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19 June 2000

Now charity is running the country

From after-school clubs to cancer care, public services are increasingly funded by the Lottery and p

By Judy Hirst

Voluntary organisations. Just who do they think they are? Time was when charities knew their place, organising bazaars and luncheon clubs, or passing round the begging bowl for the deserving poor. These days, however, the voluntary sector wants to be in on everything – including, it seems, running the country.

No government social programme is complete without its mandatory clause insisting on a leading role for voluntary bodies. New Deal, Sure Start and all the other social inclusion initiatives depend on voluntary and community sector input for their delivery. A sum of £50m is currently being spent on recruiting a new generation of volunteers. Elaborate “compacts” and codes of practice are being drawn up between government and voluntary organisations, setting out their mutual obligations. And a major tax boost to voluntary income was announced in the Budget.

Charity chiefs are well pleased with this turn of events, confident in the knowledge that new Labour needs their services to lend a patina of “community involvement” to its welfare policies.

As Stuart Etherington, the chief executive of the National Council for Voluntary Organisations (NCVO), told a recent gathering of charity luminaries, all the talk now is of partnerships, rather than contracts, with not-for-profit voluntary bodies. For the first time, the third sector – worth almost £5bn at the last reckoning – feels it has a strategic role to play.

But what does this partnership amount to? The contract culture, perfected by the Tories as a means of hiving off council services, has not gone away. The NCVO’s own research shows how middle-income charities, many of them local authority service-providers, are being squeezed by intense competition for local government funding. They are set to lose out still further as “best value” – the government’s regime for measuring local authority efficiency – starts to kick in.

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Many major welfare charities, such as the Children’s Society and the National Schizophrenia Fellowship, have doubled or tripled the proportion of income they receive from government sources, while the proportion raised from the general public has dramatically declined.

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This, then, is a strange kind of partnership, with one party permanently and increasingly in hock to the other, and obliged to provide former state services on the cheap. Already, whole swathes of local statutory services – from home helps to social housing and leisure centres – have been handed over to voluntary organisations to run. Now, by stealth, central government functions are also being turned into charitable enterprises, funded by National Lottery “good causes” money.

How many people, for example, know that healthy-living centres, after-school clubs, cancer prevention, care and treatment, lifelong learning and many other flagship government programmes are all being paid for out of Lottery money, via the aptly named New Opportunities Fund? By the end of 2000, when the Millennium Fund winds up and hands over its proceeds to the NOF, this sprawling quango will distribute around £2bn annually: one-third of the Lottery income that is allocated to good causes. But instead of going to the favourite charities of Lottery punters, this money is being used for services that most of us had naively assumed were paid for out of general taxation by government departments.

The Treasury wins three ways from this deal. First, by creaming off 12 per cent from the Lottery in taxation. Second, by getting essential services paid for out of the proceeds from Lottery ticket sales. And third, by having these same services provided at a discounted rate.

For the voluntary groups on the receiving end of this bounty, however, Lottery funding is a decidedly mixed blessing. Take, for example, out-of-school child-care, a central plank of the government’s national childcare strategy, and a precondition for the success of its New Deal for lone parents. The NOF is putting £220m into creating 865,000 childcare places. But the funding is generally for one year only. So what happens to all the after-school clubs, breakfast clubs and holiday play-schemes when the pump-priming money runs out?

They go cap in hand to some other philanthropic body, that’s what. Alternatively, according to the NOF policy director, Vanessa Potter, they can look to the market: to increased fees from the children’s parents to sustain their facilities. The Lottery funding is not meant to be a long-term subsidy, she emphasises: the point is to “create a change of culture, where people understand that high-quality childcare is something that has to be paid for”.

Yes, but by anyone except the government. The NOF’s funding is meant to complement, not substitute, mainstream government spending, “adding value” to what already exists. In practice, it is having precisely the opposite effect in many areas, with councils, LEAs and health authorities holding back from funding projects in the knowledge that Lottery money can temporarily fill the gap. In some authorities, the amount of out-of-school provision is actually shrinking, and after-school clubs are having to reconstitute themselves as charities after losing their statutory support.

The NCVO and the National Association of Councils for Voluntary Service concede that, although the principle of “additionality” is enshrined in the NOF’s founding credo, in reality the voluntary sector has lost the debate over whether Lottery money should substitute statutory funding.

The new compact between the government and the voluntary sector claims it will respect the right of organisations to challenge government policy, irrespective of any funding relationships. On the ground, however, local contracted organisations that dare to criticise their local authority rapidly find themselves out of favour.

It is significant that the strategic funding for charities promised by the compact is far more geared to helping them deliver government priorities than to pursuing their own objectives. The Charity Commission is currently tying itself up in legal knots, trying to figure out whether voluntary organisations in receipt of such funding are sufficiently independent to be defined as charities: most probably a hopeless task.

The government needs to talk up the importance of voluntary and community organisations – partly because low-paid charity workers and volunteers provide dirt-cheap services, but also to legitimise its own social inclusion project.

And so an intricate pas de deux unfolds, with each side refusing to acknowledge the truth about the other. The government pretends that the voluntary sector’s inclusion on its quangos and committees means that the community is being consulted and listened to. The voluntary sector’s representatives delude themselves that a seat at the government table means they are partners in a grand, overarching project, with a vital strategic role to play.

Meanwhile, public services atrophy and crumble, and the Lottery profits roll in. What a fatal attraction – third sector meets Third Way.