CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 540-iii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

Public Administration SELECT Committee

 

 

Third Sector Commissioning

 

 

Thursday 5 July 2007

MR JOHN STOKER, MR CAMPBELL ROBB, and MR RICHARD GUTCH

Evidence heard in Public Questions 110 - 193

 

 

USE OF THE TRANSCRIPT

1.	This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
2.	The transcript is an approved formal record of these proceedings. It will be printed in due course.

 

Oral Evidence

Taken before the Public Administration Select Committee

on Thursday 5 July 2007

Members present

Dr Tony Wright, in the Chair

Paul Flynn

David Heyes

Kelvin Hopkins

Julie Morgan

Mr Gordon Prentice

Mr Charles Walker

Jenny Willott

________________

 

Examination of Witnesses

 

Witnesses: Mr John Stoker, Commissioner, The Compact, Mr Campbell Robb, Director-General, Office of the Third Sector, and Mr Richard Gutch, Chief Executive, Futurebuilders England, gave evidence.

Q110 Chairman: Welcome to our inquiry. We are delighted to have with us Campbell Robb, Director-General of the Office of Third Sector in the Cabinet Office, John Stoker, who is the Commissioner for The Compact, and Richard Gutch, who is the Chief Executive of Futurebuilders England Ltd. Thank you very much indeed for coming along. We have invited you together so that we can stimulate some discussion amongst you. You have all given us some interesting written material and we are grateful for that. That means we do not have to ask you to say anything at length to start with but we are very happy for you to say something briefly if you would like to.

Mr Robb: I would welcome that. I am really looking forward to this. Thank you for the opportunity. We have a new Minister for the Third Sector, Phil Hope, who was appointed recently. We are delighted by his appointment. He has a lot of experience in the third sector and was previously the chair of the all-party group on voluntary organisations and charities. Ed Miliband has been voted to be the Chancellor of the Duchy of Lancaster with overall responsibility for this area. Whilst we are talking particularly about service delivery, we have a much wider agenda in the Office of the Third Sector. We have a whole range of roles for the sector and this is only one part of what we are doing. Where those charities and voluntary organisations, the third sector organisations, really want to play a part, we make sure they have the capacity to do that and that government is a particularly good partner in doing that. That is the aim of what we are trying to do. It is not just about service delivery but about all aspects of those services. It is about the creation of services and the design of services. I hope that is something we can also discuss when we get into the discussion about that wider role for the sector, because a lot of the more significant campaigning charities, for example, the RNIB[1] and the Refugee Council, deliver services but also have a very strong in their independent voice and that is something that we really welcome. We have put in place a series of measures, particularly, in the Action Plan, which I think has been circulated to you, and I am really looking forward to having a debate and discussion with you.[2]

Q111 Chairman: Thank you very much indeed. John, would you like to continue?

Mr Stoker: Chairman, I have a couple of preliminary points about Compacts. They are about relationships which go a lot wider than financial ones - although we are obviously talking about commissioning today and that is quite an important bit of the background. Although they have something of the character of books of rules, about how you behave together in partnerships, the aspiration for the longer term is that they are one route to changing people's basic working cultures and assumptions and practices, so that we might wind up over time with a mainstream working culture which favours partnership between the sectors. So there is that aspirational aspect to them as well. I have three, I suppose, headline concerns in the commissioning area at the moment. Firstly, although, as I have said, Compacts are much more than books of rules, and there is good practice in observation of the books of rules bits, there is also some inconsistency and a lack of full delivery of the book of rules bit and that can be an obstacle to the development of the more positive working culture that is a longer term aspiration. I have a bit of a concern, as well, about a side effect of the trend in financing relationships away from grant and towards procurement, in so far as it risks inculcating in public-sector people the idea that the commissioning relationship is all they have to concentrate on to the exclusion of the wider relationship between the sectors, which is part of the Compact arrangement and which is not disconnected simply because you go into this new relationship. Finally, that movement towards a procurement model and away from grants poses some special issues for some smaller local bodies that traditionally have been grant financed. I would like to encourage public commissioning authorities to think about those issues and to do what they can to mitigate effects in that area in the way that they do their commissioning.

Q112 Chairman: And Richard.

Mr Gutch: Thank you and thank you for inviting me today. I would like to give a quick bit of background and update on Futurebuilders. It was the result of a Treasury review in 2002 that was looking at whether the third sector could be playing a bigger role in public service delivery. It concluded that it could but it was being held back by not having access to finance to grow and develop its capacity, and by having quite a lot of skills and systems weaknesses, in terms of business planning, financial planning, IT, that were holding it back in terms of winning contracts. The fund, which is now a £150 million fund, provides investment to third sector organisations to help them develop the capacity to deliver public services. At the moment we are working in five areas: health and social care, education and learning, children and young people, crime, and community cohesion, but from next April, the fund is going to be working in all forms of public service delivery. We have offered over £100 million in investments to 225 organisations. It is important to be clear: we do not fund the delivery of the services ourselves. We are helping the organisation to get to a point where they can win contracts from local authorities, PCTs, Learning and Skills Councils, which will fund the ongoing provision of the service. We mainly lend money. This raised eyebrows initially, in the early days of Futurebuilders, but the concept is that the organisation prices the cost of the loan into their service price when they negotiate with a commissioner in just the way that a private sector provider would, except, of course, they are working on a non-profit distributing basis. Finally, Futurebuilders England Ltd is itself an independent non-profit company. It was set up by Charity Bank, NCVO[3], Northern Rock Foundation and Unity Trust Bank who successfully won a tender from the Treasury to manage the fund. We have a contract, which is now with the Cabinet Office, to manage the fund, so we are an independent company though obviously working under contract to the Government.

Q113 Chairman: Perhaps we could start broadly and then focus on some specific areas. One of the emerging themes coming out of our inquiry is the distance between rhetoric and reality in this area; that is the distance between some of the rather high-flown statements about what the third sector is going to do for us in terms of public services and the rather modest presence that it has and then some of the issues surrounding that. Let us try to have a go at this again. Can you tell me what the Government position is. How much of the public sector does the Government think could be run by third sector organisations?

Mr Robb: The Government has not set any targets in this way for this. As it stands, what we are talking about is quite a small proportion of public services more generally. There are a number of estimates around that but, for example, the estimate most commonly used about the NHS is that less than 2 % of all the delivery of the money spent through the NHS is spent on the third sector, so it is a particularly small part of the wider agenda. The Government is not necessarily interested in a blanket approach to this. It is not saying that all third sector organisations are unequivocally better than all public sector or all private sector organisations. It is interested in finding where third sector organisations can deliver better services for users, and, where that is the case, ensuring that those organisations have the capacity to do that, are contracted with properly and paid properly to do that. It is not about a blanket approach; it is finding those places where they can really add value and create a partnership between the public sector and the third sector.

Q114 Chairman: It wants to increase the role but it does not know by how much.

Mr Robb: It has not ever set a target for that in that sense. The nature of problems we are facing as a society are always evolving. One of the biggest and best things about the third sector tends to be its innovative approach to solving new problems as they arise. You could say now, "We want to do it in this area," and in two years a whole new set of solutions are created by the third sector that then you would want to support. So there is no set target but we want to find where it can do it best.

Q115 Chairman: The paper that you produced at the end of last year -----

Mr Robb: The Action Plan.

Q116 Chairman: -- talked about five main areas.

Mr Robb: Yes.

Q117 Chairman: The position is that we do not know how much in general the Government wants to turn to the third sector to provide but we do know that those five areas are ----

Mr Robb: There are specific areas that we think, working with other departments, we might be able to investigate with the third sector. Substance abuse is the example we have talked about before. Stopping re-offending by people who come out of prison is an area where there is evidence, for example from Crime Concern, that they have a particularly strong record. We would want to explore those areas to see if there is more the third sector can do in particular areas.

Q118 Chairman: On the Futurebuilders side, do you see yourself matching these areas? Would you have a similar agenda?

Mr Gutch: Yes. Obviously we will be embracing all those areas from next April. I think the Government has set a policy context within which local commissioners and local third sector providers can operate. It is really a matter for how the commissioners and the third sector providers respond to that policy context before one can answer your question. We have lots of examples of local commissioners and providers doing really imaginative things. I mentioned in our evidence an organisation called Building Blocks Solutions. That works in the East Midlands providing a service to seven GP practices, providing non medical support to people with mental health problems. The GP has a choice: they will either refer them for acute care or to formal counselling or to this social enterprise that will provide a listening ear to people, to help them sort out the problems that are making them depressed. It will point them in the right direction, whether it is to relationship counselling, debt counselling or whatever, and that service has been evaluated with extremely positive results. It is saving the GP practices money and it is providing patients with a much better option than simply being prescribed medication. I could see that happening in every GP practice in the country. At the moment it is only happening in seven.

Q119 Chairman: It is difficult to get a sense of whether we are talking about a series of interesting experiments or a wholesale transfer of mainstream public services into a different provider model. Campbell, you are shaking your head.

Mr Robb: Absolutely not. That is not the Government's intention at all. The Government's intention is, wherever possible, to use the third sector as a partner or as a delivery mechanism to transform public service to the end benefit of users. It is not about identifying areas where the whole of that particular service can be taken out. It is about finding those kinds of examples where they really make a difference and, wherever possible, creating the right environment where commissioners and others can have the tools and the organisations to get that to scale if we want it to happen. The areas that we have identified in our plan are areas where we believe there are characteristics which the third sector provides: innovation; flexibility; closeness to users. That is not to say that the public sector does not do those as well but we will look at those to see if there are better solutions to current public sector engagement. The Government has not talked about and certainly in that document is not talking about a transfer.

Q120 Chairman: The Opposition, of course, has done. It is talking about social responsibility which seems to involve basically saying the state has failed and the solution to all social problems is to be found in the third sector.

Mr Robb: I am sorry, who is saying that?

Q121 Chairman: The Conservative opposition, the alternative government, which is a hugely radical perspective. If I worry about the lack of reality in some of the current stuff, this seems to me to go into the realm of fantasy. Perhaps I should not look at you, perhaps I should look at the others.

Mr Gutch: Could I comment on that point. We only invest if there is going to be a clear improvement in public service delivery. We are not interested in investing in an organisation just so it can take over something that used to be in the public sector and then run it in exactly the same way. We are looking for a significant improvement. The acid test for whoever's policy it is must be: "Is this going to result in better services for users, for patients, for people on the ground?" That is the test that we always look at.

Q122 Chairman: The other thing we are discovering is that the evidence base for this is either thin or non-existent. Obviously we have had this recent report from the NCC[4] which is not terribly positive in terms of these great claims that are being made for the extra value that you get from third sector delivery. Is there a serious evidential base for moving in this direction?

Mr Gutch: I would say there is not at the moment. There are certain reasons why the third sector has the potential to improve public services and it is to do with the way it is structured, its independence, the fact that it is not bound by departmental boundaries and the fact that it can involve users in the running of the organisation. These are all things which provide the potential to deliver really good services, but I think you are absolutely right: there is not yet a good evidence base. One of the things that we say to every one of our investees is, "You must prove your case. You must be able to measure the outcomes, the difference you are making." Part of our investment is often to help you do that. In the example I gave earlier, the evaluation they did was funded by Futurebuilders: they talked to the patients, they talked to the doctors to build up that evidence base. But, yes, it is a long way from being there and it does not follow necessarily that, just because it is a third sector organisation, it is going to be better, but I think there are certain things about the way the sector is structured which give it the potential to do some things really well.

Q123 Chairman: Before I hand over to colleagues, could I ask John one question. In your paper you were flagging up some real concerns. In particular, you were flagging up whether some aspects of this Compact, this agreement between the Government and the third sector, is consistent with the competitive environment of the contracting and tendering process.[5] You say, "Difficulties arise with the financial commitments partly because most competitively funded services where the third sector is involved in delivery are not exclusive to them as providers. They are bid for also by others in the private or public sector." Then you say, "On a 'level playing field' it may not be straightforward for commissioners to deliver consistently and fully the Compact financial undertakings to third sector partners unless these have been built into the terms of the programme concerned at the outset". That is an explosive statement, is it not, the idea that somehow the nature of the competitive market in which the third sector is now being required to operate is inconsistent, as you are saying, with financial undertakings given in terms of the Compact?

Mr Stoker: It does not have to be and should not be. I am not saying there is anything intrinsic about this; it is really the way that the procurement is managed in relation to the commitments that are being given in the Compact more than anything about an inbuilt clash. I am saying that sometimes people do not think early enough, when they are designing procurement procedures for services, about how they are going to observe their commitments. From memory, the Compact itself, in the funding and procurement code, does very clearly make the commitment from Government that all the Compact commitments, whether they are about procurement or whether they are wider ones, are consistent with rules of government accounting and European Union procurement. It is a question of management rather than a problem about basic compatibility, I think.

Q124 Chairman: But the issue comes back often to this question of whether the third sector should be treated like everybody else or whether, in fact, because of undertakings that have been given, they should be treated differently. That seems to me to be a rather fundamental issue.

Mr Stoker: If the Compact was delivered, they would be treated in some ways differently. That is partly because there are commitments to consultation which are in there: commitments to a voice at the table when needs are being defined and programmes are being put together to meet them; special consideration for black and minority ethnic groups and community groups. These are all there. They do not exist in the same way for other sectors. If you read what the Compact says, in some specified areas the Government is saying that it and its agencies will behave in particular ways, and it might not with other sectors that did not have the same social value and the same effect on community cohesion, the same ability to create social capital

Chairman: Let me bring colleagues in.

Q125 Jenny Willott: You have been talking about the role of the voluntary sector in this area of work as being to improve services. It sounds like you are really talking about the third sector coming up with good ideas, piloting them in small areas with small organisations and then the idea being nicked by the public sector and carried out on a broader scale across the country as a whole. Is that a fair assessment of what often happens?

Mr Robb: It is one of the models. I recently visited a great project in Coventry. You say, "This is fantastic. Where else are they doing that?" and they say, "In Cornwall". You say, "How is it in Coventry and Cornwall?" and they say, "Because the person who set the project up here moved to Cornwall". That is how good practice is shared, by people changing jobs. It is obviously not a good way to do it. When there are good ideas and they look like they will work across the board, like the one Richard was describing, we are interested in how we get that to scale, how we support that, how the Government shares that good practice. But that is only one model. Turning Point gave evidence.[6] They are a national organisation, delivering public services on a national scale, in what they consider to be innovative ways which provide them better than they would be by other providers. There is a whole mix of things that we are looking to do and it is not just about the delivery, as I was saying before. We want to introduce commissioning which involves users, sometimes in the design of the service, sometimes using the third sector to help them do that. There is a whole range of models that we want to have, and that is just one of them.

Mr Gutch: As Campbell says, there are all kinds of situations. Mention was made of Turning Point. Turning Point are developing five rehabilitation centres in different parts of the country for people with drug and alcohol related mental health problems. They describe these as "Priory style centres but at not-for-profit prices". At the moment PCTs are paying for a lot of people with those kinds of problems to be treated, and the only way they can get them treated is in the private sector. Turning Point is helping to develop a quality service on a non-profit basis. That, if you like, is the reverse of what you said. The point about user involvement is really important. One of our investments is in Barnet Voice for Mental Health, which is the establishment of a safe house for people with mental health problems, where they can go at weekends or if they have a crisis and cannot get into the state system very easily. It is run entirely by people with personal experience of mental health problems themselves. Peacemaker, another organisation in which we invest, is run by a group of Asian people who were caught up in the Oldham disturbances in the North West. They are doing community cohesion work in schools, in communities and with local authorities, rooted in their own experience of those problems. I do not think you would ever find a private sector organisation that would be able to work in quite those two ways, because, as I said earlier, it is to do with the way third sector organisations are structured that they can involve people directly on their boards, in the delivery of services and so on.

Q126 Jenny Willott: A lot of the areas you have just mentioned are issues that are difficult politically, around race, drug abuse and things like that. Could it be seen as a way to palm off to the voluntary sector issues that are slightly difficult politically?

Mr Gutch: They are not being palmed off. They are being paid for by the public purse.

Q127 Jenny Willott: But it puts it at arm's length.

Mr Gutch: It is to do with the ability to take risks. I think it is true that third sector organisations, because of their independence, are better placed to take risks.

Mr Robb: On many occasions the users themselves are afraid of the state. Drug users and others have a difficult relationship with the state. The third sector organisations can often act as a mediator and ensure that people can get closer to what they need and to some employment services as well. That is a very positive thing, that the state is using an intermediary to begin the process of getting people back into society through drug rehabilitation and other things. There are advantages to that. This is commissioned by public sector commissioners, who are looking at this through a lens of: What is the best value for money? What is the best service? What is the best end point to the user? It is not a matter of palming off difficult issues at all.

Q128 Jenny Willott: In terms of the role of the third sector and their involvement, is it necessary for them to deliver the services? Or would you achieve the same improvement in public services by just involving them in the design of services and ensuring that you have much better user involvement in the design and then leaving it to the public sector to deliver?

Mr Robb: Both, is the answer to the question. We would want to see much more third sector engagement in the understanding of which services should be used in a local area; where residents are talked to using a third sector organisation perhaps as a consultation mechanism to understand what users want from a particular service, say for mental health, then it might be that the public sector or the local authority is best placed to deliver that. That would be absolutely fine, if that were the case, but sometimes the local authority or the commissioner might judge that the third sector provider was the best provider to do that. Again, it is not a blanket approach, but we believe there is an advantage in involving the third sector in all these different areas, and, just because you are involved in designing a service, does not mean you should end up delivering it. It might mean that you are best placed to do so, but it might mean that other people are best placed to do so too.

Q129 Jenny Willott: What is the disadvantage of using voluntary sector organisations to deliver services?

Mr Gutch: One of the reasons why Futurebuilders was set up was because there was a concern from a lot of public sector commissioners that the sector did not have the capacity to be a very reliable partner in the delivery of services. They might have lots of good ideas but they do not always have the systems in place to back them up. I think that is one of the worries that a lot of commissioners have and that is one of the reasons why we are trying to work with commissioners and say, "Look, if you are interested in perhaps commissioning more from the third sector in particular services areas, we can invest in organisations to help them get stronger, to level the playing field so they can compete better, and overcome that concern about them perhaps not being sufficiently businesslike to enter into a larger, longer contract."

Mr Robb: I would not say it is a disadvantage but there is an issue of scale. Many of you are in constituencies where you have programmes which you think are absolutely fantastic, many of which are very small local organisations, and there is that problem of how you transfer a really good idea throughout the country. Sometimes that should be the job of the public sector. Occasionally it might be that you want a voluntary sector organisation to deliver that but they only have the capacity to do it in one or two regions. So there is an issue around scale, and the ability of certain services to go nationwide if you want them to.

Mr Stoker: It is a bit difficult to generalise on this. The answer will be different in different places, at different times, in different circumstances, in different services. The one thing that we probably all regard as fundamental - the real basic assumption - is that you have the services delivered by people who are best placed to do that. Sometimes that will be the public sector directly, sometimes that will be the private sector, sometimes it will be a voluntary and community sector organisation. It depends very much on what the service is, where it is happening, down to personalities when you are talking about the local scale at which some of these things happen, but the bottom line is always the quality of the service provided to the user.

Q130 Jenny Willott: What is the disadvantage to the third sector of delivering these services?

Mr Gutch: There is a potential disadvantage of their agenda getting distorted. Obviously the whole concept of commissioning is that you have to provide what the purchaser wants to buy. One of the things that voluntary organisations have to be very clear about and their trustees have to be very clear about is "Would getting involved in this particular bit of public service delivery be consistent with our mission, consistent with what this organisation is there to do and the values it brings to it?" That is an assessment every single organisation needs to make for itself. I think it is very wise to try to retain the capacity to do other things besides just delivering public services under contract, so you retain that ability to campaign, to try out new things that commissioners do not want to pay for. I think you are very wise not to have all your eggs in one basket.

Q131 Jenny Willott: My background is the voluntary sector. We used to deliver public services to some extent and one of the issues we had in delivering the public services was resentment by the public sector of our involvement. I used to run Victim Support South Wales. Our ability to do our job relied fundamentally on the police's buy-in to our services. If they did not pass our information on and they did not contact people, we were not able to do so. How much of a problem is that? If you are talking about increasing the role of the voluntary sector in delivering public services, has any work been done at looking at the relationship between the public and voluntary sectors and how you overcome those problems?

Mr Robb: The Office is running a programme with the IDeA[7]. Over the next two years we want to work with 2,000 commissioners across public services, local and national, to make sure that we are finding the right balance. The Government is becoming a really good partner in this, across the board, to understand that and to begin to examine how commissioners can work with the authority. The disadvantage to any partnership is when one of the partners does not understand the benefits that the other one brings. Part of the Office of the Third Sector and the Action Plan is about making sure that the Government, where it wants to deliver public services with the third sector, is a really good partner. In doing that, it gets it right, it understands it and it sees the benefits it brings. We have a whole series of measures which we think will begin to do that, to help the public sector to see where the benefits are and to get it right when it does do that. If we can get that right, to go back to your earlier question, that will be about that whole range of issues, not just the delivery of the service or the mechanisms of doing it. It will be involving them early, right through the board, and seeing the benefit for users. I am happy to talk in more detail about some of the programmes if you want, but we do have a number of programmes in place to do exactly that. Futurebuilders itself does a lot of work with commissioners, in advance of giving its grants, to make sure that the partnership is in place to deliver the service.

Q132 Jenny Willott: We went to New York last year and looked at how they commission and deliver public services through the voluntary sector there. One of the things which came out very strongly from that was that the voluntary sector there is now so huge and powerful that they are not innovative any more and the innovative ideas are now coming from the public sector because it is much smaller. Do you perceive there is a risk that might happen here if we do scale up the delivery of public sector services through the voluntary sector?

Mr Robb: You did mention you had been to New York in our previous session. It goes back to the question partly of scale. The third sector is tiny in comparison to the public sector, and the amount that is delivered is still tiny in comparison to what is delivered by the private sector, so we are nowhere near that kind of situation. The big trick the Government has to get right is to get the things it wants from the third sector - that innovation, that flexibility in the contracting process - and that it does not squeeze it out in the big bear hug that you have with the state. You have to find a way to ensure - and this is what the Office is involved in in the programmes we have, having issues like the Compact Commissioner and Futurebuilders - that you retain the flexibility, the innovation, the excitement, the risk-taking, at the same time as ensuring you have good use of public money and you are getting the desired effect for users. That is the path we are on in the Office and that we want to get to through the Action Plan. We are absolutely clear that we do not want to squeeze out the very best from the third sector.

Mr Gutch: Interestingly, when I worked at NCVO, I went in 1990 to the States and wrote a report called Contracting Lessons from the US which perhaps you might be interested to see.[8] That also highlighted the danger that the sector can get too large, too bureaucratic and lose what was the whole idea about it, what was special about it. I think we have an example of that, to some extent, with housing associations in this country. They have grown and grown and there has been a need almost to reinvent some of the things that were special about housing associations, in terms of providing for groups of people who are at a real disadvantage in getting access to housing. I think the trick lies in the commissioner specifying the service appropriately. If they specify about needing to involve local people to work with local communities, that is going to point in the direction of organisations that are not multinational charities but have found ways of retaining that local route which I think is often so important.

Mr Stoker: A lot of organisations in the third sector would say to you that they are a long way from running out of ideas, because they would like more scope in the current commissioning arrangements to implement their ideas. One thing I hear quite often is that the way that services are specified does not favour the transformation which is the aspiration of the third sector participant, because they are really quite closely specified on a model that the commissioner really has pretty much firm in its own mind. They would like a bit more scope, please, for their bright ideas, if anything.

Mr Robb: If you look at some of the very big organisations - and you had Turning Point here - they are what you would consider to be large, £100 million organisations. They are some of the most innovative care providers in this country. They are getting to scale but still retaining, because of their trustees, because of their management, because of their ethos, that which is special and different and innovative about it. They believe very passionately that they can grow bigger and still deliver a service. Lord Adebowale definitely believes that Turning Point can grow bigger and still deliver a service which is innovative, flexible and close to the user. It is not necessarily just a big and small thing. Small organisations can be stifled as well. I just wanted to be clear that it is not just about that; it is not just scale that can create that kind of problem that you may fear.

Mr Gutch: I think partnerships are often the way forward between the larger nationals and local organisations. We are doing quite a lot of work with some of the bigger charities, working in partnership with a number of local groups in a particular area.

Chairman: That was very interesting.

Q133 Julie Morgan: Do you think it is possible to be critical of government/local authorities when you are in receipt of contracts with them?

Mr Robb: Absolutely, yes. I do believe that. Both in my current role and my previous role at NCVO I absolutely passionately believe that some of the biggest critics of local authorities and the government are organisations that are in receipt of funding. The Refugee Council is a perfect example which took money from the Government to help do the assessment programme and was one of the strongest critics of the Government's refugee policy. I think it is entirely possible to do that. We have to make sure - this is the job of the Office and other bits of government, the very existence of John and the Compact - that organisations do not feel they are under threat when they do that. It is one of the first lines in the Compact that the Government is committed to allowing organisations to be critical and to be in receipt of funding. We have to make sure we live up to that and the Office wants to do that both at national and local level and we have to make that happen. The interesting issue about scale here is that the danger of self-censorship perhaps happens more at a local level, when you are a small organisation in receipt and your total funding comes from that local authority. That makes you more vulnerable in a particular area to do that and there is a lot of evidence emerging that local Compacts are beginning to be a good mechanism for giving people confidence not to self-censor. In answer to your question: yes, I do believe that but we have to really work at it.

Q134 Julie Morgan: I certainly think at a local level it is more difficult. My background is in the voluntary sector as well and I think that in delivering services for a local authority you are inhibited in what you say.

Mr Stoker: My experience is the same as yours. You do quite often hear people who say that they have a frustration or they feel that part of the deal in the local Compact has not been delivered, but they grit their teeth and they do not confront it because they are afraid that there might be damage to relationships. The view I take on this is that you can only judge this locally because personalities are obviously going to be quite an element in this. But my first instinct would always be to encourage people to make the challenge and call the bluff because that is the only way that you are ever going to move attitudes and practices on, even if it might get you into conflict locally on occasions. I suppose, fundamentally, here we are, we have these local Compacts, we have the Compact at national level. To attitudes which say, "We know it is there but we are a bit too anxious to try to rely on it" there is no system answer. If you have a system and you decide not to use it, the system has failed you. My first advice is always to be courageous about this and to confront it. Of course you can do that in a constructive way; you do not have to do it abrasively. The Advocacy Programme, dealing largely with national things, based at the NCVO, does say that, although they are often involved in circumstances of disagreement and conflict, there is often a constructive path out. You can actually work constructively with people to get through problems

Mr Gutch: Clearly there is a danger but an awful lot depends on how you go about it. The reason why a voluntary organisation, in a sense, is able to speak out is because of the experience of its users. It always has to go back to that. If it seems to be adopting an ideological position, rather than talking about the experience of the people it is working with, then I think that risk becomes higher. What makes it legitimate for it to campaign is if it is talking about its users' experience.

Q135 Julie Morgan: I want to ask you about the accountability of third sector organisations. What rights do the users have in third sector organisations? We know they have rights with public services. What are the differences?

Mr Gutch: One of the themes perhaps of all our answers is that this is varied. I could not claim that every single third sector organisation is incredibly accountable to its users, but I would say it is certain that a lot are and if they have any sense they need to be working on that all the time. A legitimate question for people to ask is: What gives you the right to say this or do this? It has to be the fact that you are in touch with your users, with your local community, if that is the kind of organisation you are. It is up to the organisation to get that right.

Mr Robb: I agree with what Richard is saying. There is a lot of work going on now in the third sector, led by many of the umbrella organisations, to take this forward and to make voluntary organisations, third sector organisations, really understand their accountability mechanisms and become more transparent and accountable. They are accountable through the commissioning process, which is a separate issue. Also, we as the Government recognise that if we want organisations to play a greater role in service delivery, and that is because of users, we also have to make sure that those small organisations have the capacity to do so promptly and the ability to do that. We fund organisations like Capacitybuilders, to get down to the local level, to give frontline organisations the understanding and the means and the ability to make sure they are speaking on behalf of the users that are regularly in touch with them. Over the next few years, we want to make sure that we can support the sector to get up to speed on this and make sure it is good. As Richard says, it is variable. Some organisations are extraordinarily good at this. Some of the mental health charities and others have spent a lot of time getting users on to their boards, into their actions and employing staff so that they really are at the forefront of some of this work.

Q136 Julie Morgan: If you are receiving a service from a third sector organisation and you are dissatisfied with that service, do you have any less rights than if you are receiving it from a local authority?

Mr Robb: Nearly all third sector organisations should have complaints mechanisms that do that. It depends on whether it is a service funded by the local authority as well. There is the Charity Commission obviously. There is the Fundraising Standards Board now if your concern is about fundraising. If it is through a commissioned piece of work through the local authority then, ultimately, you could go back to the local authority to say that you were unhappy with the service. The recent NCC survey work seemed to suggest that third sector organisations were achieving a level of satisfaction equal to and in some areas better than other service providers.

Q137 Chairman: On that point, the evidence is troubling, is it not? The Charity Commission survey last year found that 69 % of charities did not have any complaints processes at all, including 40 % of those charities which were providing public services. The Independent Complaints Reviewer for the Charity Commission has told us, "In this growing area of public service, the citizen remains unprotected by redress mechanisms other than the courts."[9] Surely, for a sector which claims to put users first, that is a worrying finding, is it not?

Mr Robb: One of the things we will be working on, through our commissioning programme and with commissioners, is ensuring that those contracted to provide public service delivery have adequate means of redress for service users if they feel the service is not up to what they want it to do. We will work with people to make sure that is the possible. A great deal of very small, tiny charities may not need that, but the figure we will be most interested in is the 40 % of organisations that they say are delivering public services that do not have complaints mechanisms. We would want to work with commissioners, the sector and others, through support for the sector, to make sure that the service users feel they have adequate redress through the normal mechanisms that you would have in other sectors.

Q138 Julie Morgan: But you have no surety that they have.

Mr Robb: This is partly the responsibility of local commissioners and whoever is buying the service. Central government cannot manage all of those contracts between a local area and a local authority. If they are buying a service from a local charity, it would be not unreasonable for them to say, "What are the mechanisms by which we can find out if there are complaints about this service?" or "What are your mechanisms to do that?" That has to be done on a contract by contract basis. We would expect and hope to find ways that make that appropriate for very different organisations. You would not want the same redress mechanisms for a small £10,000 contract as you would for a £2 million contract to do something else. We would expect that to be done through the commissioners and the contractors primarily.

Q139 Julie Morgan: If you are in receipt of a service from a local authority, you have clear ways of redress which could end up with the Ombudsman, for example. Is this clear -----

Mr Robb: This should be through the contracting mechanism. In a contract that you take out with a local authority, the local authority would normally, I would assume - and, Richard, you might know more about the contracts themselves - have that mechanism of redress in that, built into the contract.

Q140 Julie Morgan: If the service is contracted from a local authority, they would have the same rights as users of the local authority service. That is what I am trying to find out. Is it the same?

Mr Gutch: A good commissioner should make absolutely certain when they contract with a third sector provider that that third sector provider has systems in place to ensure complaints can be made and dealt with, and, ultimately, yes, the matter could be taken up with the Ombudsman.

Julie Morgan: So they have the same methods. Thank you.

Q141 Paul Flynn: Do you think there are weaknesses in some charities that are used as fronts for commercial organisations to advance their causes? Shall I give you an example? There was one charity set up in 1990 by a man who was struck off as a solicitor for stealing his clients' funds. It was set up almost entirely with money from the pharmaceutical industry. The person who set it up disappeared from the organisation and so did £40,000 of their funds. I will not mention the charity because it is still in business - under new management, might I say - but up to three years ago they were getting 80 % of their funding from pharmaceutical organisations and they were distinctly silent in pointing out adverse reactions to medicinal drugs. Do you think this is a danger that is inherent in charities? Obviously you would not get this in the public sector.

Mr Stoker: I have to remember which hat I have on here because I was the Charity Commissioner for five years and spent a lot of those five years worrying about abuses of one kind or another.

Q142 Paul Flynn: The Charity Commission did investigate this organisation in the mid-1990s and did not come up with any conclusion. It allowed the organisation to continue, as it is continuing today.

Mr Stoker: I do not know any of the circumstances of the particular case. The point I would make is that vigilance is obviously important, and the existence of oversight. The other thing is that the charity sector never has been immune from abuse but you can say exactly the same about any of the other sectors that might be involved in the delivery of services, whether it is the public or the private sector, in extreme cases. Where cases like this come up, it is of course extremely important to take them seriously and examine them carefully but it is dangerous to generalise from the particular to the general.

Q143 Paul Flynn: Mr Gutch, would you like to comment on this?

Mr Gutch: In a sense, all the things we have said that are good about the third sector mean that it is going to be vulnerable occasionally to somebody trying to exploit those very freedoms, that very independence which is what is valuable about the sector. The way to address that is through having systems in place, with the Charity Commission and others. Of course it is a risk and it comes with the territory of having a sector that thrives on independence and people starting up new things and doing things in different ways.

Q144 Paul Flynn: Could I give you another example, Mr Gutch. When Viox was exposed as a drug that caused 144,000 heart attacks and strokes to people with arthritis, on the Arthritis Care website they gave advice which was: "Don't panic if you are taking it." There were one million prescriptions a year for it. I would have thought the advice: "Don't panic" is not the correct advice, if you are taking a drug that is likely to give you a heart attack or a stroke. I think the advice possibly should be "Panic now." Also on the site next to the advice was a little notice saying, "This website has recently been refurbished with help from the pharmaceutical company, the manufacturers of Viox". I understand you were Chief Executive of Arthritis Care for nine years. Is this not an example of where there is an influence on a splendid charity like Arthritis Care by money they are getting from a company that wishes to push their products under the guise of the charity?

Mr Gutch: You are right, I was the Chief Executive of Arthritis Care for nine years and I took Viox for three years myself

Q145 Paul Flynn: I am glad you survived.

Mr Gutch: All charities like Arthritis Care, that are working in the health field, have a very difficult tightrope to walk in their relationship with the pharmaceutical companies from which they may get sponsorship. In the case of Arthritis Care, they have a medical advisory committee with distinguished rheumatologists on it who will have advised the executive about what should be said in relation to the news that was coming out about Viox. Charities like Arthritis Care and all the other ones, the MS Society, et cetera, have a balancing act between not terrifying the members and users and being responsible in the way in which they report on medical research and so on that is coming out. They may not always get it right but it is very difficult. You would have found lots of GPs that would have given different advice on Viox.

Q146 Paul Flynn: Arthritis Care have a long record of recommending drugs which were later taken out of circulation because they had adverse reactions. Is it not human nature? If you are in an office and you are getting a lump of money and you know that if you do not get that money coming in you are going to have to sack John or Jane, does that not inhibit you? Is your mouth not bandaged, when you should in fact criticise drug companies when adverse reactions appear?

Mr Gutch: Arthritis Care would never recommend a particular drug. It would provide information about the choices that patients face and it would provide them with advice about the questions to ask of their GP and their rheumatologist.

Q147 Paul Flynn: There is the particular example of the charity I mentioned and then charities, like Mind, which take not a penny from pharmaceutical companies but have had a heroic role in exposing the dangers of Seroxat. Two other main mental health charities were completely silent and in fact defended Seroxat and attacked Panorama. Could I turn to your document which you take as an example of a company that you would regard as an exemplar, I presume. It is one that is having services in acupuncture, chiropracture and homeopathy. These are services without a very secure scientific basis. If I came along as a faith healer for some other organisation or if I was "Placebos R Us" and giving people a drug with nothing in it, would somebody be likely to support me - 10 percent of my patients would be killed immediately.

Mr Gutch: I think the point to remember about Futurebuilders is that we are investing in organisations that want to have a service commissioned by a PCT or by a local authority. We only invest in that organisation if the PCT, who we talk to, have said "This is a service that we want to commission." We do not have to make a judgment ourselves about whether that particular service is right because the PCT are the people who will have the authority on that; they are the people that are going to be paying for the service.

Q148 Paul Flynn: As Jenny pointed out, we went to America and one of the alarming things we found in America, concerning its future and the direction that the Government and the Conservative Party wishes to go, is that there was evidence that the third sector have taken over a huge area of work there. The difference between that and the public sector is that the third sector has a vested interest in continuing the problems that they have, and when problems diminish, the bureaucracy does not diminish in the third sector. The case we have is on homelessness, which was a huge problem in New York, as it was here, and it has gone down to a core of homeless people now, but the bureaucracy is still intact. The amount they are spending on that is a huge amount, and that is more likely to happen in the third sector than it is in the public sector, which has an interest in diminishing the problem.

Mr Gutch: I think any third sector organisation worth its salt will be constantly assessing the needs that it is trying to address. Let me give an example in the field you have just mentioned. St Giles Trust, which is one of the organisations we have invested in, were focusing entirely on street homelessness. As a strategic change, they are now working with ex-offenders, and, as you know, that is major social challenge. So, they have done exactly what you fear they would not do. They have said, "Street homeless is no longer quite the issue it was. We as an organisation have been doing street homelessness for hundreds of years." They made a strategic choice to focus their work instead on ex-offenders, preventing reoffending, which is, obviously, a major issue. So, I think it does not follow necessarily, what you said.

Q149 Paul Flynn: You are nodding, Mr Robb.

Mr Robb: No, I am nodding at St Giles'. They are an excellent organisation.

Q150 Paul Flynn: Could I give another example then, if you say the tendency is to go into other areas. The tendency, surely, is to either change the definition of homelessness or to---. We talk about people who are homeless, and people who are under-housed or in poor housing are classified as homeless and the charity continues. You have seen the hardcore homelessness in London, and, obviously, the figures have reduced to at least a third of what they were, yet the charities are expanding, they are not reducing in any way.

Mr Stoker: Can I contribute a personal experience here. After the bombings in July 2005 I was asked to take over efforts to set up the charity to have a fund for the victims, and that fund set up distributed the proceeds of public contributions almost exclusively to the victims and closed down, from memory, I think in October last year. So, I think I would say that that is not unique, that reflects a tendency in the sector to see a job, get on with it and, when you have finished the job, move on to the next thing and avoid creating permanent structures with a cost which does not contribute to the ends of the users. I am sure that practice varies, but, again, I think it would be dangerous to generalise too much from the particular.

Q151 Paul Flynn: Have you any comments on the American experience? Is there anything which you have learned from it that we should avoid here because they are so far in advance of us in this direction?

Mr Stoker: I know quite little about the American experience. I think, on the scenario where services which have been competitively contracted to third sector bodies in this country took on a bureaucratic life of their own, there is always a risk, but I do not think it is generally likely, simply because of the shortage of resources. There are fewer resources than there are people competing to use them. That is constantly making both commissioners and suppliers look at ways of doing things smarter and doing things differently. I think once that pressure is in the system, it is not likely to lapse into a kind of lazy continuity of the kind that you describe.

Q152 Paul Flynn: Mr Robb?

Mr Robb: I think that the Government is committed to finding those solutions which will benefit users. It is not in the business of creating a perpetual hegemony for any one particular sector. We are so far away in terms of scale from what you describe in New York in terms of that, I do not think that is the case, and we are very, very conscious of ensuring that there are accountable, good contracts which ensure that problems are identified and solved and move on, and this country is particularly adept at identifying and changing what a contract is for as it perceives the need to be there. I do not believe that is a place that we are moving towards.

Mr Gutch: I would make two points about the American experience. I think from the commissioning side, it is very important not to be tempted into just having a few very large contracts. I think it is important to specify them in a way that makes it possible for smaller organisations to compete to provide the service and to bring out in the specification the real value that they are looking for in terms of the way the service is provided. If it is all about big is best, then we will end up with the sort of thing that you saw in the States. On the third sector provider side, I think there is an obligation on every third sector organisation that is entering, or is involved in, public service delivery to be continually asking itself, "Is this the right thing for us to be doing? Have we got the balance of our work right? Are we still campaigning? Are we still doing new things as well as providing public services?" That is something you cannot legislate for. I think it is about each organisation continually reassessing that.

Chairman: Thank you.

Q153 Kelvin Hopkins: You have said at the beginning of your presentations this morning that the third sector is really meant to supplement and complement the public services rather than replace them. There is, of course, an interface and a slight overlap there but, by and large, they are there to supplement, doing things which perhaps the public sector cannot or will not do or is ill-suited to do. Is that fair?

Mr Robb: I think mostly that is the case, yes, absolutely. Again, it is about an assessment of the need of the user, what is it that is needed, and the supplementing thing. It comes back to the innovation thing. There is growing evidence, for example, that people who are diagnosed with cancer, if they are in an area where they have a very strong cancer network run by one of the charities in that area (most of the evidence in this area is around breast cancer support), they are really supported, they have got people that are there when they are diagnosed and they are supported and it seems that they are more likely to have a good prognosis. In some areas the PCTs are now supporting that, because they think that from diagnosis to support to treatment, there seems to be better evidence that that is working. So, that is an example where you can really supplement something that already exists. But in certain places of care, residential care, perhaps previously provided by the state, is now provided by different providers, so it is a mix and match area, but in general, I think, this is right, yes.

Q154 Kelvin Hopkins: Lord Adebowale, who came before us recently, used the same figure you did, about 2 % of overall public spending on public services is really in the third sector, and he did not anticipate it getting any larger. The real drive, he thought, was in some areas for privatisation, not for the third sector. The third sector was just a minor component of the ideological drive coming from central government. He also said that voluntary sector services over time become statutory. Many of the things we have now, like the Health Service and education, started off as voluntary sector, third sector, but became so important that they had to become statutory and provided by government. Universal provision was necessary, these services were essential for the economy, they had to be statutorily funded and publicly accountable and that is the way things have gone. Is it possible that some of the services that are now being provided in the third sector might eventually move more into the state sector rather than the other way round.

Mr Robb: That is the point I think Richard was making at the beginning in the example he gave about GP surgeries and people with mental health. What the state and the public sector is trying to do and get better at is finding those examples that you might wish to take to scale that really make a significant difference across the board. Wherever that idea comes from - it might come from within the public sector - there are lots of examples of really innovative care; they exist within the public sector. This is not a discussion which is saying that the third sector is better than the public sector at all, but what I think we are interested in is finding those ideas, and sometimes it will be about taking them to scale, and that can take a very long time, or it can happen very quickly. An example would be kids clubs that really were not a national provision 10 or 15 years ago and are now considered to be something that the state should provide in every school. That is an example of something that started in the third sector and has been mainstreamed across the board. So, yes, that is a definite possibility and I think that has to be done in a way that reflects on evidence, that reflects on usefulness and reflects on the scale.

Mr Gutch: I think there is a very important distinction between what happened in the twentieth century with services that started off as voluntary services, which were funded mainly through a voluntary source of income, eventually becoming statutorily run and statutorily funded services, and what is happening now, which is more about services being statutorily funded but provided by the third sector. One of the biggest investments is in a school called The TreeHouse Trust, which a special school for severely autistic children who are all paid for by the local education authority, but I could never see that school becoming a statutorily run school, because it is absolutely part of the life-blood of that school that the parents are completely involved in the running of it. They will do some extra things as well, which the state is not able to pay for. There is a very big difference, I think, between that kind of situation and what happened in the early twentieth century.

Q155 Kelvin Hopkins: That leads on very much to my next question, which is that one of the great advantages of the voluntary sector is that a lot of volunteers are involved, particularly where there are family interests. In Mind, for example - parents of autistic children are likely to get involved in autistic charities and so on, and the state will not do that. The third sector thus draws extra resources into provision, and very good resources, because there will be this personal concern, personal care about the people receiving the service. Is not that really the most important role for the third sector, where you draw in volunteers, people who have a personal concern about the people receiving the service?

Mr Robb: I think it is worth pointing out that there are hundreds of thousands of people who volunteer in the public sector as well, in hospitals, in schools, as child leaders, supports and everything like that. People do choose to volunteer in the public sector as well and make a massive contribution to doing that; so volunteering does not just happen in the third sector and with voluntary organisations. I think it is one of the potential benefits that you get from contracting with a third sector organisation that they may have a group of volunteers who will add to the service that they do. What most contracting is about is paid staff delivering services to a quality which meets the standards required. Many organisations choose to add to that service by the use of volunteers that help them to do that as well. So, there is a benefit there, but I would not say it was the only benefit that you get from contracting with a third sector organisation in the delivery of services.

Mr Gutch: One of the examples in our submission was a John Grooms centre for extremely disabled young people. They have got a contract with the PCTs, and that pays for the basic service that is specified by the Commission, but they are also using voluntary income to provide a fantastic service that is way beyond what the Commissioners are able to afford. I think that is a legitimate aspect of this as well, so long as it is quite clear what the Commissioner is able to specify and pay for, and then, if the charity wants to do something over on top of that through voluntary income, that is fine.

Q156 Kelvin Hopkins: One of the concerns that has been raised is that the voluntary sector, the third sector, covers a vast range of organisations, absolutely fine organisations like Mind, for example, which I visit regularly. Housing associations are regarded as part of this third sector, but they are now rapidly growing in size and merging and becoming vast landlords, effectively, moving towards being private companies. That is the likely future, particularly if an opposition party becomes a government, which may not happen, but we will see. Is it not part of the drive of government, and particularly the opposition, actually to allow that sort of thing to happen, to move things into the private sector, first of all by getting them into the voluntary sector? Certainly it has happened in housing.

Mr Robb: I can only comment on what we are implementing as a policy at the moment, and, as I have said on a number of occasions, at the scale that we are talking about, the drive is to find those areas where the third sector can deliver better services for users, to allow the state to work in partnership with them, either as a delivery mechanism or by transforming what is already being delivered by the public sector. It is about transforming public services for users wherever it is possible, and in the areas that we are talking about there is not that level of scale. Victor Adebowale would say that he can do five times as much as he does already and believes that he would be able to do that efficiently at a scale and, he would argue, I think, better than the private sector or the public sector can do it.

Mr Gutch: I think the housing association example is a very interesting one because it does, in a sense, give us an idea of what could happen more broadly. First of all, you must remember, they are non profit distributing, so they are not a commercial company. Also, I think you are getting newer, more specialist housing associations now forming and working with particular communities that are having problems with access to housing, and also housing associations are beginning to work in partnership a lot more (which is something we are keen to invest in) with local groups in their area, with local refugee organisations, for example, and seeing themselves as having a wider social responsibility in the areas where they are the mainland landlord.

Q157 Kelvin Hopkins: My final question is about the costs of commissioning other organisations other than direct state provision, because the commissioning costs are always enormous for organisations. I know my local authority, for example, whenever they have to bid for things, half of their staff seem to be involved in bidding. Voluntary organisations, particularly those very small ones, sometimes spend half of their resources on bidding for contracts when they want really to spend their resources not on bidding but actually providing the service. Is that not an inevitable problem, and how can that be addressed?

Mr Robb: Richard is in the business of exactly this, but maybe I could go first. I do not think it is an inevitable consequence of delivery of public services by outside bodies. I think it is possible, and there are good examples around the country where commissioning is light-touch, is proportionate to the size of the organisation and the size of the contract that is being led. There is always a balance to be struck in this process between ensuring that public money is well spent and is looked after and that we are confident that it is being spent on what we wanted it to do and ensuring that the transaction costs for reporting on that are appropriate and reasonable. The Better Regulation Executive, working with the Office of the Third Sector, has got a whole series of work over the next year to ensure that, wherever possible in the training of our commissioners, we are allowing and making sure that we find that balance. We support commissioners to ensure that the contracting and transaction process is not a barrier to entry to small organisations, does not take up their time, but retains the confidence of the commissioners that they are getting what they want from the public money they are spending.

Mr Gutch: I think a lot does depend on good procurement practice, and I think this concept of proportionate levels of paperwork is very important, and, of course, the length of the contract. One of the things I found when I went to the States was that so many of the contracts were just annual, and so no sooner had you bid and won one than you were having to work on the next - that clearly is a nonsense. So, good procurement is part of it. The other thing I think we touched on earlier is the concept of partnerships between larger organisations and smaller ones where the larger organisation does have the resources to do tenders and to enter into negotiations and it can then subcontract with lots of smaller organisations in a particular area. We are also investing in consortia. These are consortia of small organisations that might together enter into a contract, say, with a Learning and Skills Council, a larger contract for a longer term, and perhaps between them have one co-ordinator who can deal with that side of things allowing all the different local groups do what they do best, which is providing adult education and training for disadvantaged people, and so on. I think there are ways of addressing the issue. It is not going to go away, because we are talking about public money and, clearly, there has got to be a process for deciding how that money is allocated.

Mr Stoker: There are a lot of things that you can do improve performance. I agree with what Campbell and Richard have said. Three-year funding, to which there is a clearer commitment in the Interim Report of the Third Sector Review in December, will obviously reduce costs in that it makes our procurement processes less frequent in some cases. There is some very interesting material in your written evidence, for example, in the evidence from CIPFA[10], about ways in which the work can be specified and lots packaged in a way which is friendly to the size of organisation that you are looking for to run the procedures. Clarity of messages from the public sector commissioner about exactly how much money is on the table: I think there was an example in your written evidence of one charity's experience where their chance of getting a result was something like 5 %, and they were putting a lot of money into applying.[11] The other thing, which the Compact says, which voluntary and community sector organisations can do, which sounds simple, but I am told it is sound advice that is needed, is that before you commit too much by the way of work, time and resource you should satisfy yourself that you are actually eligible for the funding stream that you are interested in. To the extent that you go down the line a fair way before you establish that, that is obviously your time wasted and the commissioners'.

Chairman: Let see what other outstanding issues we have left.

Q158 Mr Prentice: Partnership in Public Services, the action plan, is very interesting.[12] Have you hit all your targets so far?

Mr Robb: We are certainly progressing towards some of them. We have a plan in place to do that, yes.

Q159 Mr Prentice: You talk about developing support and the development of an innovation exchange?

Mr Robb: Yes.

Q160 Mr Prentice: You are looking for a strategic partner. Has that been done?

Mr Robb: Yes, we went through a tender process and we are hoping to announce this week who the winner of that is.

Q161 Mr Prentice: Who is that?

Mr Robb: It has not been made public yet. I am not sure exactly what the process is.

Q162 Mr Prentice: It is just that this was published in December, and you say you were going to do this over the next three months. That would be the end of March, and now we are in July.

Mr Robb: Indeed. We went through a proper procurement process and a tender process to make sure that it was done openly and accountably, and that has taken longer than we had anticipated. We hope that the announcement is made this week, or next week and we hope the exchange will be up and running in the next few months.

Q163 Mr Prentice: I am still not clear in my own mind whether we are going to see a huge transfer of work from the public sector to the third sector or whether it is still going to bump along at 2 % or 3 %. There are all sorts of contradictory messages that are being sent out. Mr Robb, you told us earlier today that there is nothing here to frighten the horses, and yet in this document you mentioned that departments are increasingly turning towards the third sector to deliver public services and you also talk about the commissioning frameworks that are being developed by the Department for Health, the commissioning for health and well being. That could cover everything, could it not?

Mr Robb: Yes.

Q164 Mr Prentice: Then a commissioning framework, underpinned through statutory guidance, being developed by the communities department for local government by April 2008. The material that we have had from the National Audit Office certainly gave me the impression that we would see a wholesale transfer of services, whether to the private sector or the third sector, as part of the Government's drive to get this commissioning up and running?

Mr Robb: I obviously can only talk about the aspects of this which relate to the third sector, and the level of measures in there are about, as I have said all the way through, ensuring that, where it is appropriate, where commissioners believe it is useful to do so, the third sector can play a role in delivering services for users. We believe that that is appropriate because we believe that there are benefits to be had for where that is done properly and accountably and through the procurement process. It is about ultimately ensuring that the public sector and the public services have the capability to meet the needs of their users, and we believe that, where it is appropriate, the third sector should deliver those things.

Q165 Mr Prentice: I do not know if I am going to wake up one morning in 2008 and find out that a lot of services provided by local authorities have been floated off, whether to the private sector or to beefed up third sector organisations being supported through contracts or grants by public money. The National Audit Office says quite clearly that these local area agreements, all flagged up in the latest local government White Paper, will encourage local authorities to move away from a traditional service perspective towards a commissioning role. That seems like big stuff to me, and, yet, listening to the three of you, it is all down played, nothing really to worry about, it is something that will happen in the margins, and I want to know whether that is true: if it is something that is going to happen in the margins or whether it is something that is going to be genuinely transformational. Can you understand?

Mr Robb: Again, going back to the point, I believe where third sector organisations are contracted properly to deliver services, they can transform those services. At the current proportion of delivery by the third sector, I think it is unlikely that you are going to wake up in 2008 and find that to be the case.

Q166 Mr Prentice: Are there local authority services that are ripe for transfer or could conceivably be transferred? When we had a little seminar, I think I mentioned adoption services and a whole series of services provided by local authorities for children.

Mr Robb: You did.

Q167 Mr Prentice: Is that an area that could be floated off?

Mr Robb: Ultimately, the decisions will be made by the local authorities or the local area agreements.

Q168 Mr Prentice: Is it going to be statutory guidance?

Mr Robb: Statutory guidance on how to contract, where it is appropriate do so. I do not believe that statutory guidance is about saying you must. It is about where it is best to do so, where is there evidence to do so, working with the organisations like Futurebuilders to find those innovative ideas that make it happen. Ultimately, many of these choices are made by local commissioners and local authorities and will be in the domain of that area.

Q169 Mr Prentice: If we are going to get services transferred, if they are conditional, would it be appropriate to expect third sector organisations to provide roughly comparable terms and conditions for their staff? Would it be appropriate to expect them to offer pension entitlements that do not mirror the public sector but are broadly comparable? Would it be appropriate to expect third sector organisations to show that their staff have the skills and qualifications, and that they are spending money on training their staff to deliver services that have been transferred from the public sector?

Mr Robb: In any contract and agreement we would expect that the public sector provider provided all of the appropriate costs that would allow those things to happen.

Q170 Mr Prentice: When I spoke to the probation people in my constituency they were complaining that the third sector organisations that would take over some of the work would not have the same emphasis on qualifications, staff training, and so on, and you are saying that is just fiction and would be covered by the contract?

Mr Robb: It would be partly covered by the contract, we would hope. We are also as a Government investing in the third sector in terms of visibility to increase its workforce skills and improve through capacity building. There are a number of initiatives to ensure the voluntary, third sector organisations, not just those that are delivering public services, have the capacity do that. As part of their bidding for this process, they should be taking into account those things, yes.

Q171 Mr Prentice: Are there any areas where it would be inappropriate for third sector organisations to take on what is now universally seen as the role of the state? I am thinking of access to benefit entitlements, and so on, where people are in receipt of benefits, money from the state.

Mr Robb: I am not sure. I think that may be a question you might want to ask ministers. The approach that we are taking in the Office is to find those places where they can deliver better for users, and the Government has never ruled anything in or ruled anything out. The approach we are trying to take in the Office of the Third Sector is an evidence-based approach, working with departments, users and providers to find out which areas those are.

Q172 Mr Prentice: I understand. It would be a big change, would it not? If we are talking about employment services being moved from, say, Jobcentre Plus into the third sector, if employees of the third sector organisations could determine whether a member of the public, a citizen, could receive a state benefit, that would be a big change, would it not?

Mr Robb: That would ultimately depend on whether there were third sector organisations who wished to do that well. That would be a choice for trustees and management boards of charities themselves. Ultimately, that would be their choice as to whether that was something they felt was appropriate for a charity or a third sector organisation to do.

Q173 Mr Prentice: Can I just ask Mr Stoker about the Compact going back to 1998? We know that a huge amount of public money is going into ethnic minority organisations. Mr Gutch told us about Peacemakers, I think, in Oldham. In paragraph 13 of the Compact it talks about black and ethnic minority voluntary and community organisations and that the concerns of those organisations will be addressed through a specific code of practice which will reflect their distinctive needs and circumstances.[13] Has that code of practice been published? I do not know. What does it say about their distinctive needs and circumstances?

Mr Stoker: Yes, it has. There are two codes actually. There is one which is for community organisations; one which governs black and minority ethnic organisations. In both cases they are basically about the spirit of dealings between public sector bodies and the groups concerned. They are very largely about making allowance for the fact that some organisations in both categories will be less well resourced than organisations of other kinds. The codes encourage public authorities to pay special account in consulting with organisations of both kinds and to bear in mind particular needs.

Q174 Mr Prentice: Should we not be moving away from that, corralling black and ethnic minority organisations separately?

Mr Stoker: I think maybe we should. Certainly if that code was being produced these days, it would be much more about diversity issues, generally expressed and much less about a particular sector, but it just reflects the fact that the Compact and the codes have developed as they have over time.

Mr Prentice: Thank you.

Q175 David Heyes: To continue Gordon's questioning on the Compact, it must be getting on for its 10th birthday now. Certainly since it has been put together is over 10 years, and it was put together at a time of great optimism, with the arrival of the new government. I can certainly remember my signatures on a local compact somewhere, together with the mayor and various other workers from the voluntary sector. It seemed to me that it was rhetoric and is still rhetoric. We are still a long way away from achieving the fine aims of the Compact. Just to quote it, it does say it is a starting point, not a conclusion, and it is a general framework for enhancing the relationship between government and the voluntary and community sector, but over and over again in your evidence today, and the previous evidence we have had, we hear "we have not got there yet, we are still a long way away". Why is it that, 10 years after the Compact, it is still rhetoric?

Mr Stoker: It is not all still rhetoric. There is good practice as well as bad practice. Every year there is an annual review of the Compact where ministers sit down with local government leaders and also people from the third sector. I went to my first of these last November, and everybody did freely admit that there was still a gap to be closed between the level of commitment at the top and delivery down the track. Sometimes that is because of what is perceived, I think, by public sector bodies as a force majeure. Other priorities which come in, sometimes about resources, sometimes about leadership, either at the top or in the line, sometimes simply about a cultural change which has not yet completely happened and which has got more steam behind it in some areas than others. I think that the solution to this for the long-term (and it will take some time to get to a better position) is not to sacrifice the aspirational aspects of the Compact, this idea that you should move towards relationships between the sectors which are genuinely different and are based on fuller synergy and mutual understanding. I think that the answer in the short-term to increasing confidence in the process, particularly in the voluntary and community sector, is to do the knitting better and for the public sector partners in particular, not only the public sector partners but public sector partners in particular, to put systems in place so that they are better satisfied that they are actually living up to what you might call the "book of rules" bit of the Compact.

Q176 David Heyes: Are things being done to that end?

Mr Robb: Absolutely. I admit to having been involved in the Compact since its launch in 1997, and I was actually involved in the negotiations between the sector and the Government when I was in the sector. I think there is an interesting thing about it. I think it does work in places. If you go to Tower Hamlets or Sheffield, in some local areas they have taken this concept and they have really used it and they believe it helps the relationship at a local level. The thing about it as well is that it has been evolving. Over the years it has been looked at a number of times and, essentially, when you look at it, you say, "If we did not have this, we would have to invent something very like this", and it has been evolving over the years. The creation of John's post is another staging post on the way to saying: "Which bit of it is not working? How do we fix that?" We have done that. I think the Compact Commission is a really exciting development. I think it is a real opportunity, independent of government, to take government and make sure it is living up to its commitments under the Compact and also for the third sector to live up to its commitments under the Compact as well. I do think it is a way of thinking about a partnership between the two sectors, which is very helpful.

Q177 David Heyes: The reality is huge disproportions of power. It is a clumsy use of that disproportional power by governments and by public sector bodies that is the main source of complaint in terms of things like constantly talking about good procurement practice, a quality commission, and so on. We have been saying that for years, and there is little evidence that it is happening.

Mr Robb: The creation of the Office of the Third Sector is one of the attempts by government to put in place the mechanisms based in the Cabinet Office to really drive this kind of practice across government; the creation of the Compact Commissioner is another way of doing that. I think there is evidence. There are places where it does work, there are places where it does not work and we have to really push to make sure that it does, and I think as regards the imbalance of power, you are right, and part of the reason for having a Compact in the first place is to say that we recognise that and the public sector recognises that and here are some of the ways that you can try to redress that balance of power by thinking about how you commission, by thinking about how you consult, how you really work with organisations. So, the Compact is there to redress that balance. We have not been totally successful at doing that, but we need to keep working on it.

Mr Stoker: What I will say is that I am absolutely sure that at the strategic level in government - and most places in local government too - there is absolutely genuine commitment to making the relationships work. If you look at developments in central government, since around about 2000 every spending review that has happened since has centred round looking at ways in which the voluntary and community sector can be enabled to play a fuller part in society as well as in services. There has also been money put where the Government's mouth is in the shape of capacity building, both through Futurebuilders and also Capacitybuilders. So I do not think it is a question of lack of genuine will to get these partnership arrangements working better, it is just that there is quite a long process of cultural change which is going to take a sustained effort to get through.

Q178 David Heyes: What you have just described as genuine commitment in local government earlier has been described as continuing short-termism in contracts, continuing insensitivity to the needs of the third sector in formulating contracts, and so on. Is that genuine commitment?

Mr Stoker: There is scope for improvement. I think the point in this is that you often get a different perspective and a different kind of engagement if you talk to either, say, a leader or a chief executive in a local authority about partnership between the sectors than if you then talk to the person that, maybe two or three tiers down in the organisation, has spent a career procuring the services as a procurement professional, they have a narrower view often.

Q179 David Heyes: And a very tight budget?

Mr Stoker: And a very tight budget, and used to thinking about things in cost terms rather than in terms of broader value for money, and it is the leadership and the cultural change and the systems to iron out the differences between those views which is the gap in the market at the moment, I think.

Q180 David Heyes: It is the level playing field argument, is it not? They want the establishment of a level playing field between the public, private and voluntary sectors. Given the worthy intentions of the Compact, given the need to be sensitive in putting contractual arrangements in place, how is that consistent with the competitive neutrality that the CBI particularly are arguing for?

Mr Stoker: The level playing field, when it comes down to the bottom line, which is the quality of services delivered to users, is the same for everybody from every sector. The way you can reconcile it with the third sector locally - say you are a local authority, you are, for the first time, moving to procure, on an authority-wide scale, a service or an activity which has previously been financed perhaps by grants in smaller local pockets: you can think about how you parcel up the work because if you parcel it up in certain ways it is going to be more accessible to small and voluntary sector bodies than if you package it up in others. You can think about ways in which you can actually enable some of the smaller organisations that are present locally to get together in consortia to bid for that in circumstances where they might not be able to do that on their own. They can do all of that without actually moving away from the level playing field.

Q181 David Heyes: Really?

Mr Stoker: Yes.

Mr Robb: I am not sure that the level playing field---. There are a whole range of reasons why the playing field is never necessarily level. There are many voluntary organisations who would say---

Q182 David Heyes: A carefully contoured playing field.

Mr Robb: A carefully contoured playing field, indeed. Ultimately, it is about those who wish to buy services, those who wish to commission services, really understanding what it is that they wish to buy and being willing to pay extra for something. We were talking earlier on about the benefit volunteers bring to a particular service. If that is the case, are they willing to pay more for that particular service? The examples that are most difficult to commission for are people with multiple needs, a small charity that is supporting drugs users. If they are successful at what they are doing, there are savings to a local authority across the board and through police and all other things like that. It is very hard to measure what that success is, but commissioners have to be really aware of what they are doing. That is how you create a level playing field, because the Commissioner, the buyer of the service, is exactly clear about what it is they want to buy and they understand the cost that they are willing to pay for that and sometimes they may wish to pay a premium from the third sector or from the private sector or from the public sector because they think they will get something extra for doing that.

Mr Gutch: I think, in our experience at Futurebuilders, we have got quite a long way to go before worrying that the level playing field is becoming uneven in the wrong direction. Our overwhelming experience is that commissioners still view the third sector through grant spectacles - they do not treat them in a business-like way - and the kind of contracts that a commercial provider will expect to get - take refuse collection or something, which will be long-term contracts, fully reflecting the costs of the provider in providing the service - are miles away from most of the funding relationships that third sector organisations experience at the moment, so we have got a long way to go to get this bit of the playing field up to the level.

Q183 David Heyes: One last point, if I might. When we had the trade union people in a few weeks ago with David Prentice from Unison, for instance, the top man in Unison, and these were not his words, but the impression he gave us was that what was really going on here was that the third sector, the voluntary sector was just a Trojan horse for a drive towards the complete marketisation of what we considered as public services in the past, and that the continued problems of tight public sector budgets, the drive to get costs down, and so on, meant that inevitably the third sector were never going to get any bigger than they are now and the consequence was that they will be squeezed out completely because the market would drive it. I give that as a report, that is what the trade unions are saying, and I would be interested to hear your view on that. You are a Trojan horse.

Mr Robb: As I have said on a number of occasions, what the Office of the Third Sector and Public Services Action Plan are here to deliver is better services for users by using the third sector in appropriate places to do that, and that is what we are trying to implement, and to give the third sector the opportunity to work in partnership with the public sector to benefit users, because we believe that in certain circumstances the third sector can deliver services that are better for users, sometimes in partnership and sometimes on their own, and, as I said before, what we are interested in is good contracts that ensure that all of the different things that the contractor wants from that contract, including staff development or the full cost of that, are met through that process. That is what we are interested in.

Q184 Chairman: As a matter of fact, is it possible for a commissioner to say, "We are only interested in taking contracts from third sector providers"?

Mr Gutch: I do not think it is, but what I think it is possible for the commissioner to do is to specify the service in such a way that it is highly likely that only a third sector organisation would be able to deliver that, and that is about perhaps placing particular emphasis on the involvement in the local community, working with local people in particular ways that you would not expect a commercial provider to be able to do. I think it would be contrary to EEC procurement rules to state that you only want to procure from a third sector organisation, but you can specify in a way that makes it much more likely.

Q185 Chairman: This is odd, because if even part of the rhetoric is true, which is third sector brings distinct qualities to the provision, the user focus and everything else, it seems absurd that you cannot say, therefore, we want these services to be provided by third sector organisations. You can then do your competition amongst third sector organisations to see who can best provide it, but you would have said that you think this is the sector that you think should provide the service. Is it really the case we cannot do this?

Mr Robb: I think it is back to the carefully contoured playing field analogy, in that what we are interested in is not specifically the provider of the service. There are benefits that we think third sector organisations bring in terms of flexibility, innovation, closer to users, long-term commitment, servicing multiple needs, and that a commissioner should, if they perceive that is the problem, having gone through a process for really understanding the needs of the users, commission a service that requires those things to be taken into account and may even pay a premium for that to be the case because they believe that provides a real benefit, and then there is an open competition for that; but the public sector, the private sector and the third sector can compete on that and they have to have the evidence, there needs to be the evidence that that provider can provide the evidence that they can do that and that they are the best provider that is in place to do that.

Q186 Chairman: Is it the case that under EU procurement rules you cannot say, "We only want third sector providers?"

Mr Robb: Can I honestly say? I am not an expert on EU procurement rules. I am happy to get back to you on doing that, but my understanding would be (and Richard would know this better) it is the case that for contracts of this nature you have to have an open tendering process.[14]

Mr Gutch: I think it is the essential difference between a grant and a contract. A local authority can provide a grant to any voluntary organisation it wishes, but if it is contracting for a service, then, under EU procurement rules, it has got to be open. As we say, there are ways of specifying it, and also the size of it and all kinds of things, so that you can make it more likely that it is going to be appropriate for that service to be delivered.

Q187 David Heyes: Equally, under the rules, you cannot disqualify a tender that you know to be a loss leader from a private sector organisation that is trying to grab the market.

Mr Gutch: No. If I can make one last point, in a way I think it would be odd if you could say this is only for third sector providers because, as we have been saying throughout, it is not an absolute certainty that the third sector provider is going to be able to provide the service that is needed. We are talking about having the potential to do it, but that has surely got to be put to the test.

Q188 Chairman: I am sorry to worry about this, but if something is not put out to tender, you can simply commission directly, can you not, which does not involve going through a competitive process?

Mr Gutch: This is getting into the complex territory none of us feel fully qualified to answer.

Q189 Chairman: It is pretty essential to know whether this is an area you want to develop or not?

Mr Gutch: You can have negotiated agreements with a provider. Where there is a provider in a very much niche area of provision and it simply would not make sense to open it up, then you can have a negotiated agreement in those kinds of circumstances. You would have to marshal all your reasons for doing that in case there was a challenge, but that is one of the grounds, I think, on which you can have a negotiated arrangement.

Q190 Mr Prentice: I want to ask you about faith, because before Blair politics and religion did not really mix and public money did not go to religions, but now public money goes to promote interfaith dialogue, and so on and so forth, and we are getting used to that. I asked Mr Stoker earlier about the Codes of Practice, and I see in the Compact that there was a Code of Practice promised in 1998 (I am sure it has been published) on community groups, including those which are faith based. Are there particular difficulties about contracting with faith organisations? Just as I have been sitting here I have thought of lots of examples where faith based organisations may want to get involved - the Salvation Army doing meals on wheels, a local Muslim organisation doing Halal, and so on and so forth. What are the opportunities for faith based organisations to get involved, and are there particular dangers that we should be alerted to? Is it a good thing that faith based organisations get involved? Does it matter?

Mr Gutch: I think if you look at the history of charities, obviously lots of them have been motivated by a particular faith, and that is often what has brought people together to do whatever they are doing. The distinction we make is that there is a difference between what is the original motivation for the organisation, the value base of it, and who they are providing their services to. In most cases we would expect the service to be open to people of all faiths. Unless there is some particular, say certain types of education, sometimes there may be a case for that not being appropriate, but in most social services one of the things we would look at very carefully in assessing the application is: is this going to be open to all those who could potentially benefit from it in the particular locality?

Q191 Chairman: Forgive my ignorance, but is it happening in a big way as I speak, that faith organisations are delivering lots of services for local authorities and maybe even central government, I honestly do not know.

Mr Robb: In the context of how much the services are delivered by voluntary or third sector organisations, it is not my understanding a high percentage of those are particularly faith organisations. However, it is worth noting that there are a growing number. The Charity Commission is registering a greater number of faith based organisations and others and, as part of the consultation exercise that the Office of the Third Sector is running with the Treasury over the last year, our trade organisations have increasingly come up and said they were interested in discussing exactly those types of problems.

Q192 Chairman: Is this a good thing or are you neutral on this?

Mr Robb: We want to find out what that is and have a discussion with them. We would not be against or for. We just want to find out what those issues are and have a discussion with them, but, particularly if there is a growth in faith based organisations, we would need to ensure we had the right policies and ways of interacting with that and that people were involved in that process.

Q193 Chairman: As we end, can I ask one final question. We have had a lot of questioning about whether the state has an agenda to push third sector provision further and faster. What about the other side? Is the third sector queuing up, knocking on the door saying, "We want to do more of this? On the Futurebuilders side, we have not asked you about the level of demand there is for your services. Is there vastly more demand than you can meet or are you in the business of trying to stimulate the market? What about third sector organisations who want to do partnerships with the private sector? Are you interested in getting involved there? What happens when people default on your loans from the third sector? What do you do to them then? Quickly, just a sense from the supply side what it feels like at the moment.

Mr Gutch: I think you have to remember with our investment approach, as I said in my introduction, we are primarily lending money; so I think we are pleasantly surprised with the level of demand. We have had 1,300 applications, totalling over a billion pounds, and in a recent survey it was established that 25 % of voluntary community organisations are willing to consider taking out a loan. Part of your question is about the appetite for loan finance, because that is what we are offering, but the other side of it is the public service delivery. I always go out of my way to say this is not for all parts of the sector. There is lots of incredibly important work the sector does which is not about the agenda we have been discussing today. There are people who want to do things through voluntary income, local community action campaigning work, etcetera, etcetera, and I am very pleased that the Office of the Third Sector have introduced a new grant programme to support that kind of work. That is very important. So, I would say there is a growing interest. We have not had more demand than we can cope with, but I expect demand to expand, and it crucially depends on the commissioning environment: because if you are taking out a loan, in the end, you are expecting to repay it because of getting a contract and fees, and the more well developed that market becomes, the more likely you are to be willing to take out a loan.

Mr Robb: Can I just reiterate, we are absolutely not in the business of forcing organisations to deliver public services when they do not want to do that. In fact we have got a whole range of other policies which are about supporting organisations. We have got nothing to do with public services, but what we want to do is to ensure that for organisations, when they do want to deliver public services, there is a good partnership, that they have got the capacity to do it, that they are held accountable for that in an appropriate way and that we facilitate that innovation and change for users, and that is what we are interested in.

Chairman: Okay. We have had some very rich evidence, which we shall digest and use as best we can. Thank you very much indeed for your time this morning.

---

[1] Royal National Institute of Build People (RNIB)

[2] Cabinet Office, Partnership in Public Services: An action plan for third sector involvement, December 2006

[3] The National Council for Voluntary Organisations (NCVO)

[4] The National Consumer Council (NCC)

[5] Cabinet Office, The Compact, November 1998, Cm 4100

[6] Q 1-55

[7] Improvement and Development Agency (IDeA)

[8] NCVO Publications, Contracting Lessons from the US

[9] Ev 24

[10] The Chartered Institute of Public Finance and Accountancy (CIPFA)

[11] Ev13

[12] Cabinet Office, Partnership in Public Services: An action plan for third sector involvement, December 2006

 

[14] Ev