Wales TUC Submission to the National Assembly Communities and Culture Committee Enquiry: Funding of Voluntary Sector Organisations

Purpose

The Wales TUC welcomes this opportunity to provide evidence to the Communities and Culture Committee Enquiry into the funding of the Voluntary Sector in Wales.

The Wales TUC readily acknowledges that the Welsh Assembly Government and many, but regrettably not all, Local Authorities have been most supportive of the Sector. Wales has long tradition of voluntary and community work and recognises the Sector’s role in innovation, advocacy, campaigning, specialist work and the significant 'value added’. This is somewhat at variance with the situation in England where the Third Sector has been described as the Government’s 'weapon of choice’ in Public Service Reform, which has resulted in a huge amount of under funded outsourcing to the sector and increasing commercialisation and poor practice as a consequence.

Wales TUC affiliates represent approximately 9,000 members working across the Sector. Predominantly, though far from exclusively, those members work in health and social care, children’s services and related occupations. Some Third Sector organisations are significant employers and public service deliverers working on contracts particularly to local government. Such organisations often raise little or no money through 'traditional’ donations and fundraising activities, but are reliant, sometimes almost exclusively on that contract income. There are clearly distinctions between such Third Sector organisations and the more traditional concept of voluntary organisations or charities with their community base, fund raising activities, campaigning, specialist advice, support and advocacy roles.

As one would expect, this paper will concentrate on the staffing implications of funding arrangements. We make no apology for this. There are over 46000 paid employees in the sector. This is apparently equivalent to 2.2% of the total workforce. The generally insecure funding regime clearly impacts on the Voluntary Sector in a destructive way. Below we highlight employment insecurity, the impact upon quality in the Sector and the increasing, in our view deleterious, effects of the 'creeping contract culture’.

This submission has the full support of the Wales TUC Secretariat but is subject to formal ratification by the Wales TUC General Council which meets quarterly and next in January 2008.

Background

Employment Insecurity

While there’s been a significant improvement in grant periods and funding duration (though it does now seem that three years is becoming the maximum rather the norm) some of that increased security is on the other hand being offset by the increasing reliance on contracts and creeping "contestability” .

There is an intensifying climate of competition for work (and funding), resulting in anxiety amongst workers about future employment prospects. This situation is aggravated by uncertainties over Supporting People funding and its future if and when this money is entirely transferred to Local Authorities

Voluntary Sector workers can be subject to all aspects of employment insecurity, most particularly the threat of job loss and changes to terms and conditions (particularly pay).

There has been an increasing shift away from the traditional alignment to local authority pay scales as "quasi-market” rewards are developed. Atypical forms of employment, such as temporary contracts, are common. Some workers are frequently put under notice of redundancy while awaiting news about funding renewal. Skills shortages can be caused by a low opinion of the sector as an employer stemming from perceptions about low pay..

Impact on the Sector

The insecure funding and contracting environment can affect service quality particularly in the following aspects:

Greater demands on management time and resources, particularly as contracts come up for renewal
Heightened bureaucracy associated with programmes such as Supporting People
Reduced staffing levels
Threats to continuity of care from employee turnover and falls in employee morale.
The shift from capacity building grants to contracts has begun to convert many voluntary organisations into service providers without the same degree of independence and advocacy as previously.
Grants offer space to experiment, develop the innovative approaches for which the Third Sector is known and have some control over their work rather than working to another’s agenda.

There is some cause for concern about the impact of service delivery upon the independence and governance of charities. Equally there are concerns that Voluntary Sector bodies generally having a relatively narrowly focused public benefit objective with a particular constituency and with wide discretion about how to achieve it, may work well within the broader public interest but have to balance their public benefit purpose with the wider public interest. The public sector is ultimately accountable to the electorates through the democratic process; by contrast the Third Sector however open and transparent is accountable to its users, donors and other stakeholders. These issues of accountability, equity and transparency will become increasingly significant.

Contracting

The use of Competitive Tendering and sharper commercial contracting practice, particularly including 'output specifications’, indicates a lazy approach to development and raising standards and almost seems to outsource policy making, innovation and standard setting. There are a number of local Authorities who pay no heed to national policies discouraging the privatisation of social care. The advent of contestability for the Voluntary Sector has resulted in an increasing shift away from grants to reliance on contract income from public bodies. At the same time the amount of work commissioned by the public sector continues to significantly increase. Many Voluntary Sector organisations have to compete with public and private sector bodies, often to provide core public services. These developments involve a danger that service quality and treatment of staff will deteriorate and the ability of Voluntary Sector organisations to innovate and campaign independently can be compromised.

Competitive tendering presents particular problems for smaller Voluntary and Community organisations, not least in terms of their capacity to compete. Furthermore, if Third Sector bodies are obliged to operate in markets then it’s surely not surprising if they start to adopt the practices and language of their private sector rivals. Several charities now identify becoming a bigger provider of government funded services amongst their aims. For example the Shaw Trust in its desire to become the main provider of employment services for disabled people.

Contestability usually results in voluntary organisations "fighting it out” over price with a detrimental effect upon service, For example, in certain areas NCH and Barnardos compete for children’s services contracts, often on price rather than the qualitative question of their approaches and ethoses in respect of the needs of local communities. Large scale competitive tendering for accommodation services for adults with learning disabilities has been introduced recently in Pembrokeshire, Ceredigion, Cardiff and the Vale of Glamorgan with cost quite clearly being the major determinant of contract award with all of the difficulties that large scale transfers of staff and services bring with them (in some instances this has involved transfers of staff from voluntary organisations to the private sector). No additional protections are afforded to Voluntary Sector staff in these circumstances, despite them clearly providing a public service on behalf of a statutory body. Unfortunately, this can cause some resentment as statutory public sector employees, quite correctly benefit from some most welcome albeit limited enhanced protections in similar circumstances

Recommendations

Quality needs to be emphasised above cost in the developing "quasi market”. Commissioning practices, particularly in certain Social Services Departments must be improved.
There needs to be a greater acknowledgement of the impact of the reshaping of Supporting People on service quality and workforce issues. There needs to be better quality standards developed under the programme to counter some of the poor contracting practises of local authorities.
Staffing issues need to be given a much higher profile both in the awarding of grants and contracts. Ideally we would argue that contacts for service provision should take out workforce terms and conditions from contracts, guaranteeing public sector level terms and conditions for Voluntary Sector workers and allowing competition to be about different types of service delivery and quality that can be offered.
There needs to be a statutory mechanism to ensure "full cost recovery” principles on all bidders so that contracts include allowances for workers training and development, incremental pay rises, pensions and so on. All vital areas that so often suffer in the bidding process and the scramble to achieve the lowest cost.
Full cost recovery principles have got widespread support but these must be enshrined in some form of statutory manner. No bidder for work will include such overheads in bids if they fear the competitors may not do. If there is no investment in training and development, the result will be a fall off in staff skills, difficulties in recruiting and service standards will suffer. .
Social clauses need to be introduced into contracts including guarantees for fair terms and conditions of employment across sectors.
Some of the excellent measures that have been introduced for the workers in the 'statutory’ public sector at time of employment transfer have been most welcome, but they need to be fairly and properly applied and extended to public service workers in voluntary organisations. Partnership Agreements, full TUPE protections including pensions and measures to avoid the development of the two-tier workforce need to be enforced and extended to cover Voluntary Sector to Voluntary Sector transfers and also to Voluntary Sector to Private Sector transfers
Currently commissioners don’t seem to have any consideration for the interests of the workforce in the organisations with whom they contract or invite to bid. There also seems to be little partnership working between the Voluntary Sector and commissioning bodies despite the regular talk of compacts and partnership working.
While there is much in the Welsh Assembly Government’s recently published and welcome Strategic Action Plan for the Voluntary Sector - 'The Third Dimension’ about compacts and partnership and equality for the sector with other social partners, there is little about equality of staff treatment across the public and voluntary sectors and using social clauses to drive up employment standards in grants and contracts despite recommendations from the 2004 Review of the Voluntary Sector Scheme.
Contracts should be stable and as long as possible, following more a service level agreement model than a commercial one. Third Sector organisations currently spend a large proportion of their time and resources reviewing bids and re bidding, often at the expense of improving the efficiencies of services. Staff who are subject to a series of short term contracts suffer a drop in morale and the organisation’s ability to recruit is also harmed.
The possibility should be investigated of cross sector schemes for training, development and pensions to protect workers who are transferring between small community based groups which don’t have the capacity to provide such benefits. If such schemes aren’t developed the larger Community and Voluntary Sector will become increasingly like competitive private companies. They will dominate the sector and local community based organisations that are less able to provide such benefits will be at a permanent disadvantage.