Examination of Witnesses (Questions 260
- 279)
TUESDAY 10 JULY 2007
MR MARTIN
NAREY, MR
PHILIP CULLUM
AND MS
ALISON HOPKINS
Q260 Kelvin Hopkins: We are
talking about the third sector rather than the private sector,
but I intend to move on to that. Lord Adebowale came to speak
to us a couple of meetings ago and he said that in reality the
amount of money going to the third sector is quite small and that
the real drive of the government is towards the private sector.[7]
He also said something very interesting, which was that most of
today's modern public services started as voluntary organisations,
in the third sector, sometimes with religious backing, churches
or whatever, and they became so essential for general provision
that they became part of the state sector. Some of these niche—and
I use the word niche—organisations will not do that. But
is there not a case that some organisations even now might eventually
find themselves in the state sector? Just one example. The Hospice
Movement—there is a wonderful hospice on the edge of my
constituency which has been built on large voluntary donations,
from wealthy people largely, but the revenue costs are very high
and they are increasingly pressing for the public sector to pay
the revenue costs of running the place. One can see over a period
of 10, 15, 20 years it might find itself in the state sector rather
than the voluntary sector—the process that Lord Adebowale
was talking about. But the government is trying to drive services
in the other direction. What is going to happen?
Mr Narey: There is a compromise
in that particular situation. The state could commission that
voluntary organisation to continue to provide hospice beds if
the health service in this case decides that it needs them and
it can provide hospice beds through a committee arrangement rather
than through direct management; I think rather than the service
being entirely absorbed back into the public services that is
likely to happen more in the future. It is the case that much
of the work that we do could not be done if there were not a public
sector commissioner wishing to pay for it. We would do some of
our work but most of our work would disappear. So in that particular
example I think what is more likely to happen is that the public
sector will have ultimate accountability for that work, as it
should for people who are facing death in hospice beds, but they
do not necessarily need to deliver that work directly. That is
the big change. What I learnt as a commissioner was that I discovered
the scope to improve public services more quickly through contract
management and commissioning and I found it easier than managing
directly.
Q261 Mr Liddell-Grainger: Can
I ask you a little about the relationship between the state and
the third sector? One of the things we have heard about before
is added value. How do you quantify added value to what you do?
Mr Narey: As some of my previous
answers, I am cautious about joining this chorus which says that
we have some sort of added value. I hear the word distinctiveness
used about the service provided by the voluntary sector and I
have tried to bury the word distinctive and remove it from the
Barnardo's lexicon. What is important is that if we have to be
commissioned to run public services that we should provide effective,
evidence-based and cost effective public services, that is what
matters. I think to concentrate on something with value added
is sometimes to mislead.
Q262 Mr Liddell-Grainger: Do
you agree with that?
Mr Cullum: Yes, I do and I think
NCC as a whole would. It is one of the areas that we looked into
before we started doing our research because we felt we needed
to understand as far as possible what it meant and was intended
to mean. Even talking to the larger organisations within the third
sector, like ACEVO[8]
and NCVO[9],
there is not a very clear definition even for them as to what
it means in practice. Certain third sector organisations who are
interested in delivering these services have difficulty—they
are sometimes asked in the tender document to explain what added
value they bring and they do struggle with that when they are
trying to describe what it is. That is partly why we are very
pleased that the office for the third sector has come out and
said that it will certainly drive some more evidence collection
and try and build up an evidence base, but I think individual
organisations need to do that as well. I think third sector organisations,
just as with private organisations, have to be able to demonstrate
what it is that they are bringing and I agree with Mr Narey that
they should avoid the term altogether and be much more precise.
Q263 Mr Liddell-Grainger: I
think one of the problems is that a very small amount of money
in the overall pot goes into the third sector—it is tiny,
a couple of per cent. If that is to expand, and I expect you would
like it to expand, and you want to be more included in what goes
on, is not one of the ways of doing it showing what you bring
to the table?
Ms Hopkins: Absolutely.
Q264 Mr Liddell-Grainger: If
that is the case and you agree with that, how do we prove it?
Mr Narey: We need to draw evidence
for the work that we do. I think that the voluntary sector has,
in recent years, fallen behind the public sector in demonstrating
the evidence of its impact. Although targets have gone very much
out of fashion I believe that the target culture forced public
services to concentrate very much on demonstrating that they made
a difference, and I think that is much less developed in the voluntary
sector. I still sometimes go to some of our projects, and I am
going to Wales tomorrow to see a number of projects, and I see
a project which looks very nice but when I say, "This looks
lovely but how do we know it works?" people sometimes look
at me as if it is a rather odd question, but actually that is
the absolute question because there are lots of things we do in
this area which look nice and seem nice but if they do not have
a real impact on children's lives we should not be doing them.
Mr Cullum: From our perspective
obviously, how consumers and the users of services perceive them
in terms of how they have been treated and the quality of the
service and the outcome that they see for themselves are absolutely
key determinants. Lots of organisations, particularly in providing
social services, can come up with lots of stories where people
say, "This service has changed my life" because that
is what the services are there for, but it is the comparators
in that service and other services and who is offering the best.
Just to give one example from our research, in employment services
we asked people who had experience of each of the three sectors
does the service work, as it should? The third sector, 88% of
people said yes; the private sector 69%; the public sector 31%.
That is a very striking difference.
Q265 Mr Liddell-Grainger: If
we do get further we need to open up the third sector more. If
we open it up how do we achieve that? We live in the day of media
spin—dare I say spin?—and that is what people want
to see. I suspect that most people do not know the difference
between the third sector and the public sector and they just accept
whichever way it goes. First could you, the third sector, explain
how you are going to do it?
Mr Narey: First of all, I would
preface that by saying that we do not deserve work because we
are the third sector.
Q266 Mr Liddell-Grainger: That
is not what I am saying.
Mr Narey: And I do not seek work
on that basis. I think if we brought the same culture of competition
to the provision of public services that we bring to every other
part of our lives, where we all shop around, whether it is for
cars or phones or whatever, if that element were brought into
public service and if we got local authorities, for example, to
concentrate on commissioning those public services I think that
the benefits of that would become pretty evident pretty quickly.
As local authorities started to build and develop services in
one part of the country which were better than others and cheaper
than others, whoever the provider was, then I think that there
would be a tendency for the competition to grow and grow.
Q267 Mr Liddell-Grainger: One
of you used—and I think it may have been Philip, and I am
sorry if it was not—the words "risk averse". Is
that not one of the problems, that you are so terrified at getting
it wrong or ending up in the media for whatever reason, that you
just do not want to take any risks at all? Without risk we cannot
achieve because there are certain risks in all sorts of walks
of life. Do we have to redefine slightly what we mean by statutory
obligations, third way obligation, et cetera? Do we need to slightly
change the values, maybe, of what we are doing, as a nation?
Mr Cullum: Absolutely and this
is something, going back to my membership of the Better Regulation
Commission, that we have actually pushed on, and calling for a
much less risk averse society. I think one of the interesting
things from NCC's research is that it is often not citizens who
are risk averse, it is not parents and children who are calling
for bans on conkers in school playgrounds, it is often organisations
and people who are often not particularly senior people who are
involved in contracting, whichever side, who are just playing
it safe. Martin talked about management and there is something
about management both on the commissioning side and on the service
provider, which is about getting that message across right into
the heart of the organisation. There is a kind of appropriate
risk management, but risk aversion actually damages everybody.
Q268 Mr Liddell-Grainger: Do
you agree with that, Martin? You have had a slightly wider experience
in other sectors as well.
Mr Narey: It is easier said than
done sometimes and I do have some sympathy for commissioners who
want to be somewhat cautious in what they are ordering. A commissioner
who commissioned—it is not a children's service—had
a contract which was very light in terms of child protection issues,
for example, and was likely to face severe criticism when something
went wrong. I certainly think that there is much ground which
could quite easily be made in making the commission process much
less restrictive. A good tender proposal should outline exactly
what an authority wants in terms of outcomes and should be much
less prescriptive on how the tenderer goes about achieving those
outcomes.
Q269 Mr Liddell-Grainger: One
of the points is surely that because there are variations throughout
the country that people do not quite understand who is providing
what—and rightly so, why should they, they just want a service.
Do you think we should make it very much clearer, through various
mediums, who are providing that service? Like we have these wonderful
signs that say "Funded by the EU" should we have "funded
by" to make it synonymous with an organisation—I am
not looking at Barnardo's, it can be across the board.
Mr Narey: Sometimes the branding
might need to go the other way. I suspect that a lot of members
of the public and also our service users who come to our service
and see Barnardo's over the door probably do not give local authorities
the credit that they deserve. Perhaps the sign should say, "Barnardo's,
commissioned and paid for by the local authority".
Q270 Mr Liddell-Grainger: Do
you agree?
Ms Hopkins: I would think that
most service users do not mind and would not mind, although it
is useful to have the information. But more concern is understanding
what the lines of accountability are, so if a service is provided
by Barnardo's or any other organisation and there is a problem
or something goes wrong, what the line of accountability is then—is
it the Director of Barnardo's, is it through the funding authority?
I think it is in circumstances like that that the relationship
becomes much more important. It is something that has been recognised
by the local government ombudsman and my colleagues in the other
ombudsman services, and in fact they have just released a special
study looking at partnerships and contract agreements for delivering
public services because they themselves had come across particular
problems where there is a split in responsibility or different
services are funded from different sources and the lines of accountability
and the governance arrangements inherent within either a contract
or a partnership agreement have not been made clear. So I think
that would worry me more than knowing who is funding Barnardo's
or another organisation to deliver the services; it is really
being able to track back if a problem occurs.
Q271 Paul Rowen: I was interested
in your report and the three examples that you have taken. Is
it not the case though that you cannot really draw generalisations
from that. If you take the employment service it is relatively
new for a third sector to be as massively involved as they are
now. The rules for social landlords have been prescribed quite
heavily now by the Housing Corporation and have got tighter as
time has gone on, and social care has traditionally, since local
authorities have been divesting themselves, been the preserve
of the private sector. How can you draw conclusions and say that
people do not know the difference when you are dealing with, if
you like, a spectrum of time and services that are at different
ends of the spectrum. One is new and innovative, employment services,
and that is where the third sector grant is, and the other are
long established and the rules are being set by the commissioners.
Ms Hopkins: In a way we deliberately
chose those three services partly so that we could look at services
in these different models of delivery and indeed where they have
had different experiences and where the third sector was better
established—
Q272 Paul Rowen: You have
made the point about commissioning and if you take social housing
the rules are very rigidly stacked, what the housing corporation
will fund, whereas 20 years ago it was a lot more innovative.
Therefore, there is less room for manoeuvre for the third sector
to be even better.
Ms Hopkins: That may be true but
I think what we would say about that is that even though there
are quite well defined rules and regulations in social housing,
and indeed particularly in social care, the kinds of criteria
for the service users that we are talking about as being important
to them are so intrinsic to delivering a decent service that they
should be there whether the service is strictly defined or not.
Actually that is not an excuse, it is not an excuse to say that
the housing corporation says we have to do all these things, but
actually being polite and friendly and treating service users
with dignity and respect should just be part of the service and
should not be something special.
Q273 Paul Rowen: I thought
your paper about the needs of the third sector was very good,
about the level playing field. A large organisation, 110,000 people,
what proportion of your contracts are currently short-term? This
year, with the Children's Fund ceasing, how many of them are changing
around this year and what level of staff and what level of service
provision does that actually affect for an organisation like yours?
Mr Narey: I was in the northwest
last week and I asked that specific question and I asked a director
of the northwest to do the calculation for me. As things stand
in the northwest—and I have no reason to believe that this
is very much worse in the rest of the UK—at the moment for
about 70% of our work we do not know whether we will be doing
it on 1 April, either because contracts are coming to an end,
work is being taken back in house or because local authorities
have indicated that they want to continue but they are not sure
yet whether or not they will have the funding, and they have within
the contracts the ability to give notice to quit if they do not
find the money. So it is a very unstable environment.
Q274 Paul Rowen: Do you not
believe that that affects the quality of what you are able to
deliver? Presumably a lot of your best staff will be looking for
jobs elsewhere?
Mr Narey: It can affect the quality
of what we are doing. I am sometimes astonished and humbled by
the way people hang on and most of this work we will retain, and
I think a lot of staff working in the voluntary sector get used
to short-termism and have the confidence to move on and do something
else. But it is very troubling and it is very worrying for them
and we should not be putting employees who sometimes have family
responsibilities through that uncertainty.
Q275 Paul Rowen: Taking another
point that Ian touched on, and that is if the third sector is
going to grow and more services are going to be commissioned,
is it not the case that a lot of it is used as a cost cutting
exercise by local authorities that have a budget problem and can
suddenly see your extra added value is actually saving them money.
Mr Narey: I do not think there
is anything wrong with local authorities wanting to save money
as long as they are not asking us to do work which is of a very
poor standard. If a local authority asked us to do something really
cheap and cheerful and we thought the work of, for example, supporting
children in care was likely to be ineffective we would not bid.
But I think it is entirely legitimate for local authorities that
want to drive down costs by getting organisations to compete against
one another. I have never managed an organisation in the public
or the voluntary sector that did not have a tendency over time
to lose a bit of sharpness. The most dedicated people over time,
the circumstances of what they are doing will sometimes favour
them as opposed to service users. I think that Barnardo's is a
tremendous organisation but I do not think we have enough services
which open sufficiently at weekends, and a commissioning arrangement,
because we are being competitive, would probably drive us to extend
opening hours and give a better service to service users than
we do at the moment and probably at no increased cost.
Q276 Paul Rowen: Why does
it then cost you £19,000 to place a child but £12,000
for a local authority? I know you have VAT but that does not account
for all of it.
Mr Narey: Because it is a particular
area where we take those who are extraordinarily difficult to
place. The local authority will generally deal with an adoption
of a child themselves if they can do it; they will usually only
call on us when they have failed to find adoptive parents, and
this is an area where we do have a niche. We do not deal with
the adoption of white babies, we deal with the adoption of very
hard to place children from minority ethnic groups, frequently
severely disabled or with learning difficulties, and we still
find parents for them. But it takes a lot longer and it costs
more.
Q277 Paul Rowen: Given that
the third sector is so diverse how do you get that level playing
field and ensure that there is equality of provision and equality
of opportunity across very widely different fields?
Mr Narey: My level playing field
concerns are not between ourselves and, say, NCH, I think that
is a matter for the organisations. The level playing field I worry
about is between the voluntary sector and the local authorities,
and I am not sure that when decisions were made to take work back
in house, for example, which is happening at the moment, I cannot
conceive that that takes proper recognition of, for example, pension
costs. We have had to abandon our five star pension scheme last
year, so have NCH and I think the Children's Society have already
done so. But the cost of continuing with a five star pension scheme
in local authorities I suspect is not remotely factored in to
the costs of bringing work in house.
Q278 Mr Walker: Very briefly,
is your turnover growing year on year? Are you expanding as an
organisation year on year?
Mr Narey: Yes, it is, Mr Walker.
Q279 Mr Walker: Given that
you are expanding how much of a problem are short contracts because
you were saying that you are worried at the end of each contract
cycle and this April a number of contracts are up for review and
they may not be renewed, but actually in reality what is happening
is that you are winning additional contracts every year and the
ones you have the vast majority are being renewed anyway.
Mr Narey: Because it is not in
the same part of the world. We are losing a lot of work in the
southwest at the moment because we do a lot of children's fund
work there. We are expending very fast at the moment in East Anglia
but you cannot move the staff from one to another.
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