Community and Voluntary Sector Funding

Debate between Naz Shah and Jim Cunningham

Tuesday 24th November 2015 Westminster Hall

[Naz Shah]

My hon. Friend the Member for Brent Central (Dawn Butler) makes a valid point. We are seeing that theme across the country.

The £2.3 billion reduction in Government funding is interesting. It will come through a number of streams, because the third sector has a symbiotic relationship with many Government-funded organisations, not least local councils, whose budgets have been decimated by austerity. However, the wider point is that the Government have been unable to build the third sector’s capacity to apply for more complicated contracts through increasingly complex and larger tendering processes.

[Mr Jim Cunningham (Coventry South) (Lab)]

I congratulate my hon. Friend on securing this timely debate. The Government talked about a big society, but they really meant a smaller society. My hon. Friend touched on an important point. A lot of local authorities procure services from the voluntary sector—particularly from citizens advice bureaux, and I am sure from a lot of other organisations. In a time of austerity, people badly need those services. They cannot get legal aid any more for a whole range of issues. Does my hon. Friend agree that that is an injustice perpetrated on society?

[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.