Reliance On Contracts Puts Charities At Risk

The future of Britain’s biggest charities is being put at risk by their growing dependence on poorly-funded contracts to deliver public services, the chair of the Charity Commission will warn today.

{mosimage}Dame Suzi Leather’s stark assessment comes after a survey revealed that fewer than one in eight charities running services was confident it was being paid enough to cover its costs.

An “all-party love-in” between the voluntary sector and politicians who see the sector as offering a more effective and user-friendly way of delivering public services is also threatening charities’ independence, she will say.

In the survey carried out by the commission only 26% of charities providing services said they felt free to make decisions without pressure to conform to the wishes of their funders.

The findings and Dame Suzi’s comments will ignite a long-smouldering debate about the proper role of charities in the 21st century and the right balance between service delivery and campaigning.

There has been growing restiveness about the enthusiasm with which some charities have embraced the so-called contract culture, achieving startling rates of growth.

The sector as a whole for the first time obtains more income from the state than from any other source, including public donations, and household-name charities such as NCH, Age Concern and Mencap are heavily reliant on contracts to run services. According to the survey, two in three of the biggest charities – with annual incomes exceeding £10m – that deliver services are dependent on public contracts for more than 80% of their income.

Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said it was alarming the survey had found just 12% of charities running services to be confident they were covering their costs without having to subsidise those services from other sources. But the findings of pressure on charities to conform were more shocking still.

“That is very dangerous because it means they are not able to exercise independent judgment,” Mr Etherington said.

The survey, conducted online, attracted more than 3,800 responses. Of responding charities with annual income exceeding £500,000, more than 60% were running public services on behalf of central or local government or the NHS. Of all responding charities running such services, 43% said they knew they were not being paid the full costs, 38% said they were being paid them only some of the time and 7% said they did not know.

Dame Suzi, who will unveil the findings at the NCVO’s annual conference, says in Society Guardian today that they are “a wake-up call” for the voluntary sector and public authorities alike. “Underfunding threatens the survival of charities delivering public services. Charities, commissioning authorities and government have to address this urgently. If they don’t, they will end up killing the very thing they believe in.”

A spokesman for the government’s Office of the Third Sector said it defended robustly the sector’s capacity to take on contracts while continuing to campaign effectively for social change.