Community and Voluntary Sector Funding

Debate between Naz Shah and Chris Davies

Tuesday 24th November 2015 Westminster Hall

[Naz Shah]

I absolutely agree. I will come on to talk more about the big society—or the failure to have a big society—and what should be done.

The coalition Government and this Government concretely demonstrated their commitment to tendering provisions for the VCS sector when they embraced the Public Services (Social Value) Act 2012. They have attempted—I use the term loosely—to reform public sector procurement to benefit VCS and social enterprise groups through their open public services approach. However, the reality on the ground is quite different. According to the National Audit Office, income from the Government to deliver contracts decreased by £1 billion in 2012. Its report shows that the biggest private sector contractors’ market share increased, and in 2012 charities lost almost £886 million in contracts, while the largest providers’ income grew by £551 million. That is unacceptable.

Those are not new statistics, and the problems are not new. There has been a lack of solid progress since the 2012 Act was enacted. The Government backtracked and kicked their commitment to transparent tendering into the long grass. They tender contracts that are far too large for the majority of VCS organisations to bid for; they put unrealistic timescales on the bidding process, which works in the favour of the larger private companies; and the calculations of cost value per unit still fail to consider the social value added by VCS organisations. Those issues are magnified by the financial pressure that all VCS organisations are under. Many have adapted and risen to the challenge of maintaining a similar level of service by innovating and raising finance elsewhere. The Government have failed to give due consideration to how charities can build the capacity that will give them the necessary skills to bid for contracts.

There has been a massive shift away from grant funding, which was more discretionary, to contract-based services, which are far more rigid. Without flexibility and financial stability, VCS organisations are unable to innovate—not in their front-line service, but in their capacity to bid for large contracts against private companies. I am extremely interested to hear how the Government will address that capacity shortfall to ensure that those who are doing the best, most valuable work are capable of applying for such contracts.

I used to issue health action zone grants. As a former NHS commissioner, I have seen at first hand how the voluntary and charitable sector developed, and how the Government strangled the ability of smaller organisations to thrive and meet the demand in their communities. Until recently I chaired a large mental health organisation, which, as a large organisation, was in a privileged position. We were able to ensure that we could survive. That is an example of the inequalities that are created by the Government’s stance on voluntary sector funding.

A further issue that must be addressed today is the Government’s longer-term strategy to devolve discretionary business rate exemptions for the VCS sector and charities. As the Minister is aware, there is currently an 80% mandatory business rate relief for charities, and the other 20% relief is provided at the discretion of local councils. Councils are already suffering incredible pressure on their budgets and are struggling to offer the full rate relief that is important to large and small VCS organisations. That 20% can be the difference between keeping services going and their having to close altogether. The situation made difficult by the uncertainty about the future of the rate relief and the expected full devolution of council tax control to councils.

It is essential that we give small charities all possible support so that they can continue to provide services to our constituents. It is imperative that the Government issue a long-term strategy on rate relief. Ideally, they should help councils to offer full rate relief to all charities for the foreseeable future. Given that more of the financial burden has fallen on councils in areas of higher deprivation, such as my constituency, it is not fair that yet again the Government are not supporting the communities that have the most need.

Recently, I was invited to address an event in my constituency organised by the Blenheim Project, which helped local women and their children who were made homeless and vulnerable due to domestic violence. I heard moving testimony and stories from those who had received invaluable support from the project and who, as a result of that help, managed to live not as victims but as active and productive citizens. Breaking the cycle of homelessness is the most cost-effective approach in the long term and has benefits for communities and for the economy as a whole. I heard from one woman who stayed in the project as a young child with her mother after they finally had to leave home. She continued to enjoy security at the project even though it had been taken away from her at home. That young women went to university and is now working and contributing to society. She is just one example from thousands of similar stories about the importance of receiving that much-needed support.

However, the event was not held to celebrate the Blenheim Project moving forward or developing; it was to celebrate the project’s achievements upon its closure due to funding cuts. It was sad, because I know the value and appreciate the benefit that the project added to my constituency and community, reaching places and people that others could not. As someone whose life has been shaped immensely by the voluntary sector, both as a service user when facing difficulties in my own life and when I worked in it as an employee, I am devastated at the loss of the project’s beds. Let me be clear: one bed space literally means the difference between life and death for some women. Where I come from, one death is one too many.

The charity had 37 long years of hard work, supporting hundreds of women and providing exceptionally high-quality support to prevent women and children from becoming permanently homeless. It had proved itself successful, but could not find a sustainable financial platform despite offering a service that others could not, and for a modest sum when all its intangible benefits are considered. If it was not the definition of a public good that we in this House should protect at all costs, what is?

The pressures of the funding cuts brought about by the coalition Government’s austerity measures and increased by this Conservative Government cut to the heart of our communities. They disproportionately affect northern councils that have some of the poorest wards in the country. The funding cuts have propelled councils to rationalise and reconfigure services to meet demand and support vulnerable people, but the impact on service delivery continues to hit the most vulnerable indirectly, and initiatives such as the Blenheim Project are falling victim. The VCS is known to provide high-class services to people and communities who often get missed by mainstream services, but this Government believe that that does not carry a price tag, as we have seen from their so-called big society pronouncements in the past.

The changes in funding, which have required the development of new commissioning and VCS frameworks, have made it impossible for projects such as Blenheim to continue providing the quality support that they know women and children need. The new reality in funding and commissioning arrangements makes many successful small charities unsustainable. Small to medium-sized local charities face challenges due to the drive towards commissioning processes that seek to maximise outputs on the same resources. The tendency for bigger charities to drive down costs as loss leaders in the first instance makes the option of tendering for contracts unsustainable. Smaller charities do not have the resources to invest in future developments, never mind taking on projects as loss leaders as part of a wider strategy. In a statement, the Blenheim Project said:

“Due to pressures in funding Bradford Council can no longer support as many homeless people as before and have drastically reduced both the number of places they will fund and also the level of funding”,

which would no longer be adequate for the services that the project offered. In addition, the council took away the project’s ability

“to assess the needs and risks of the clients”

for itself.

Only a few hundred yards up the road from the Blenheim Project used to be another project, the Manningham Mills Community Association, which has also bitten the dust. Another community has been robbed of a vital resource due to funding cuts and belt tightening. For me, however, there is belt tightening and there is just strangling a community. What the Government are doing is a shameful indictment of how out of touch they are with the communities they are supposed to protect.

[Chris Davies (Brecon and Radnorshire) (Con)]

The hon. Lady is making a generalisation—it sounds as though the whole of the third sector had disappeared. I met the Powys Association of Voluntary Organisations, my local third sector governing body, just last week at its annual general meeting. Everyone would like more money, but such organisations are striving to succeed and still doing an extremely valuable job. I regret the fact that the hon. Lady is making it sound like the third sector has vanished.

[Naz Shah]

I thank the hon. Gentleman for that comment. Although I agree that the third sector is doing a valuable job and is working hard, if one considers the Tory Government’s proposed £300 million-plus cuts to the Big Lottery Fund, which I will refer to later, that will put my comments in context.

In communities such as my constituency of Bradford West, where more than 26% of children are already living in poverty, the average weekly wage is more than £110 less than the national average. In another ward in my constituency is a specialist project catering for black and minority ethnic women fleeing violence, which would have soon closed due to pressures facing the local council were it not for the intervention of the Big Lottery Fund, the input of which in my community is literally life-changing. Across my great city there are many other examples of the axe falling heavily, and all of them have a few things in common. They are smaller VCS organisations, providing vital services and lifelines to those most in need of support and plugging the gaps where statutory services are not delivering strongly.

The Government are making it harder to secure grants and funding at a time when demand is increasing and capacity is already stretched to maintain current service levels. The top-heavy austerity measures and the slashing of Bradford council’s budgets by almost half by 2020 have led to a short-termist view, wholly created by the Conservative Government. Whereas councils were previously able to take long-term views on VCS funding, the parameters of that work have now been narrowly defined. The money available has been restricted to reduce costs, there has been a drive for efficiency and to obtain ever-increasing best value, and a reduction in unit costs has led to the likes of the Blenheim Project being placed in vulnerable positions. The situation is set to get significantly worse and have an impact on other areas of the VCS and charitable economy.

The Government fail to realise that much of local government, the NHS and the third sector operate in a symbiotic relationship, helping to create a robust mechanism to meet needs across the board. Taking out the third sector or reducing its ability to operate under financial strain will have an impact on the drive to reduce admissions, promote self-care and increase community capacity for home care and the promotion of health. We are only storing up problems for the future. Saving money in that way is a false economy.

Along with the provision that we have lost due to charities such as the Blenheim Project closing, the Bradford district has lost expertise and the ability to reach out to places and groups that need help. The project closed its doors at the end of September 2015 after 37 years of supporting hundreds of vulnerable, homeless women and children. As a result, Bradford has lost jobs and 17 rooms for vulnerable people, and wider community involvement and community development has ended. A successful church community project has closed, leading to the loss of valuable expertise that knew its community exceptionally well. There are many other such cases across Bradford, and the picture is repeated in constituencies across the country. It is not unique to Bradford West.

My final point is about potential cuts to the Big Lottery Fund. We have been hearing reports of a 30% reduction, with the money being used to cover a hole in the finances of the Department for Culture, Media and Sport equating to between £300 million and £320 million a year. If true, that will be devastating to VCS organisations across the entire country. I will use the example of my constituency to illustrate just how damaging the loss of 30% of grant money would be to small organisations, in particular small charitable projects. Since 2014, the fund has commissioned 466 projects in my constituency to the tune of £4.9 million, almost 90% of which were for under £10,000. It is an amazing array of projects, targeting some of the most vulnerable and the most in need. From that alone, we can see how a reduction in grant awards would decimate the small community projects that can have transformational impacts on people’s lives as they often concentrate on specific, niche needs. The Anah Project in Bradford is only there because of the Big Lottery Fund. Furthermore, as I said, we have seen changes to the awarding of grants, a lack of capacity in the VCS to apply for more complex funding and the loss of funding from struggling local councils. In all, plainly, the big society appears to be even more hollow than first feared.

Unlike the Government in their approach to communities such as mine in the north, the Big Lottery Fund does not discriminate. It gives out funding to individual projects, based solely on the value they add and, most importantly, on need. We could face a betrayal not only of the great work that individuals and organisations do in the community with lottery funding, but of the members of the public who elected this Government. Many will feel that the Government are overstepping the mark if they backtrack on the principle of the additionality of lottery money, which has been reiterated time and time again by successive Governments. The money is there for the community, not for this Government or any Government to plug holes in their funding.

I want assurances from the Government that they are considering the long-term implications of their decisions and the pressure that they are putting on the VCS. More has to be done to tackle the inequality in procurement and the manner in which contracts are decided if we hope to be able to retain some of the most valuable and innovative community engagement work across all sectors in the foreseeable future. Charities and voluntary organisations need to be able to plan their funding and projects on a longer-term basis. The Government not only have a responsibility to help build capacity in the third sector through investment, but they also need to give assurances on the unknown costs by making critical decisions, such as on council tax relief for charities. Ultimately, the Chancellor must not use the Big Lottery Fund to act as tape to cover up poor financial planning in central Government. As John Major said, lottery money is from the people for the people.