Memorandum from UNISON
BACKGROUND
The following document is UNISON's submission
to the Public Administration Select Committee's inquiry into commissioning
public services from the third sector.
In December 2006 two key policy documents were
released. The Treasury and the Cabinet Office published The
Future Role of the Third Sector in Social and Economic Regeneration—Interim
Report, and the Office for the Third Sector in the Cabinet
Office published Partnership in Public Services: An Action
Plan for Third Sector Involvement. Throughout our comments,
these two government documents are referred to as "the interim
report" and "the action plan" respectively.
Last year UNISON commissioned two major pieces
of research into the voluntary sector and its role in providing
public services: Third Sector Provision of Local Government
and Health Services by Steve Davies of the Cardiff School
of Social Sciences, and False Economy? The Costs of Contracting
and Workforce Insecurity in the Voluntary Sector by Ian Cunningham
of Strathclyde University. Both documents are due for release
in March, after the deadline for submissions to the Select Committee.
UNISON would therefore be keen to submit both reports as soon
as they are released, as they will represent new and detailed
contributions to this debate.
INTRODUCTION
UNISON has always been a friend to, and a member
of, the community and voluntary sector. We have always had many
thousands of members in the sector, in organisations which campaign
for progressive social change, develop new and innovative ways
of improving civil society, and work in partnership with statutory
bodies. We recognise that all of these roles are crucial to the
UK's public services.
UNISON now has more than 60,000 members employed
in community and voluntary sector organisations such as charities,
community groups, social enterprises and housing associations,
and we are engaging in progressive, modern partnerships with many
of those employers. In addition, we also engage in joint campaigning
work with many community and voluntary sector organisations. As
a result, we are uniquely placed to comment on the role of the
community and voluntary sector, including social enterprises and
housing associations, in civil society and public service delivery.
WHAT IS
THE THIRD
SECTOR?
The interim report defines the third sector
as "on-governmental organisations which are value-driven
and which principally reinvest their surpluses to further social,
environmental or cultural objectives". Voluntary and community
organisations, charities, social enterprises, cooperatives and
mutuals are all included.
UNISON feels that this definition is so broad
that it leaves open the possibility of a distortion of what the
sector is and should be; it risks organisations qualifying as
third sector organisations which perhaps should not be.
At one extreme, the use of the word "principally"
leave open the possibility that private companies which re-invest
a proportion of their profits in a social good could qualify for
the government assistance being pledged in the action plan. This
would clearly be an inappropriate use of the funds set aside for
developing the sector, as it would be indirectly contributing
towards the profits of a private company—which is not the
intention of the interim report or the action plan.
Although the Government now uses the term "third
sector" to refer to a variety of organisations which are
neither public nor fully private companies, we prefer our term,
"community and voluntary sector", as it reflects the
qualities which third sector organisations have historically brought
to public services and society in general: independence, innovation,
campaigning for progressive social change, the ability to identify
gaps in public sector provision of public services, and working
in partnership with the statutory sector to develop solutions
to fill those gaps.
An increasing number of "third sector"
organisations are being set up specifically in response to a perceived
desire on the part of government to contract out services to such
organisations, often hived off directly from a statutory body
or a section of a statutory body. For example Trafford Community
Leisure Trust and Wigan Leisure and Culture Trust (one of the
case studies in the action plan) were both set up as charities
after it became possible for charities to provide public services
which public authorities have a statutory duty to provide.
UNISON has grave worries about these organisations,
which emerge merely so as to boost competition, often by removing
sections of the public sector. This seems to us to run the risk
of being privatisation by another name; and even if the organisations
do not emerge directly out of a statutory body, their creation
merely to compete for services will have harmful implications
for public services. The result is the increasing marketisation
of public services, with terms and conditions and the quality
of the service provided driven down so that organisations can
successfully bid for services.
Meanwhile, other third sector organisations
are being formed in a more `organic' manner, taking on the community
and voluntary sector roles described above, but with perhaps a
more business-like way of operating. At their best, such organisations
could be performing the roles that voluntary sector organisations
have been performing for a long time, like campaigning, advocacy
and innovation. UNISON support this work and wants to see it flourish.
However, these organisations may also end up behaving much like
those set up specifically to bid for services, as described above.
Many factors will help determine which of these paths such organisations
go down, and perhaps the most important of these determinants
is Government policy.
UNISON'S SUPPORT
FOR THE
SECTOR
UNISON welcomes the rise of modern, professional
community and voluntary sector organisations, as we would support
any organisation's commitment to run itself professionally and
ensure its own stability, as this will help provide job security
for our members—and stability for service users. Many of
the more old-fashioned charities are suffering severe financial
difficulties and this is often manifested in detrimental changes
to terms and conditions—for example recent moves by two
of the UK's largest charities to remove their final salary pension
schemes.
At the same time, the Government's attitude
towards the community and voluntary sector is changing. In particular,
the creation of the Office for the Third Sector within the influential
Cabinet Office, with its own dedicated minister, should join up
the Government's approach to the sector. If the Government is
genuinely committed to quality public services without any ideological
bias towards contracting out, then this new Office will be a constructive
force for reform.
However, several government departments have
set up task forces or similar groups to look at increasing community
and voluntary sector provision of public services, and the membership
of these groups and the proposals coming out of them suggest that
the aim is to look at how the Government can go about increasing
sector provision as it wants—not to look at whether or where
this should occur. Our worry is that the result will be "knee-jerk"
transfers, with insufficiently broad or detailed consultation.
COMPETITION
The Government seems to be in grave danger of
creating a community and voluntary sector in the private sector's
image, rather than recognising the current and historical value
of the sector and building upon its strengths and capacities.
Wherever the community and voluntary sector's
involvement in public services is increased, the Government seems
determined to base this involvement on the principles of markets
and competition.
Contracts for service provision are now the
Government's preferred option for supporting the "third"
sector, as opposed to grants. In 2003-04, 38% of community and
voluntary sector income came from statutory sources, and this
figure has been and will continue to rise. Meanwhile, for the
first time, the community and voluntary sector obtained more money
from contract fees than it did from grants, and again, this trend
is continuing.
As a result, organisations are forced to put
an increasing amount of their own resources into winning contracts,
and less into obtaining grants and donations. Of course, this
means that contracts are becoming the source of an ever-greater
proportion of voluntary organisations' income. In this way, the
move from capacity-building grants to the dominance of contracts
has already begun to convert many voluntary organisations into
service providers, without the same degree of independence and
advocacy as before.
With this move, of course, comes competition.
Intrinsic to the process of bidding for contracts is the Government's
notion of contestability. Whereas before a local service would
be provided by the local authority, unless that authority felt
that a particular voluntary organisation could bring something
particular and useful to the process, often now the authority
decides first to contract out, and then lets various voluntary
organisations fight it out. For the service users, there can only
be one result: a cheap service. For example, in many parts of
the country, NCH, Barnardo's and the Children's Society are competing
for children's services contracts based on who can do it cheaper—not
on the qualitative question of their approaches and ethoses in
respect of the needs of local communities.
TERMS AND
CONDITIONS
When organisations begin to compete in this
manner, the obvious way for them to do it is by implementing reduced,
or unequal, terms and conditions. Below we examine four aspects
of this.
1. Two-tier workforce
As contracts are won and lost, staff are transferred—from
the public sector to a voluntary organisation, and from voluntary
organisation to voluntary organisation—whether the voluntary
organisation is a charity, a community group or a social enterprise.
Trade unions fought hard for the Code of Practice on Workforce
Matters, which prevents the emergence of a two-tier workforce
in cases where public sector employees are contracted out to a
service provider, ensuring that new recruits receive comparable
treatment. However, this is not being fully implemented, and in
any case it does not apply when workers are transferred from one
community and voluntary sector service provider to another, or
between community and voluntary sector and private service providers.
The result is that there are still many cases
of workers employed by the same organisations, doing the same
public service work, but being paid different amounts. This is
clearly unfair. Without proper enforcement of the Code, or a fair
wages clause, this problem will get worse as voluntary organisations
provide more public services.
2. Spiralling low pay
Low pay is a problem in the community and voluntary
sector. Community and voluntary sector and social enterprise salaries
are already lower on average than those in the public sector.
For example, in Greenwich Leisure Ltd., held up as a beacon of
excellence and best social enterprise practice in the action plan,
workers' salaries are consistently lower than those of workers
employed by the public sector to do the same jobs. There are examples
of very poor terms and conditions in private care homes, which
based on the definition in the interim report could be classed
as third sector organisations.
As long as these differentials remain in place,
the sector will lose any competition with other sectors for the
best staff. If you can't recruit or keep the best staff, the quality
of the service provided will fall. To make up for this, organisations
will have to make the services even cheaper, and this downwards
spiral will continue.
3. Pensions and staff training
The problem is not just with basic conditions
like pay rates. For most community and voluntary sector organisations,
full cost recovery is an aspiration rather than a reality. When
organisations need to compete on costs grounds to win contracts,
the first terms and conditions to be affected are pensions and
training. Many community and voluntary sector organisations in
which UNISON organises are presently downgrading their pension
schemes; one major charity with which we work closely, and which
prides itself on its historic commitment to training its staff
and using this development to tailor its children's services,
has had to cut its training budget by 50% in the last two years,
and attributes this directly to the inability to achieve full
cost recovery from commissioning bodies. This problem is inherent
in the process of implementing a service delivery system based
on contestability.
4. Insecurity for all
Recent moves towards three-year contracting
cycles are welcome. But even this places a massive burden on organisations
which have to invest significant amounts of money in re-bidding.
Staff's jobs are permanently insecure; but more importantly, the
service users feel insecure. The kind of public services which
the action plan envisages the sector delivering are often the
kind which require a direct one-on-one interface between service
users and staff—for example the National Offender Management
Service. Such insecurity cannot be in the interests of providing
a high quality public service.
INNOVATION
Historically, the community and voluntary sector
has played a crucial innovatory role in public services: using
its campaigning and advocacy to find holes in public service provision,
develop solutions, and work with the public sector to implement
them. The action plan makes clear the Government's appreciation
of the voluntary sector's capacity to innovate, and UNISON both
applauds this good practice and wishes to see it continue with
proper Government support.
However, as third sector organisations change
expenditure patterns so as to win contracts, the research and
development investment needed for such work is in danger of falling.
So in the long-term too, the Government's own reform agenda for
public services could be damaged, as it is beginning to destroy
what could be seen as its own "R&D" division. The
proposed Innovation Exchange will be of little use if the innovation
under discussion ceases to take place.
REGULATION
The interim report states that "the Government
is committed to ensuring that regulation is appropriate and that
complying with regulation is as easy as possible". Although
UNISON is in favour of making regulation easier to understand
and reducing unnecessary administrative burdens, the Government
should be careful not to fall into the trap of assuming that all
administrative burdens are unnecessary. Although UNISON is in
favour of public service deliverers working efficiently, we believe
that a clear framework is needed for rigorous regulation of the
voluntary sector, especially those in health and social care which
are likely to be dealing with vulnerable people. NHS Trusts and
Local Authorities are strictly regulated, and any other organisation
providing such services should be treated equally.
FUNDING
The interim report and the action plan both
refer to capacity building measures such as the ChangeUp hubs.
UNISON is in favour of measures which help the voluntary sector
to build its capacity without necessarily bidding for contracts
for public service provision. However the unions have had difficulty
in engaging with the Workforce Development Hub, despite the fact
that a lot of the information the Hub wishes to disseminate is
already available from the unions. We feel that a valuable opportunity
for partnership working is being missed.
In addition, we do have some reservations about
the £10 million a year which was committed for funding for
investment in social enterprises in the Scaling new heights
action plan, and which is referred to in the public service
delivery action plan. UNISON is concerned that such funding is
being made available to social enterprises at a time when the
NHS is struggling to repay large historical debts. This funding
may give social enterprises an in-built advantage when it comes
to bidding for contracts.
UNISON'S RECOMMENDATIONS
UNISON's policy is to oppose privatisation and
contracting out. However we have always supported, and will continue
to support, the community and voluntary sector—workers who
for many years have made a vital contribution to public services.
In addition, even having opposed transfers,
where they occur we will defend the terms and conditions of members
in the new employers. So if the Government is committed to transferring
to social enterprises, charities, community groups, housing associations
and other voluntary organisations, the transfer and contract processes
must be better managed.
Full cost recovery
There should be some statutory mechanism to
enforce "full cost recovery" principles on all bidders,
so that all contracts include payment for workers' training and
development, incremental pay increases, pensions, and so on. As
voluntary organisations become ever more reliant on public service
contracts, it becomes increasingly vital that their contracts
enable them to fund ongoing overheads such as these. For example
if they cannot pay for training and development, the result will
be that existing staff's skills will fall behind, and the organisation
will not be able to recruit the best possible staff. The service
users will clearly suffer.
Full cost recovery principles have obtained
wide support from the sector and government. But if this is not
enshrined in some statutory manner, then nothing will happen.
No bidder for work will include such overheads in bids if competitors
may not do so. Enforcement of full cost recovery is essential.
Contract length and bidding processes
Contracts should be stable and longer than one
year. "Third sector" organisations spend a large proportion
of their time and resources reviewing bids and then re-bidding
for them. Staff are subject to a series of short-term contracts,
which lowers morale and harms the organisation's ability to recruit
staff. Once more, the final result of all of these factors will
be a poorer quality public service. Consequently, we believe that
contracts should be longer, so that organisations can get on with
providing the best possible service. We welcome recent moves towards
three year contracts, but many private sector contractors receive
much longer contracts, and voluntary organisations will not be
able to compete on a "level playing field" with the
private sector (as the Government expressly wishes) unless contract
lengths are equalised.
Contracting processes need careful examination
so that successful bidders have an interest and expertise in the
relevant services. If "contestability" refers to competition
based on both cost and quality, then the systems put in place
to assess organisations' capacity to deliver an expert service
must be robust.
Umbrella schemes
The Government should investigate the possibility
of cross-sector schemes for training and development and pensions,
to protect workers who are transferred to small, community-based
groups which do not have the capacity to provide such benefits.
The benefits of such a move to the workers in question are obvious,
but the Government's own vision for its relationship with the
"third" sector depends on this as well. If such schemes
are not developed, then the largest community and voluntary sector
bodies will become increasingly like competitive private companies.
They will dominate sector provision, and the local, community-based
organisations which are less able to provide pensions, training
and so on will be at a permanent disadvantage. The vision of public
services driven by locally-determined user needs will be severely
undermined.
UNISON is keen to work with the Office of the
Third Sector in helping to develop such schemes.
Fair terms and conditions
Agenda for Change terms and conditions should
be safeguarded for staff transferring from the NHS, and implemented
for those already in the community and voluntary sector, to avoid
two (or multi) tier issues. Similarly, local government terms
and conditions should be safeguarded and extended. If all of the
sectors are to compete for services on an equal footing, then
the workers carrying out the same work but employed by different
sectors deserve the same terms and conditions. If this does not
happen, then organisations providing inferior terms and conditions
will be better able to win contracts, and with lower terms and
conditions will come a poorer quality of service (for the reasons
given in various places above).
February 2007
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