Voluntary Sector Funding

Lord Wood of Anfield Excerpts

Thursday 24th November 2011 Lords Chamber

[Lord Wood of Anfield]

My Lords, I thank the right reverend Prelate the Bishop of Ripon and Leeds for giving the House the chance to debate the crucial issue of the work of the voluntary sector in our most deprived communities and how that work is being affected by the economic crisis and the Government’s cuts to local authority budgets. Debates such as this shine a light on the plight of those whose voices do not often get heard, and remind us of our duty to show, as the Dean of Norwich said on the 20th anniversary of the landmark Faith in the City report, that our common concerns can be harnessed in the common good.

We all know the vital work that is done by voluntary and community organisations, especially in our most deprived communities. It is work that becomes more, not less, important in difficult economic times such as this, when large-scale cutbacks in funding combine with increased demand among the most vulnerable for the care and community services that these organisations offer. No doubt the Minister will refer in his reply to the need for the voluntary sector to take its fair share of pain in the spending cuts that the current Government are prioritising. I agree. The question is not whether, at a time of fiscal pressure, the voluntary sector should somehow be given wholesale protection from cuts. Rather, the question is whether the cuts meet three eminently reasonable criteria: are they proportionate, are they distributed fairly and are they being made intelligently with regard to the long-run viability of the organisations affected?

I shall start with the scale and proportionality of cuts. About one-third of the voluntary sector’s income of £35 billion a year comes from statutory sources. Survey work has shown that the maximum cut to a local authority in 2011, a figure referred to earlier, was just under 9 per cent of income. However, the average for members of ACEVO was 23 per cent of their funding. For smaller organisations it was higher, at 27 per cent of their income. Activities in the voluntary sector that have been especially badly hit are children and youth charities, services for the elderly and disabled, homelessness and housing charities. For some organisations, the cuts have been both disproportionate and catastrophic, a famous case being Oxfordshire Children and Voluntary Youth Services, hit by 90 per cent cuts in its funding and intending to close in March 2012. If we are all in it together, we should all be in it together in roughly the same way—a way that is proportionate to our means and to the importance of activities to our communities and country. The scale of the cuts to the voluntary sector and the absence of proportionality should give us all real cause for concern.

What about the distribution of cuts and, in particular, their effect on deprived communities? Again, it is becoming clear from survey evidence, imperfect as it may be, that the cuts are having more of an impact on organisations in deprived areas than on those in other areas. First, we know that local authority areas where deprivation is higher are experiencing larger cuts in funding, partly to do with the way that area-based grants work. Secondly, since voluntary sector organisations are more likely to be based in these areas—because activity rightly follows need and demand—such organisations are more likely to experience cuts in government funding. Their dependence on state support, compared to other sources of support, means that their activities will be hit more savagely than those of organisations in better-off areas. The result of this variation is that there is now little doubt that the most vulnerable are being hit the hardest. As Dame Clare Tickell, chief executive of Action for Children, said just last month:

“The scale and pace of change, alongside the cutbacks that we have seen over the past year, are unprecedented. We are now seeing the impact in communities across the country—and fear it could result in severe and long-lasting damage to the most vulnerable children and their families as they struggle to cope … We are at a tipping point”.

What about the third criterion, of sensible cuts? Are they being made intelligently and with regard to the long-term viability of the organisations affected? We know that the cuts have cut into the core activities of the voluntary sector. A third of those surveyed reported having to cut the services that they provide. More than 40 per cent have had to make staff redundant.

As the noble Lord, Lord Rennard, has reminded us, given that cuts of this magnitude are under way, the case for a strategic approach to managing their implementation and impact becomes more compelling for a number of reasons. Many charities have no reserves at all to fall back on, or hold very limited amounts of expenditure. If cuts are imposed without strategy and intelligence, they could lead not only to an interruption of services for a few years but to a more permanent scrapping of expertise and networks that cannot simply be replaced when the good times return. Moreover, in a period when demand for these services among the most deprived is rising, cutting the ability of the voluntary sector to meet these needs often simply displaces the need for provision back on to the state. The needs of the most vulnerable are not like a need for luxury goods which we can defer for a bit while we tighten our belts; they are needs that must be met. Cuts to the voluntary sector which shift the burden of meeting those needs on to another part of the statutory funding landscape neither serve the interests of those in need nor help the spending plans of the Treasury.

What do we know about the Government’s strategy for implementing these cuts, especially in our most deprived areas? The first answer is: not as much as we should. As far as I am aware, the Government do not have reliable data on the distributional effects, by local authority, of the cuts on the voluntary sector. Nor have they taken steps to help ensure that the best practice of councils in handling these cuts is spread to other councils. We know that the way in which local authority cuts to the voluntary sector are being handled varies wildly from case to case. Some local authorities are approaching this difficult task of distributing the pain of cuts in partnership with voluntary organisations, observing the compact between the voluntary sector and the Government, while others show little interest in that partnership.

Does the Minister agree that one important action that the Government could take would be to make sure that all local authorities are aware of and complying with the NCVO’s best practice guide, as well as observing the terms of the compact, such as giving at least three months’ notice when changing funding decisions? Can the Minister also tell us about any plans that the Government have for the renewal in 2012 of the transition fund that was set up for 2011—I believe it was £100 million —to help organisations in the voluntary sector that had been hit by the cuts? Lastly, what are the Government doing to ensure that the Government themselves, and not just the umbrella associations that represent the voluntary sector, monitor the impact of the cuts on that sector, especially in deprived areas?

The effect of spending cuts on civic activity in deprived areas is no doubt of concern to all of us, whatever our party affiliations might be. But there is another, special reason why this Government should care about the long-term effects on the capacities of the voluntary sector: their big idea, the big society, purportedly relies on the health and expansion of this sector, at a time when it is being hit considerably harder than other parts of the institutional landscape.

While the idea of strengthening civic society is of course shared by all, the claim occasionally made by some members of the Government to have come up with the idea has been met with some derision. Their failure so far to respond to the disproportionately severe and long-term effects of cuts to voluntary organisations on poorer areas speaks to two more specific blind spots in the Government's big society agenda.

The first is that they show no appreciation of the importance not simply of inequality in funding but of inequality more generally. The fundamental fact is that inequalities in wealth and income, and levels of deprivation, affect the quality of civic life and the capacity of voluntary organisations. We know that in less well-off areas, you are much less likely to see volunteering. You are twice as likely to be a volunteer if you have graduated from university than if you have no qualifications. One-third of the population provides 90 per cent of total volunteering hours.

The problem is that the laudable desire for a big society is not matched by an understanding of these inequalities or of the more limited capacity for society to be big in poorer areas. Professionals in the sector know it: 83 per cent of voluntary sector chief executives said that they thought the big society would not work well in deprived communities. Sixty per cent of the public agree.

So what is stopping the sincere advocates of the big society responding to this? I think that the answer lies in a second blind spot: the idea that a big society needs a shrunk state to work, when in fact a well functioning civic society needs a supportive state and a Government who understand what factors lead to barriers to participation on the one hand and who build capacity on the other.

A Government who are serious about this would support the big society not just through funding but through helping to skill up the sector, encouraging partnerships and promoting collaborative budgeting et cetera. It is a view that was supported by David Cameron, the Prime Minister, in a speech in 2009, when he said:

“I believe that, in general, a simplistic retrenchment of the state which assumes that better alternatives to state action will just spring to life … is wrong … This means a new role for the state: actively helping to create the big society”.

Eighteen months in, we are still waiting for some idea of what this more active, constructive role for government might be. As this debate has reminded us today, it is the most vulnerable and most needy in our poorest areas who need imagination and boldness on the part of the Government most of all.