding that they, too, overlook that role.