Charity Chief Executives write to the Treasury

On Friday 19 October 2012, the Chief Executives and Secretaries of several large UK Charities sent a Letter to Sajid Javid MP, Economic Secretary to the Treasury, which led many of its readers to believe that they had not only signed up to the Coalition Government’s Spending Cuts, but to its Welfare Reforms too!

These are some important points from their letter:

  • “As leaders from the voluntary sector, we are looking forward to working with you to build a more sustainable economic future for our country, by stimulating growth and tackling the deficit. In particular, we are writing to inform Treasury negotiations for the Autumn Statement and Budget 2013”.
  • “Firstly, our sector stands ready to make a greater contribution to the Government’s Open Public Services agenda. Crucially, we need the opportunities to do this. National and local commissioners need more encouragement and support to engage with the sector”.
  • “Thirdly, as the Government’s welfare reforms take effect, we know that some of the most vulnerable people in our country will be affected – including children. Our sector will be at the frontline – helping individuals and families prepare for and manage change. Naturally, the Government wants to support people off benefits and back into jobs wherever possible. But we know that it can end up costing Government more if vulnerable people are not supported through these processes appropriately: the costs associated with contested work capability assessments are an example of this. We therefore ask Ministers to give special consideration to the important work that our sector, and particularly advice services, can play in relation to welfare reforms and preparing for their impact”.

The organisations which signed this letter include:

All these organisations have Boards, Trustees and Members which range across the length and breadth of the Voluntary, Community, Social Enterprise and wider Third Sector in England, Wales and Northern Ireland. Some extend their reach into Scotland too. Many should surely be asking how their organisations became associated with this letter?

No wonder that on Wednesday 21 November 2012 NCIA (the National Coalition for Independent Action) reckoned that these umbrella bodies had signed up to privatisation and welfare reform and responded:

  • “NCIA says the open public services agenda is code for privatisation and termination of public services. “We question whether we should connive in delivery of policies about which there is growing evidence of damage to our common wealth and to vulnerable people. Our starting point should always be the expressed needs of our beneficiaries and those with whom we stand in common cause.”
  • “NCIA also criticises the letter’s reference to welfare reforms, “because these are not reforms. They are cuts, the effects of which we observe daily, and are being monitored nationally. The clear inference is that the sector is, through these leaders, offering increased levels of volunteering to compensate for shrinking public services.”
  • “NCIA adds that the letter to Javid does not mention the role of voluntary and community groups campaigning alongside service users, trade unions and public sector staff against cuts. Or the difference between national and local organisations; or service delivery and campaigning bodies.

And all this comes in the wake of Unite Voluntary Sector members calling for Charities to leave ACEVO. Unite’s Community, Youth and Not for Profit members working in organisations like Crisis, Greenpeace and Amnesty International and Unite’s London and Eastern Region, have been calling for action at national level.

Back to Top

Brief History of Third Sector Organisations and Coalition Government Policies

The reality is that we should not be too surprised by any of this. As long ago as Thursday 08 March 2012 in Killing Social Enterprise Softly Huckfield wrote a lengthy chronology stretching from New Labour’s introduction of Flexible New Deal in 2009 as the forerunner to the Work Programme to various Coalition Government proposals throughout 2010 and 2011 for the gradual privatisation of public service delivery. Killing Social Enterprise Softly showed in detail how the main London based Third Sector Organisations did not oppose any of these initiatives in principle and instead only sought some small amendments.

Is it any wonder that, following these organisations’ failure to oppose the Coalition Government’s Agenda, The Guardian on Thursday 02 March 2012 referred to John Lister’s “Teach Yourself Lansley“, which defined Social Enterprise as follows:

  • “Social enterprise: (oxymoronic noun) interim nonprofit private provider paving the way for proper private takeover”

The following represent Coalition Government initiatives, seeking to introduce private finance in to into public service delivery, which were not opposed by these organisations:

  • “Modernising Commissioning Green Paper”. December 2010.

    This Green Paper sets out the Coalition’s intention to widen public sector commissioning procedures. The Social Enterprise Coalition ““Response to Modernising Commissioning: Increasing the Role of Charities, Social Enterprises, Mutuals and Cooperatives in Public Service Delivery”” January 2011, was hesitant on payment by results.

    The SEC Response said on page 4: “We would support mechanisms where parts of payments are dependent on the outcomes delivered but not the entire payment. We know of examples of contracts where 20%-30% of payment is dependent on outcomes and results delivered”

  • Growing the Social Investment Market: A Vision and Strategy. February 2011.

    This White Paper outlined the potential of the Social Enterprise contribution of 1.5% of GDP to “help unlock a slice of the £95 billion of UK charitable income and endowment assets for social investment”. The National Council for Voluntary Organisations (NCVO) set up a Working Group which produced the NCVO Commission on Tax Incentives for Social Investment: Analysis and Recommendations in January 2012, which included Social Enterprise UK. Basically the Report seeks to extend direct private investment in Third Sector Operations. On page 22 “Recommendations”, the Report says:

    “Second, the Government should consider how equity or equity-like investment made directly into enterprises established for community or social benefit should be eligible for CITR (Community Investment Tax Relief)along the following lines:

    “The meaning of “CITR” would be extended to read: “entitlement to tax reductions in respect of amounts invested by [individuals or companies] in community development finance institutions or through equity or equity-like investment into enterprises established for community or social benefit”.

    In other words, this NCVO Commission signed up in principle to support Social Impact Bonds.

  • Open Public Services White Paper. July 2011.

    This White Paper is specific about opening public service delivery to wider tendering and commissioning. ACEVO’s Response to the Open Public Services White Paper on October 10 2011 under “3. Open public services require a healthy provider market for commissioners and service users to choose from; the Government therefore needs to take steps to promote a healthy provider market” the ACEVO Response encouraged more competition in public service delivery:

    “In both cases we believe there is a case for Government to promote a health provider market, ensuring that the shape of the provider market is determined primarily by what is in the interests of taxpayers and service users, not what is in the interests of particular providers”.

    Under “2.There needs to be greater emphasis on the delivery of reform, and accountability for delivery”, the ACEVO Response continued:

    “We recently surveyed all third sector subcontractors involved in the Work Programme (with 148 responding, ie. just under a third of all third sector subcontractors) and found that 42% thought DWP’s differential pricing would not be adequate to ensure the Work Programme helps harder-to-reach client groups, with 47% unsure and only 9% responding that it would be adequate. At the very least this suggests that there is a need to ensure that the success of the Work Programme in supporting the hardest to help is monitored, and remedial action taken if it is found not to be wanting”

    Though this ACEVO response advocates a “Right to Redress” and adherence to the Merlin Standard, the trouble is that any “Right to Redress” comes too late when bad practice has been carried out and Social Enterprises and other Third Sector groups have already lost work.

  • Department of Business, Innovation and Skills “Improving Access to Non-Bank Debt – Call for Evidence” November 2011

    This Section describes NCVO and Social Enterprise UK proposals for tax incentives to stimulate private investment in the Third Sector.

  • On Friday 27 January 2012 Social Enterprise UK in a “Letter to respond to the Department for Business, Innovation and Skills: Improving Access to Non-Bank Debt – Call for Evidence” sought relaxation of regulations to permit more direct private investment:

    “Other initiatives that we believe the government should explore include:

    “Reform of tax incentives – We would like to see the government seriously consider the recently submitted policy recommendations from the Commission on Tax Incentives for Social Investment, of which Social Enterprise UK are members”

    “Regulatory framework reform – In particular, we would like to see the government review the current financial promotions rules with a view to providing exemptions for community and social finance offers. Underpinning any exploration into reforming the regulatory framework, we would also like to see how individual socially motivated investors could be benefitted and supported. In the same vein, to look at collective investment models/products designed around actively courting retail investment – e.g. retail social impact bonds, crowd funding – which could perhaps work in a similar way to ISAs with protections against exploitation such as caps”

These NCVO and Social Enterprise UK responses seek to encourage further Social Investment by private investors in Third Sector and Charitable activities. They also represent broad support for the direction of the Cabinet Office Paper “Growing the Social Investment Market:A Vision and Strategy. February 2011“, the main purpose of which is to encourage more private investment in Third Sector delivery.

This surely represents a national policy shift towards privatisation which is not supported by most of these organisations’ Social Enterprise or other Third Sector members?

Back to Top

Investment in Third Sector Organisations

These Third Sector Organisations should take note of evidence provided by their own members. “Investment Readiness in the UK”, July 2012, published by ClearlySo, New Philanthropy Capital and Big Lottery, shows that most Third Sector Organisations are totally unprepared for this kind of investment. This was a very big survey, as shown on page iv of the Executive Summary:

  • “As part of this research, we surveyed 7,420 VCSE organisations from the Big Lottery Fund’s grantee database and ClearlySo’s membership database; 1,255 organisations completed the survey, which equates to a response rate of 17%. We also carried out a literature review and over 40 interviews with investors, intermediaries and support providers across the four countries of the UK. Five case studies were conducted to provide further practical insights into the journeys taken by organisations to secure investment”.
  • As page 8 says:

    “Successive governments have spent (or “invested”) significant sums in the last decade – over £400m in Community Builders, Future Builders, the Social Enterprise Investment Fund and other mixed grant/loan funds -to support organisations towards investment. But while these programmes have no doubt supported a number of individual organisations, at a systemic level the investment readiness of the sector as a whole is still perceived to be lacking”.

  • “…..At one extreme, Community Builders had 4000 enquiries leading to 200 applications and 37 investees – equivalent to less than a 1% conversion rate and thus a significant mismatch of perceptions between investors and applicants”.
  • Or as page 41 “Mismatch No 3: Investor Readiness for Investing in Social Returns” says:

    “This mismatch is further evidenced by the type of capital demanded by and offered to the sector. Our survey respondents predominantly seek risk capital on sub-commercial terms of between the £10,000 and £100,000 range. However, if what is on offer from investors is larger asset-backed capital on near commercial terms, there is a market failure, captured in the typical exchange between investors and potential investees who accuse each other of “not understanding the social enterprise model” or “not being investment ready”.

These quotations are from a very large survey of Social Enterprises, Voluntary and Community Organisations across the country. The “Investment Readiness in the UK” Report’s conclusions are hardly a clarion call for the kind of policies supported by Third Sector umbrella organisations above!

Conclusion

The National Coalition for Independent Action is right to ask whether these Third Sector Organisations support the Coalition Government’s agendae for privatisation and welfare reform. It is difficult to imagine that this is what most of their Social Enterprise, Community Action and Voluntary Sector members want.

But as shown above, and in Killing Social Enterprise Softly for these organisations to be supporting Coalition Government initiatives which are not in the interests of most Third Sector Organisations is nothing new.

In December 2012, Social Enterprise UK published The Shadow State: A Report about Outsourcing of Public Services. Pages 5 to 7 show:

  • “An unknown amount of public money is being taken out of the social economy and redistributed to private individuals and investors through shareholder dividends, rather than being retained in areas where services are commissioned, or being reinvested in service improvements”.
  • “Years of purchasing services from the lowest bidder on price has left authorities with little real choice over who they can buy services from. For example, children’s and adult social care markets are dominated by private providers and the largest players are often private equity companies who that have bought out other providers. Costs can skyrocket when there is little or no choice of provider”.
  • “While social enterprises are growing and gaining confidence in consumer and business-to-business markets, our research shows that the ones working mostly in public service markets are drastically low in confidence. Many are making redundancies and turning away from public service markets in order to survive, just when they are needed most. They cite public-sector procurement policy as one of their biggest barriers to sustainability”.

Is it any wonder that all this is happening when Social Enterprise UK and other Third Sector Organisations, rather than opposing Coalition Government policies, just keeping offering their broad support?

Back to Top