Examination of Witnesses (Questions 140
- 159)
THURSDAY 5 JULY 2007
MR JOHN
STOKER, MR
CAMPBELL ROBB
AND MR
RICHARD GUTCH
Q140 Julie Morgan: If the
service is contracted from a local authority, they would have
the same rights as users of the local authority service. That
is what I am trying to find out. Is it the same?
Mr Gutch: A good commissioner
should make absolutely certain when they contract with a third
sector provider that that third sector provider has systems in
place to ensure complaints can be made and dealt with, and, ultimately,
yes, the matter could be taken up with the Ombudsman.
Julie Morgan: So they have the same methods.
Thank you.
Q141 Paul Flynn: Do you think
there are weaknesses in some charities that are used as fronts
for commercial organisations to advance their causes? Shall I
give you an example? There was one charity set up in 1990 by a
man who was struck off as a solicitor for stealing his clients'
funds. It was set up almost entirely with money from the pharmaceutical
industry. The person who set it up disappeared from the organisation
and so did £40,000 of their funds. I will not mention the
charity because it is still in business—under new management,
might I say—but up to three years ago they were getting
80% of their funding from pharmaceutical organisations and they
were distinctly silent in pointing out adverse reactions to medicinal
drugs. Do you think this is a danger that is inherent in charities?
Obviously you would not get this in the public sector.
Mr Stoker: I have to remember
which hat I have on here because I was the Charity Commissioner
for five years and spent a lot of those five years worrying about
abuses of one kind or another.
Q142 Paul Flynn: The Charity
Commission did investigate this organisation in the mid-1990s
and did not come up with any conclusion. It allowed the organisation
to continue, as it is continuing today.
Mr Stoker: I do not know any of
the circumstances of the particular case. The point I would make
is that vigilance is obviously important, and the existence of
oversight. The other thing is that the charity sector never has
been immune from abuse but you can say exactly the same about
any of the other sectors that might be involved in the delivery
of services, whether it is the public or the private sector, in
extreme cases. Where cases like this come up, it is of course
extremely important to take them seriously and examine them carefully
but it is dangerous to generalise from the particular to the general.
Q143 Paul Flynn: Mr Gutch,
would you like to comment on this?
Mr Gutch: In a sense, all the
things we have said that are good about the third sector mean
that it is going to be vulnerable occasionally to somebody trying
to exploit those very freedoms, that very independence which is
what is valuable about the sector. The way to address that is
through having systems in place, with the Charity Commission and
others. Of course it is a risk and it comes with the territory
of having a sector that thrives on independence and people starting
up new things and doing things in different ways.
Q144 Paul Flynn: Could I give
you another example, Mr Gutch. When Viox was exposed as a drug
that caused 144,000 heart attacks and strokes to people with arthritis,
on the Arthritis Care website they gave advice which was: "Don't
panic if you are taking it." There were one million prescriptions
a year for it. I would have thought the advice: "Don't panic"
is not the correct advice, if you are taking a drug that is likely
to give you a heart attack or a stroke. I think the advice possibly
should be "Panic now." Also on the site next to the
advice was a little notice saying, "This website has recently
been refurbished with help from the pharmaceutical company, the
manufacturers of Viox". I understand you were Chief Executive
of Arthritis Care for nine years. Is this not an example of where
there is an influence on a splendid charity like Arthritis Care
by money they are getting from a company that wishes to push their
products under the guise of the charity?
Mr Gutch: You are right, I was
the Chief Executive of Arthritis Care for nine years and I took
Viox for three years myself
Q145 Paul Flynn: I am glad
you survived.
Mr Gutch: All charities like Arthritis
Care, that are working in the health field, have a very difficult
tightrope to walk in their relationship with the pharmaceutical
companies from which they may get sponsorship. In the case of
Arthritis Care, they have a medical advisory committee with distinguished
rheumatologists on it who will have advised the executive about
what should be said in relation to the news that was coming out
about Viox. Charities like Arthritis Care and all the other ones,
the MS Society, et cetera, have a balancing act between not terrifying
the members and users and being responsible in the way in which
they report on medical research and so on that is coming out.
They may not always get it right but it is very difficult. You
would have found lots of GPs that would have given different advice
on Viox.
Q146 Paul Flynn: Arthritis
Care have a long record of recommending drugs which were later
taken out of circulation because they had adverse reactions. Is
it not human nature? If you are in an office and you are getting
a lump of money and you know that if you do not get that money
coming in you are going to have to sack John or Jane, does that
not inhibit you? Is your mouth not bandaged, when you should in
fact criticise drug companies when adverse reactions appear?
Mr Gutch: Arthritis Care would
never recommend a particular drug. It would provide information
about the choices that patients face and it would provide them
with advice about the questions to ask of their GP and their rheumatologist.
Q147 Paul Flynn: There is
the particular example of the charity I mentioned and then charities,
like Mind, which take not a penny from pharmaceutical companies
but have had a heroic role in exposing the dangers of Seroxat.
Two other main mental health charities were completely silent
and in fact defended Seroxat and attacked Panorama. Could
I turn to your document which you take as an example of a company
that you would regard as an exemplar, I presume. It is one that
is having services in acupuncture, chiropracture and homeopathy.
These are services without a very secure scientific basis. If
I came along as a faith healer for some other organisation or
if I was "Placebos R Us" and giving people a drug with
nothing in it, would somebody be likely to support me—10%
of my patients would be killed immediately.
Mr Gutch: I think the point to
remember about Futurebuilders is that we are investing in organisations
that want to have a service commissioned by a PCT or by a local
authority. We only invest in that organisation if the PCT, who
we talk to, have said "This is a service that we want to
commission." We do not have to make a judgment ourselves
about whether that particular service is right because the PCT
are the people who will have the authority on that; they are the
people that are going to be paying for the service.
Q148 Paul Flynn: As Jenny
pointed out, we went to America and one of the alarming things
we found in America, concerning its future and the direction that
the Government and the Conservative Party wishes to go, is that
there was evidence that the third sector have taken over a huge
area of work there. The difference between that and the public
sector is that the third sector has a vested interest in continuing
the problems that they have, and when problems diminish, the bureaucracy
does not diminish in the third sector. The case we have is on
homelessness, which was a huge problem in New York, as it was
here, and it has gone down to a core of homeless people now, but
the bureaucracy is still intact. The amount they are spending
on that is a huge amount, and that is more likely to happen in
the third sector than it is in the public sector, which has an
interest in diminishing the problem.
Mr Gutch: I think any third sector
organisation worth its salt will be constantly assessing the needs
that it is trying to address. Let me give an example in the field
you have just mentioned. St Giles Trust, which is one of the organisations
we have invested in, were focusing entirely on street homelessness.
As a strategic change, they are now working with ex-offenders,
and, as you know, that is major social challenge. So, they have
done exactly what you fear they would not do. They have said,
"Street homeless is no longer quite the issue it was. We
as an organisation have been doing street homelessness for hundreds
of years." They made a strategic choice to focus their work
instead on ex-offenders, preventing reoffending, which is, obviously,
a major issue. So, I think it does not follow necessarily, what
you said.
Q149 Paul Flynn: You are nodding,
Mr Robb.
Mr Robb: No, I am nodding at St
Giles'. They are an excellent organisation.
Q150 Paul Flynn: Could I give
another example then, if you say the tendency is to go into other
areas. The tendency, surely, is to either change the definition
of homelessness or to— . We talk about people who are homeless,
and people who are under-housed or in poor housing are classified
as homeless and the charity continues. You have seen the hardcore
homelessness in London, and, obviously, the figures have reduced
to at least a third of what they were, yet the charities are expanding,
they are not reducing in any way.
Mr Stoker: Can I contribute a
personal experience here. After the bombings in July 2005 I was
asked to take over efforts to set up the charity to have a fund
for the victims, and that fund set up distributed the proceeds
of public contributions almost exclusively to the victims and
closed down, from memory, I think in October last year. So, I
think I would say that that is not unique, that reflects a tendency
in the sector to see a job, get on with it and, when you have
finished the job, move on to the next thing and avoid creating
permanent structures with a cost which does not contribute to
the ends of the users. I am sure that practice varies, but, again,
I think it would be dangerous to generalise too much from the
particular.
Q151 Paul Flynn: Have you
any comments on the American experience? Is there anything which
you have learned from it that we should avoid here because they
are so far in advance of us in this direction?
Mr Stoker: I know quite little
about the American experience. I think, on the scenario where
services which have been competitively contracted to third sector
bodies in this country took on a bureaucratic life of their own,
there is always a risk, but I do not think it is generally likely,
simply because of the shortage of resources. There are fewer resources
than there are people competing to use them. That is constantly
making both commissioners and suppliers look at ways of doing
things smarter and doing things differently. I think once that
pressure is in the system, it is not likely to lapse into a kind
of lazy continuity of the kind that you describe.
Q152 Paul Flynn: Mr Robb?
Mr Robb: I think that the Government
is committed to finding those solutions which will benefit users.
It is not in the business of creating a perpetual hegemony for
any one particular sector. We are so far away in terms of scale
from what you describe in New York in terms of that, I do not
think that is the case, and we are very, very conscious of ensuring
that there are accountable, good contracts which ensure that problems
are identified and solved and move on, and this country is particularly
adept at identifying and changing what a contract is for as it
perceives the need to be there. I do not believe that is a place
that we are moving towards.
Mr Gutch: I would make two points
about the American experience. I think from the commissioning
side, it is very important not to be tempted into just having
a few very large contracts. I think it is important to specify
them in a way that makes it possible for smaller organisations
to compete to provide the service and to bring out in the specification
the real value that they are looking for in terms of the way the
service is provided. If it is all about big is best, then we will
end up with the sort of thing that you saw in the States. On the
third sector provider side, I think there is an obligation on
every third sector organisation that is entering, or is involved
in, public service delivery to be continually asking itself, "Is
this the right thing for us to be doing? Have we got the balance
of our work right? Are we still campaigning? Are we still doing
new things as well as providing public services?" That is
something you cannot legislate for. I think it is about each organisation
continually reassessing that.
Chairman: Thank you.
Q153 Kelvin Hopkins: You have
said at the beginning of your presentations this morning that
the third sector is really meant to supplement and complement
the public services rather than replace them. There is, of course,
an interface and a slight overlap there but, by and large, they
are there to supplement, doing things which perhaps the public
sector cannot or will not do or is ill-suited to do. Is that fair?
Mr Robb: I think mostly that is
the case, yes, absolutely. Again, it is about an assessment of
the need of the user, what is it that is needed, and the supplementing
thing. It comes back to the innovation thing. There is growing
evidence, for example, that people who are diagnosed with cancer,
if they are in an area where they have a very strong cancer network
run by one of the charities in that area (most of the evidence
in this area is around breast cancer support), they are really
supported, they have got people that are there when they are diagnosed
and they are supported and it seems that they are more likely
to have a good prognosis. In some areas the PCTs are now supporting
that, because they think that from diagnosis to support to treatment,
there seems to be better evidence that that is working. So, that
is an example where you can really supplement something that already
exists. But in certain places of care, residential care, perhaps
previously provided by the state, is now provided by different
providers, so it is a mix and match area, but in general, I think,
this is right, yes.
Q154 Kelvin Hopkins: Lord
Adebowale, who came before us recently, used the same figure you
did, about 2% of overall public spending on public services is
really in the third sector, and he did not anticipate it getting
any larger. The real drive, he thought, was in some areas for
privatisation, not for the third sector. The third sector was
just a minor component of the ideological drive coming from central
government. He also said that voluntary sector services over time
become statutory. Many of the things we have now, like the Health
Service and education, started off as voluntary sector, third
sector, but became so important that they had to become statutory
and provided by government. Universal provision was necessary,
these services were essential for the economy, they had to be
statutorily funded and publicly accountable and that is the way
things have gone. Is it possible that some of the services that
are now being provided in the third sector might eventually move
more into the state sector rather than the other way round.
Mr Robb: That is the point I think
Richard was making at the beginning in the example he gave about
GP surgeries and people with mental health. What the state and
the public sector is trying to do and get better at is finding
those examples that you might wish to take to scale that really
make a significant difference across the board. Wherever that
idea comes from—it might come from within the public sector—there
are lots of examples of really innovative care; they exist within
the public sector. This is not a discussion which is saying that
the third sector is better than the public sector at all, but
what I think we are interested in is finding those ideas, and
sometimes it will be about taking them to scale, and that can
take a very long time, or it can happen very quickly. An example
would be kids clubs that really were not a national provision
10 or 15 years ago and are now considered to be something that
the state should provide in every school. That is an example of
something that started in the third sector and has been mainstreamed
across the board. So, yes, that is a definite possibility and
I think that has to be done in a way that reflects on evidence,
that reflects on usefulness and reflects on the scale.
Mr Gutch: I think there is a very
important distinction between what happened in the 20th century
with services that started off as voluntary services, which were
funded mainly through a voluntary source of income, eventually
becoming statutorily run and statutorily funded services, and
what is happening now, which is more about services being statutorily
funded but provided by the third sector. One of the biggest investments
is in a school called The TreeHouse Trust, which a special school
for severely autistic children who are all paid for by the local
education authority, but I could never see that school becoming
a statutorily run school, because it is absolutely part of the
life-blood of that school that the parents are completely involved
in the running of it. They will do some extra things as well,
which the state is not able to pay for. There is a very big difference,
I think, between that kind of situation and what happened in the
early twentieth century.
Q155 Kelvin Hopkins: That
leads on very much to my next question, which is that one of the
great advantages of the voluntary sector is that a lot of volunteers
are involved, particularly where there are family interests. In
Mind, for example—parents of autistic children are likely
to get involved in autistic charities and so on, and the state
will not do that. The third sector thus draws extra resources
into provision, and very good resources, because there will be
this personal concern, personal care about the people receiving
the service. Is not that really the most important role for the
third sector, where you draw in volunteers, people who have a
personal concern about the people receiving the service?
Mr Robb: I think it is worth pointing
out that there are hundreds of thousands of people who volunteer
in the public sector as well, in hospitals, in schools, as child
leaders, supports and everything like that. People do choose to
volunteer in the public sector as well and make a massive contribution
to doing that; so volunteering does not just happen in the third
sector and with voluntary organisations. I think it is one of
the potential benefits that you get from contracting with a third
sector organisation that they may have a group of volunteers who
will add to the service that they do. What most contracting is
about is paid staff delivering services to a quality which meets
the standards required. Many organisations choose to add to that
service by the use of volunteers that help them to do that as
well. So, there is a benefit there, but I would not say it was
the only benefit that you get from contracting with a third sector
organisation in the delivery of services.
Mr Gutch: One of the examples
in our submission was a John Grooms centre for extremely disabled
young people. They have got a contract with the PCTs, and that
pays for the basic service that is specified by the Commission,
but they are also using voluntary income to provide a fantastic
service that is way beyond what the Commissioners are able to
afford. I think that is a legitimate aspect of this as well, so
long as it is quite clear what the Commissioner is able to specify
and pay for, and then, if the charity wants to do something over
on top of that through voluntary income, that is fine.
Q156 Kelvin Hopkins: One of
the concerns that has been raised is that the voluntary sector,
the third sector, covers a vast range of organisations, absolutely
fine organisations like Mind, for example, which I visit regularly.
Housing associations are regarded as part of this third sector,
but they are now rapidly growing in size and merging and becoming
vast landlords, effectively, moving towards being private companies.
That is the likely future, particularly if an opposition party
becomes a government, which may not happen, but we will see. Is
it not part of the drive of government, and particularly the opposition,
actually to allow that sort of thing to happen, to move things
into the private sector, first of all by getting them into the
voluntary sector? Certainly it has happened in housing.
Mr Robb: I can only comment on
what we are implementing as a policy at the moment, and, as I
have said on a number of occasions, at the scale that we are talking
about, the drive is to find those areas where the third sector
can deliver better services for users, to allow the state to work
in partnership with them, either as a delivery mechanism or by
transforming what is already being delivered by the public sector.
It is about transforming public services for users wherever it
is possible, and in the areas that we are talking about there
is not that level of scale. Victor Adebowale would say that he
can do five times as much as he does already and believes that
he would be able to do that efficiently at a scale and, he would
argue, I think, better than the private sector or the public sector
can do it.
Mr Gutch: I think the housing
association example is a very interesting one because it does,
in a sense, give us an idea of what could happen more broadly.
First of all, you must remember, they are non profit distributing,
so they are not a commercial company. Also, I think you are getting
newer, more specialist housing associations now forming and working
with particular communities that are having problems with access
to housing, and also housing associations are beginning to work
in partnership a lot more (which is something we are keen to invest
in) with local groups in their area, with local refugee organisations,
for example, and seeing themselves as having a wider social responsibility
in the areas where they are the mainland landlord.
Q157 Kelvin Hopkins: My final
question is about the costs of commissioning other organisations
other than direct state provision, because the commissioning costs
are always enormous for organisations. I know my local authority,
for example, whenever they have to bid for things, half of their
staff seem to be involved in bidding. Voluntary organisations,
particularly those very small ones, sometimes spend half of their
resources on bidding for contracts when they want really to spend
their resources not on bidding but actually providing the service.
Is that not an inevitable problem, and how can that be addressed?
Mr Robb: Richard is in the business
of exactly this, but maybe I could go first. I do not think it
is an inevitable consequence of delivery of public services by
outside bodies. I think it is possible, and there are good examples
around the country where commissioning is light-touch, is proportionate
to the size of the organisation and the size of the contract that
is being led. There is always a balance to be struck in this process
between ensuring that public money is well spent and is looked
after and that we are confident that it is being spent on what
we wanted it to do and ensuring that the transaction costs for
reporting on that are appropriate and reasonable. The Better Regulation
Executive, working with the Office of the Third Sector, has got
a whole series of work over the next year to ensure that, wherever
possible in the training of our commissioners, we are allowing
and making sure that we find that balance. We support commissioners
to ensure that the contracting and transaction process is not
a barrier to entry to small organisations, does not take up their
time, but retains the confidence of the commissioners that they
are getting what they want from the public money they are spending.
Mr Gutch: I think a lot does depend
on good procurement practice, and I think this concept of proportionate
levels of paperwork is very important, and, of course, the length
of the contract. One of the things I found when I went to the
States was that so many of the contracts were just annual, and
so no sooner had you bid and won one than you were having to work
on the next—that clearly is a nonsense. So, good procurement
is part of it. The other thing I think we touched on earlier is
the concept of partnerships between larger organisations and smaller
ones where the larger organisation does have the resources to
do tenders and to enter into negotiations and it can then subcontract
with lots of smaller organisations in a particular area. We are
also investing in consortia. These are consortia of small organisations
that might together enter into a contract, say, with a Learning
and Skills Council, a larger contract for a longer term, and perhaps
between them have one co-ordinator who can deal with that side
of things allowing all the different local groups do what they
do best, which is providing adult education and training for disadvantaged
people, and so on. I think there are ways of addressing the issue.
It is not going to go away, because we are talking about public
money and, clearly, there has got to be a process for deciding
how that money is allocated.
Mr Stoker: There are a lot of
things that you can do improve performance. I agree with what
Campbell and Richard have said. Three-year funding, to which there
is a clearer commitment in the Interim Report of the Third Sector
Review in December, will obviously reduce costs in that it makes
our procurement processes less frequent in some cases. There is
some very interesting material in our written evidence, for example,
in the evidence from CIPFA[10],
about ways in which the work can be specified and lots packaged
in a way which is friendly to the size of organisation that you
are looking for to run the procedures. Clarity of messages from
the public sector commissioner about exactly how much money is
on the table: I think there was an example in our written evidence
of one charity's experience where their chance of getting a result
was something like 5%, and they were putting a lot of money into
applying.[11]
The other thing, which the Compact says, which voluntary and community
sector organisations can do, which sounds simple, but I am told
it is sound advice that is needed, is that before you commit too
much by the way of work, time and resource you should satisfy
yourself that you are actually eligible for the funding stream
that you are interested in. To the extent that you go down the
line a fair way before you establish that, that is obviously your
time wasted and the commissioners'.
Chairman: Let see what other outstanding
issues we have left.
Q158 Mr Prentice: Partnership
in Public Services, the action plan, is very interesting.[12]
Have you hit all your targets so far?
Mr Robb: We are certainly progressing
towards some of them. We have a plan in place to do that, yes.
Q159 Mr Prentice: You talk
about developing support and the development of an innovation
exchange?
Mr Robb: Yes.
10 The Chartered Institute of Public Finance and Accountancy Back
11
Ev 225 Back
12
Cabinet Office, Partnership in Public Services: An action
plan for third sector involvement, December 2006 Back
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