Cheap, efficient and entrepreneurial: these were the characteristics that politicians hoped the voluntary and private sectors would bring to the provision of public services. First under New Labour, then under the Conservatives during a period when councils and government departments had far less money, a radical reshaping of the state’s role also led to a reshaping of charities. In 2009, under Gordon Brown, charities received 37% of their income from the government. Austerity, particularly cuts to local government, has seen that figure shrink to a quarter.
While charities became dependent on government money, there was a parallel marketisation of public services, with state contracts handed out in competitive tendering exercises. This saw the traditional division between the welfare state and civil society blurred as charities (though not all of them) drifted away from their former role in prevention and became enmeshed in the delivery of services.
Encouraging charities to compete against each other for contracts was the wrong way to stimulate innovation. Precious resources were diverted to winning tenders. Even so, charities increasingly lost out to private sector outsourcing specialists. They ended up subsidising public services when the value of contracts did not cover costs.
Drawing on their reserves, supported by staff and volunteers and determined not to fail the people they exist to help, most carried on regardless. High prices now threaten to tip some over the edge, as rising bills combine with falling donations to put pressure on bottom lines. What happens next? The immediate risk is job losses, closures and sales of assets including buildings, which will be repurposed for private gain.
Looking ahead, efforts at strengthening the sector’s position in policy terms have begun. The National Council for Voluntary Organisations is consulting on a manifesto. Next week, senior Labour figures will explain their vision of civil society. Meanwhile, research from the Institute for Public Policy Research proposed devolution as an alternative frame for public service reform – but did not specify the role of non-profit organisations in this configuration.
Charities do innovate. At a recent event to mark the closure of Children England (a small 80-year-old charity), its chief executive, Kathy Evans, described them as the mechanism whereby people’s ideas about how to improve the world are turned into action. Many of what are now public services were invented by philanthropists before the state took them on. But the sham of Lord Cameron’s “big society” – window-dressing for austerity – undermined what ought to be, in a thriving civil society, a creative partnership with the state. Unintended but predictable consequences of an outsourcing model relentlessly focused on value have included the relocation of children’s homes to the poorest pockets of the country.
While recognition of this model’s shortcomings has grown, fixing it is another matter. Some councils, such as Plymouth’s, are experimenting with alternative systems that promote collaboration. But localism is not a panacea, and meaningful change will be impossible without investment. Working with small, community-based groups brings new challenges about governance and accountability (though history shows that these are issues for big organisations too). Charities as well as public authorities should reflect on, and communicate with supporters, what they think their role should be in the years ahead.