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Fiona Mactaggart: Does my right hon. Friend agree that one of the ways in which he can protect the independence of small local voluntary organisations is his proposal to encourage local authorities on three-year funding? I remember back to 1990, when Tory Wandsworth council, with no notice, completely cut the budget for Battersea law centre. It was only because a small charity that I was involved in gave it £4,000 that it had a big enough breathing space to continue fundraising, and since then it has raised some £10 million for advice in Battersea. There needs to be a framework for ensuring that local authorities have longer-term funding for small voluntary organisations such as the law centre.

Edward Miliband: My hon. Friend is absolutely right. Stability of funding is crucial and we want to make progress on that.

Mr. Tyrie: The Minister helpfully explained that he is in favour of an extension of taxpayer support—that is, providing taxpayers’ money for campaigning activities through tax relief. He has denied that a charity can be set up and run exclusively for campaigning purposes. Will he now say whether he supports the setting up and running of a charity largely for campaigning purposes?

Edward Miliband: No; these decisions are a matter for the Charity Commission. There are 13 charitable purposes, and that is what matters when an organisation is set up. The regulator must decide whether it meets the charitable purposes set out in the Charities Act and provides public benefit, and the question is then whether, in pursuit of those charitable purposes, it can campaign. We need to be absolutely clear that charities are able to campaign to further their charitable purposes. We need politicians from all sides—I hope that Conservative Front Benchers will think again—whether local or national, to understand, celebrate and respect that right to campaign.

I believe that Members in all parts of the House will take pride in the compassion, dedication and diversity of the third sector—the 600,000-plus people who work in the third sector, the 20 million people who volunteer, and the estimated 35 million people who donate money at least once a month. They are a testament to a willingness to take action for a fairer Britain. Over the coming years, the conclusions of this review point to how we can support their efforts.

1.7 pm

Mr. Francis Maude (Horsham) (Con): It is probably more than six years since I took part in a debate from this Dispatch Box, and the old cliché about one’s opposite numbers looking younger as the years go by turns out to be true in this case.

Until the last five minutes or so, I appreciated the measured and temperate tone in which the Minister opened the debate. These matters should not be the subject of intensely partisan debate, and for the most part they are not, as in his third sector review, with which Members in all parts of the House would agree. We do not need to describe such bipartisanship as treacle, exactly—honey, perhaps, I might say, without
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getting too cloying. It is important that these matters are properly discussed, and I am grateful that we are finally having this debate.

It is a pity that the review was released if not under cover of darkness, then on the eve of the recess, through a written statement. That is not quite in tune with the pledges made by the Prime Minister when he took office. It may not be quite so groundbreaking a document, useful though some of it undoubtedly is, as that which was foreshadowed. It does not have the heft or depth of the report led by my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), “Breakthrough Britain”, which is very detailed, substantive and well researched. One or two items in it are already finding their way into Government policy. As they are good ideas, we welcome that.

Everyone pays lip service to the desirability of greater involvement of the voluntary sector in social action and social enterprise, but lots of questions are prompted by that bland statement. We are concerned about the independence of voluntary and third sector organisations from Government, as that independence should be a matter of crucial importance. It is inevitable that where an organisation is getting a significant part of its funding from the public sector, in one form of another, issues are sometimes raised about independence. None the less, independence is crucial. It is interesting that it is not until one reaches page 87 of this 100-page review that one finds any reference to third sector organisations being independent of control by the state, and even then, it is a hidden-away statement on regulation:

Such organisations should be independent. That is important, because that independence is part of the basis on which they have the public’s trust. We all value what they can achieve in social action, not only because they are often more efficient and therefore deliver more for the taxpayer’s pound than direct Government provision, but principally because they tend to be closer to the people and communities that they aim to serve, and because they can be more directly and more immediately responsive to people’s needs, more innovative and less constrained in what they do. Crucially, they are also more likely to be trusted by their users than are the organs of the state. We will come back to that point.

The issue of independence is thus central to the effectiveness of the sector. There are broader philosophical arguments for independence to do with the dispersal of power and influence, and the vigour and vitality of civil society. We can explore those on another occasion. Our concerns about the erosion of the independence of voluntary sector organisations are serious. I would like to spend a moment on this.

The review referred to the principles of the Compact:

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The Compact principles are important.

It was slightly ironic that just before the review containing those splendid words was published, both the chief executive of the Commission for the Compact and the commissioner resigned without any explanation. As far as I know, those posts have not yet been filled, so it would be useful to hear some amplification about how the assertion that the Commission will take forward the application of the principles will be fulfilled. We also need some explanation of why, only a year after it was established, both its chief executive and the commissioner have departed. The departures are unexplained and some voluntary sector leaders, such as Debra Alcock Tyler of the Directory of Social Change, have expressed their dismay. She has said that

Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations—ACEVO—has been damning in his assessment of the effect of the Compact:

—it is actually from 1998—

He also says:

It is significant that even the National Council for Voluntary Organisations, which has been the sector’s leading advocate of the Compact approach, now appears to question its effectiveness. Its chief executive, Stuart Etherington, has said:

In reality, the principles of the Compact, which are important, are, in far too many cases, simply being ignored; they are honoured much more in the breach than in the observance. Full cost recovery, prompt payment and multi-year funding, all issues that have been raised in this debate, are simply not happening on anything like the scale envisaged. The dependence of third sector organisations on the state has increased rather than lessened, through the increased use of contracts rather than grants, with strict constraints on what can be done with the money—quite apart from the absence of the positive sides of the compact. That increase reflects a mindset that sees using the third sector as a means of outsourcing Government activities rather than as empowering people to find different and better ways of helping people and communities.

On the funding announcements in the third sector review, the starting point must be a recognition of the hit that the sector has already suffered at the hands of this Government. In the Prime Minister’s last Budget as Chancellor alone, the rate of gift aid tax relief was cut from 28p to 25p in the pound, a cut of more than 10 per cent.—the annual cost to charities is in excess of £70 million. Characteristically, that was not a change mentioned by the then Chancellor in his speech, nor did it appear in the Red Book—it was in the fine print; as so often,
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the bad news was hidden away. It was also not in the Treasury’s Budget notes, nor was it mentioned by the Minister who was then responsible for the third sector or in any office of the third sector communication.

Mark Lazarowicz: Just to be clear, is it the right hon. Gentleman’s policy that tax relief should be given at a rate higher than the level of tax being charged?

Mr. Maude: If I may paraphrase what my right hon. Friend the Member for Witney (Mr. Cameron) said yesterday, if the hon. Gentleman wants to discuss our policies, let us have the election and let the manifesto that the Minister has been slaving away trying to write be published. We will then have the debate and let the people choose. If that is what the hon. Gentleman wants, bring it on.

The change that I referred to has been made, with the resulting £70 million hit to the charitable sector, and that is on top of the effect of the abolition of tax credits on investment income, which costs charities about £250 million a year. That figure does not even include the cost of abolishing tax credits for voluntary sector bodies that do not have charitable status, which were not even covered by the transitional relief arrangements. Against that background, the £80 million small grants programme looks like thin gruel.

A report from the Directory of Social Change highlights the importance of serious, stable grant funding:

It goes on to warn that exactly the opposite is happening:

Even where grant programmes survive, they are failing to deliver stable funding for voluntary groups. According to the Charity Commission more than two thirds of all funding agreements were for one year or less, and fewer than a quarter were for more than two years. The Government are failing to deliver on their promise of extending the funding. We support that promise and I think that it would engage support across the House.

Another obvious part of the background to funding decisions is the effect of the raid on the lottery. The first raid on the lottery for the Olympics was announced in June 2006 and removed £410 million from the lottery good causes, including £213 million from the Big Lottery Fund. Then they came round again in March to take another £675 million out of the lottery good causes. According to the Minister, the funding settlement

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That is a bit disingenuous, because the protection applies only to the funding that voluntary organisations get from the Big Lottery Fund. The funding that the voluntary sector gets from other lottery distributors, such as the Heritage Lottery Fund, Arts Council England and Sport England, will not be exempt from the second Olympic raid. According to the NCVO, cultural, sporting and heritage charities will lose more than £100 million as a result.

On the issue of public service provision, concern has been expressed in many parts of the sector about monopoly commissioning. Everyone is now in favour of diversity of provision, and monopoly commissioning is a concern. A look at offender management services and employment services illustrates that concern.

The centralised management of many public services means that commissioning decisions are taken a long way away from the local contexts in which voluntary sector providers are often best able to demonstrate their strengths. Another disadvantage of centralisation is that services tend to be commissioned on a national or regional basis, effectively excluding medium-sized and smaller voluntary sector organisations which lack the immediate capacity to take on contracts of that size.

There is also a tendency for centralised commissioning to generate a “we know best” attitude from the state, specifying in excessive detail not only what services should be delivered, but how they should be delivered. That tendency to be over-prescriptive is a problem across the procurement of services in much of the public sector and it severely limits the scope for innovation and diversity, which is often the best reason for involving voluntary organisations in the first place.

By opening up the delivery of public services, but not the commissioning side, the Government are programming a clash of cultures into the system. As long as top-down control systems are the norm, public sector managers will attempt to conduct their relationship with voluntary sector providers according to the same rules to which they themselves are subject. There are no easy answers as this is very complex territory, but I urge the Minister to look further at the issue.

The saga of the way in which the Department for Work and Pensions has treated voluntary sector bidders for contracts under the pathways to work scheme is illustrative. The tendering process for phase 1 of the scheme was aborted less than three hours before the original deadline for tenders in February, as a result of the Government revising the specifications at the shortest of notice. A new deadline was set for 25 April, requiring significant additional resources to be devoted by the bidders. When the results of phase 1 were announced, only two of the 16 regional contracts went to the voluntary sector, both to the same charity, which is the largest in the employment services field.

Stephen Bubb of ACEVO—up to that point a strong supporter of the Government’s approach—said that the voluntary sector had been

by the DWP’s procurement practices. He added:

Many employment charities that had been delivering services to the long-term unemployed will now be reduced to the status of sub-contractors to the private sector firms running the main contracts. That will significantly reduce the margin on the services they provide, threatening their financial viability.

Another example is the Offender Management Act 2007, which will centralise the commissioning of probation services. We opposed that Bill, which made the Minister abandon his usual efforts to be non-partisan and throw around accusations of betrayal:

There are shades of “his master’s voice” in those remarks. However, it was clear just who was betraying whom when a coalition of charities working with offenders was formed to oppose the centralising provisions of the Offender Management Act. Members of the coalition include the Prison Reform Trust, The Prince’s Trust and Crime Concern. A spokesman for the Prison Reform Trust highlighted the threat to small charities:

There is a simple, broad point here. New Labour has from its outset had an extraordinarily centralising and controlling approach to government. Any idea that that approach might change with the new Prime Minister would have been incredible to any seasoned observer, as it was always clear that he was the big clunking centraliser at the core of new Labour. It was always certain that once he got his hands on the job that he had craved for so long, those tendencies would be wholly unconstrained. I have always thought that his approach was summed up by the worst of all phrases from the new Labour lexicon—“earned autonomy”. When translated, that means, “You can do whatever you like, as long as we agree with it. You have no real autonomy or freedom, and you are always on the end of a lead, with master ready to twitch the string at the least sign of independence.” That is why so much of the Government’s language on the third sector does not ring true.

It is in the nature of the third sector that it should be diverse, dispersed, vigorously independent and capable of innovation. A voluntary organisation’s strength is its closeness to its service users and its ability to provide a much more personal, responsive, differentiated, flexible and swift service than the traditional organs of the state. That independence, the allowing of which requires trust and optimism from the Government, is key. But I am afraid that it is and has been under threat from, or has been eroded by, the Government.

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