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

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

PUBLIC ADMINISTRATION COMMITTEE

 

 

Third Sector Commissioning

 

 

Tuesday 10 July 2007

MR MARTIN NAREY, MR PHILIP CULLUM and MS ALISON HOPKINS

Evidence heard in Public Questions 194 - 288

 

 

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 Committee

on Tuesday 10 July 2007

Members present

Dr Tony Wright, in the Chair

Paul Flynn

David Heyes

Kelvin Hopkins

Mr Ian Liddell-Grainger

Mr Gordon Prentice

Paul Rowen

Mr Charles Walker

Jenny Willott

________________

 

Examination of Witnesses

 

Witnesses: Mr Martin Narey, Chief Executive, Barnardo's, Mr Philip Cullum, Deputy Chief Executive, National Consumer Council (NCC) and Ms Alison Hopkins, Senior Policy Advocate, NCC, gave evidence.

Q194 Chairman: Welcome to everyone, particularly welcome to our witnesses this afternoon: Martin Narey, Chief Executive of Barnardo's, Philip Cullum who is Deputy Chief Executive of the National Consumer Council and Alison Hopkins who is a Senior Policy Advocate for the National Consumer Council. Thank you for coming to help us with our inquiry into third sector commissioning. We particularly wanted to talk to you, Barnardo's as a big provider and NCC as a big observer of these things; thank you for the memoranda that you have submitted. Would you like to say anything by way of introduction or shall we just get into some questions?

Mr Narey: I am very happy to start, Dr Wright, thank you.

Q195 Chairman: Shall we just head off and see where we go? Could I start with this business about evidence; what we have discovered is that there are a lot of arguments in this area and a lot of claims made for what the third sector can offer as a public service provider, but the evidence is slightly more complicated, is it not - and I am looking at Alison in particular because you have done the work. We have all read the summaries of the research that you have been doing on comparing user experience across sectors. Could you tell us first of all in general about the research evidence that exists on this and then what you discovered when you did the piece of research that you have reported recently?

Ms Hopkins: Certainly. First of all on the general evidence there is a host of anecdotal evidence about third sector delivery and third sector organisations, and by that I mean lots of case studies, lots of quotations. Each organisation collects its own feedback from service users but it tends to fall into what would be the qualitative evidence heading; it is little stories and quotations. It was all very convincing and all very inspiring, but when one wants to stand back and try and assess and quantify that evidence it is very difficult to do so, there is very little quantitative, statistical evidence on the third sector, partly because it is so difficult to define, it is a huge spectrum of organisations of different sizes and different governance arrangements operating in different sorts of areas. It was one of the reasons why we did our piece of research, it was partly to have a think about how one might add to the evidence base and acquire some quantitative data, but it is quite complicated to do. In part we were trying to find a way of developing some quantitative data, but we also wanted to look at was there something about the third sector that was different in the way it delivered service, so we were looking for distinctiveness from the user perspective. As you know from the summary of the report we chose three service areas to look at, each of which has a slightly different service delivery model: social housing, employment services and domiciliary care for older people. We selected a random sample of providers from the three main delivery sectors - public, private and third sector - except for housing where we did not do private. What we found about the variation within the delivery, or indeed how the third sector stood out from the other sector providers, was that it is just not possible to generalise about third sector, so although third sector organisations hold a well-earned reputation, perhaps, our evidence showed that it was not always the case that third sector organisations were highly innovative, responsive to users, flexible and indeed they did not always make people feel part of the community which we were expecting would stand out quite strongly. In some service areas such as employment services third sector organisations really did stand out, they excelled at being very responsive to users, dealing with problems as they arose, that kind of issue. In domiciliary care that was not the case, it was the private sector providers who were seen to be the strongest on user responsive factors and things like treating service users with dignity and respect. In social housing we did not find a lot of difference at all between third sector providers and public sector providers, and indeed in both areas responsiveness to users was not a great strength. Overall none of the providers really performed very well in terms of listening and responding to their users, they tended to be much better at the nuts and bolts of service delivery, providing one-way provision of information, but not necessarily in listening and responding, which we were surprised about, we thought third sector would stand out in that area.

Q196 Chairman: You went around asking people.

Ms Hopkins: Yes.

Q197 Chairman: How many people did you ask?

Ms Hopkins: It was 1230 people altogether, divided between the three sectors and the three services, a quite small but robust sample which we built up using random selection from given populations in the different service areas.

Q198 Chairman: If a policy-maker said to you "As a result of doing work of this kind what conclusions would you draw about where the third sector could most appropriately be used to provide public services, what would you say?

Ms Hopkins: From our evidence certainly the strengths of the sector would seem to be in niche services, niche specialist services, where third sector organisations have lots of scope to be innovative and flexible and responsive, the kinds of services like the employment services that they are contracted to provide, possibly in partnership with others. That seems to be where their strength lies.

Q199 Chairman: I am not entirely sure what a niche service is?

Ms Hopkins: By that I mean a service that has been commissioned, usually for a particular need or for a particular user group, so perhaps with people who have been out of work for an awful long time or particularly groups such as young black males or something like that. It is a very specified service.

Q200 Chairman: Difficult groups.

Ms Hopkins: That is one way of describing it.

Q201 Chairman: Is that your conclusion, that the third sector is particularly good at dealing with difficult groups?

Mr Cullum: Where it is quite targeted and focused where there may be particular needs. Part of what we also picked up was cases where it is not about just the narrow provision of one service but where people's life circumstances lead into lots of other needs. One of the things that people said in some of the areas was "They dealt with me as a more rounded person and they provided things that I was not really expecting" which partly speaks to something about innovation but also about the understanding of the broader spectrum of need rather than just saying we rather mechanistically provide one particular service.

Q202 Chairman: I am not sure how the notion of "nicheness" fits with this holistic view because, by definition, niche is niche; holistic requires operation across the piece.

Mr Cullum: Niche groups is the point, so it is trying to see what the needs of particular groups of people are. Part of the rhetoric around the third sector is an understanding of users and the ability to get close to them. One of the things that we found was that actually that rhetoric in some instances can be rather overblown, particularly when it is being provided to quite a general population like social housing, but where it does stand up, it would seem from our research, is where there are groups of people who have quite particular circumstances. In that case that kind of focus on who are the users and what do they really need comes out more strongly.

Q203 Chairman: Can I bring Martin Narey in on this same point, partly to ask what your response is to research of this kind which is suggesting a more complicated picture of user experience across the sectors, bearing in mind that you say in your evidence that, "Evidence from Barnardo's work shows that services provided by the third sector are popular with both service users and with commissioners."[1] In a way you are making the claim and the people having done the research say actually this is all rather more complicated.

Mr Narey: The first thing I would say, Dr Wright, is I do not agree with the niche point, there is no reason why the voluntary sector cannot work in very wide-ranging services and in a whole range of activities, but I do not make any claim about the services provided, certainly by Barnardo's, being naturally better than those provided by the public sector or the private sector. We are popular with users. I spend a lot of time visiting our 400 projects around the UK and I am fairly consistently told by users that they like coming to us because we are Barnardo's or, more to the point, because we are not social services. That is generally pretty unfair on social services, it is a little bit about packaging. I do not make the claim that our services are necessarily better, but it seems to be undoubtedly the case that users do like them and we might just have an advantage in getting access to hard-to-reach people. For example, one of the services of which I am most proud in Middlesbrough in the North East supports young girls and young men, getting them off the streets where they are subject to abuse and prostitution. A number of the young people there say consistently that they would not come to the service if it was not the name of a voluntary sector provider above the door. Whether or not that reflects fairly on the statutory services, I think it probably does not.

Q204 Chairman: Leave aside the word niche; the proposition that it is some of the more difficult territory, it is some of the harder to reach groups, some of the more challenging areas, would you subscribe to the idea that broadly that is the territory where the third sector can be most useful?

Mr Narey: It can be and at Barnardo's we pride ourselves on working with some very hard to reach groups. We educate children in schools who have been multiply excluded from many schools and we try to hang on to young people and stay with them, so we can do that but I do not think that is a structural issue. My view is that there is nothing that the voluntary sector can do that the public sector or private sector cannot do just as well. There is nothing special about us, what is important is that organisations are well-managed, and I would say that competition is what drives improvements in services. A lot of people in my sector think there is something important about being in the voluntary sector, as if we have a monopoly of compassion, and it is most unfair, we do not. If we are not well-run, if we do not run our services well - and we have some excellent services and some which need improvement - we will not give good service to the users.

Q205 Chairman: It is well-made services irrespective of who provides them as long as there is a contestable environment; that is your feeling on it.

Mr Narey: Yes.

Q206 Chairman: Could I just ask as a matter of information, because we shall talk to you in a minute about the business of commissioning, from Barnardo's point of view in terms of the contracts that you bid for roughly how many do you get of the ones that you bid for?

Mr Narey: We get work in two sorts of ways. We still get quite a lot of work where commissioners simply ask us if we would like to do the work, so obviously we get all of those. When we are in competition with other voluntary sector organisations we win about one in three.

Q207 Chairman: I have not quite worked out, and I am sure it is because I do not understand enough, as to why in some cases you can be asked directly to do things and why in other cases it has to be contestable. If you are a great believer in contestability why would you want to be in a situation where you are simply given the service as it were?

Mr Narey: Because we respond to requests from local authorities, for example, and there is much less evidence of contestability in Scotland where we operate where we still get a lot of our work on the basis that we have always provided that service or we are providing a service in an adjacent town and we are asked to repeat it. In England and Wales the tendency is much more now for competition, there is very little work that we get and certainly no new work that we get other than through competition with other voluntary sector providers.

Q208 Chairman: In your evidence you mention the North East where there are three authorities for which you would like to do work but you are prevented from doing so. In paragraph 6 in your evidence you say: "In the North East, three local authorities have recently stated to us that their preference would be to commission parenting services from us, but that in some cases commissioning and procurement rules inhibit them in doing so."[2] I just wondered quite what you meant by that.

Mr Narey: The Government for many years has been speaking in very encouraging terms about more work being put out for competition and more work being made available to the public sector. Our experience is that there are a number of problems with commissioning and its use is very patchy. Indeed one of the challenges which organisations like us face in the next couple of years is coping with the amount of work which is going back in-house, Children's Fund work, for example, is being absorbed back into local authorities. Some local authorities are much better than others at putting out work to competition; others for all sorts of reasons prefer to keep the work in-house. My view, as you would expect, is not that we are owed any work, we should not expect any work, but we would welcome more consistently to be given the opportunity to demonstrate what we can provide at a given price and to be compared exactly evenly - not to everybody - with local authority in-house provision and that by other organisations including the private sector.

Q209 Chairman: In this particular case do you happen to know what is it about the commissioning and procurement rules which inhibit you?

Mr Narey: I do not know the details of this particular case. My understanding is that those who are responsible for the work have said they would very much have liked us to have a chance of providing it but the local authorities have decided that the work is going to stay in-house and be directly delivered. Some local authorities are much less in favour of putting work out to competition than others.

Chairman: Let me bring some colleagues in and we will explore these issues further.

Q210 Mr Walker: Mr Narey, you came from the Home Office, prisons. This is perhaps slightly off the subject under review today but how do you think, for example, the charitable sector could help with prisons, i.e. the management of prisons or perhaps the reintegration of prisoners into society? I am sure charities are already working within the prison system, but where is there scope to extend that level of engagement with the charitable sector?

Mr Narey: The voluntary sector already does a great deal, both in prisons and with offenders in the community. I spent virtually all of the considerable investment I got from Jack Straw in 1998 to 2000 for drug treatment on the voluntary sector because I believed then and I believe now that they would do a good job. There are lots of small pockets of work which are being contracted out and where the voluntary sector has made a valuable contribution, but what has happened is that since the creation of NOMS[3], which I was partially responsible for, there has not been a much greater step, as I had expected and hoped, to a much wider use of the voluntary and the private sector in delivering services. Contestability, which was very much at the heart of the creation of NOMS, has made very slow progress indeed. I should say straightaway that this is not a bid for Barnardo's, we have no wish to run prisons, but the voluntary sector and the private sector could play a much greater role in very large scale contracts. I believe the contribution of the private sector to improving the public sector in terms of managing prisons has been enormous and I would like to see a much greater use of competition and much greater opportunities for the private and the voluntary sector for much larger scale contracts.

Q211 Mr Walker: I have nothing against prisons themselves; in fact if we need more prisons let us build more prisons. What offends me is the idea that we have revolving door prisons; we get prisoners who go in, they serve a sentence and they keep coming back, recidivistic criminals. Where should the charitable sector be engaging with the prison service to ensure that when people are in prison they actually receive the support they need, the training they need, the services they need to go back into society and be productive members of the community. You said you had some ideas on how this should work but they were not actioned or taken forward; could you be specific in some areas where you think work needs to be done and should be done?

Mr Narey: A great deal more could be done to rehabilitate prisoners while in custody and to prepare them more adequately for their release so they will be reintegrated into society. Simply putting out work with current levels of over-population to the private or voluntary sector will not change the very poor reconviction rates; the fact is that rehabilitative activity has to be spread amongst far too many prisoners at the moment. One of the reasons why it has been difficult to progress NOMS and one of the reasons why I left the Home Office was that I despaired of getting a stable sentencing policy, which is absolutely necessary. If you are going to manage offenders effectively, make sure that they are released in a more considered manner and are supported in the community. You have to have a system which is not working every single day at breaking point.

Q212 Mr Walker: When prisoners are released from prison back into the community you are suggesting - I hope I am not putting words into your mouth - that it is done on a rather ad hoc basis and that there are not enough integrated support networks to help in those critical few months after their release from prison. That would strike me as an area that is ideally suited for the charitable sector to reach out to those people and help them readjust to civilian life.

Mr Narey: My view is that we send too many people to prison. I believe there are some people in prison who probably need to stay there longer and the changes this government made a few years ago in introducing more indeterminate sentences should be praised, but the vast majority of the people we send to prison stay for three or four weeks and they get virtually no rehabilitative activity in that time. We would not send someone to hospital, watch them get no medical treatment whatsoever and expect them to get better, but that is what we expect of prisons. Although there are some improvements at the margins and some individuals do do well in prison - and I retain an old-fashioned view that custody could be made to work, it could be an enriching, rehabilitative educational experience - it cannot possibly be that it is such an experience when prisons are working at breaking point and when their energies are being consumed at coping with the day to day problems of managing too many prisoners.

Q213 Mr Walker: What interventions could Barnardo's be making - or perhaps you are already making them - with young people before they get to the stage where they face incarceration? You probably have a number of initiatives in place but I am sure there is a great deal more you would like to be doing. In a couple of minutes could you just canter through those areas?

Mr Narey: If we are talking about avoiding people going into custody, despite the issue being complicated it is fairly straightforward. In order to stop people offending you need to do two things: make them employable and get them somewhere to live, so the sorts of things we do in our residential schools where we do make people who have been otherwise on the scrapheap employable are very important. Our 25 different schemes around the country which support children leaving care, help them to get accommodation, give them advice on getting into jobs, all those have a significant effect on stopping sometimes the inevitable drip of very vulnerable people, particularly children who have been in care, into custody. Our record in this country on the outcomes for children in care remains pretty woeful. I am very optimistic about the new White Paper published just before the change of Prime Minister, it will make a real difference, but my goodness we serve children in care very badly at the moment. I met many of them when I was working on that.

Q214 Jenny Willott: I want to ask some questions around the risks associated with commissioning, particularly the risk to the third sector. From the research that was done by the NCC did you look at all at mission creep, either through organisations working with flexibility - flexibility and adaptability enough to be able to serve all the needs, as we were talking about earlier, the holistic needs of an individual - and balancing that with mission creep where work starts developing outside of your initial remit. What have you done to look at how that is balanced and how you make sure you do not do the latter?

Mr Cullum: We did not look at the extent to which organisations try to create a new opportunity for themselves, if that is what you mean.

Q215 Jenny Willott: Is it forced on them by the terms of what is available for them through money? Are they being pushed into creeping outside of their initial aim because that is where the money is?

Mr Cullum: One of the questions that comes out of our research is does the government use the third sector in the right way and does the commissioning process actually narrow what the third sector has to offer. It is about insight into people and what their needs are. If there is at times more creativity from the third sector, is the commissioning done in a very mechanistic technocratic way that just requires very narrow delivery, which could almost be done by anybody, and then it is just a question of is it the quality of the management and the people who happen to be providing a particular service. The way the government does it, it may be missing the opportunity in a sense.

Mr Narey: If I may add to that, I do not think there is any question of the voluntary sector being forced to do anything. One of the great privileges of working in the voluntary sector in my view is that we can choose what to do. We look at lots of tender documents from local authorities and some of them we decide not to apply for because we do not want to do it, so it is not a question of being forced into things. I cannot tell you how many times I would have liked to have told successive Home Secretaries I would like someone else to run Feltham or Brixton but I could not; it is a great privilege of the voluntary sector that we can choose. I do not think there is any question of voluntary sector organisations being forced into doing work which they perhaps will not think is effective or which expands their mission beyond their competence because it is up to us whether or not we express an interest in doing the work.

Mr Cullum: We have certainly come across, in other contexts, third sector organisations who have been taken advantage of by government in the sense that government has relied on the organisations' commitment to their mission to essentially underpay them for the services, so it is basically working on the basis that the government will get away with paying what they can because the organisation is so committed to its mission that it will not withdraw. If third sector delivery is sustainable then clearly there has got to be some kind of going rate for it, else it does not really do anything either for the sustainability of the organisations or in the end for the services that are being provided to consumers.

Q216 Jenny Willott: Picking up on something that you said earlier, Mr Cullum, you were talking about design versus delivery. Should the third sector be involved more in the design of policy and then to some extent does it really matter who then delivers it, or is it in the delivery that they have a lot to offer?

Mr Cullum: I am sure they have lots to offer at all stages. I suppose the thing we would most point out is rather than being about the third sector, it is more about consumers' involvement in shaping policy, so more involvement in the commissioning process so that there is more user-led commissioning where people who the services are intended for play a part in deciding what is tendered for and then at the end in assessing whether or not they have been delivered. Those are both points which are in the third sector action plan and I guess the question is that clearly we are not at that stage, and lots of organisations who commission do not involve consumers either in assessing or in the shaping stage at the beginning, and how is that going to be put into practice.

Q217 Jenny Willott: Do charities have to find new problems to tackle as older ones go away and disappear, for example running orphanages. Do they have to find new problems just to stay in business?

Mr Narey: That is certainly not the case with Barnardo's; although we do not run orphanages any more we work with the same sort of children who would otherwise have been in orphanages, it is just that we put a lot of work into getting them fostered and adopted. While we have 3.8 million children living in poverty in the fifth richest economy in the world I do not think we need to invent any problems at all; that is the overwhelming challenge of all our work with children, that so many of them live in poverty. One in three children in the UK; 70 % of Bangladeshi children live in poverty; it is overwhelming.

Q218 Jenny Willott: What about organisations, for example like Shelter, which have changed a lot of the work that they do and have adapted to much more campaigning around poor housing, whereas it used to be focused almost entirely on homelessness?

Mr Narey: I do not feel competent to speak on that.

Ms Hopkins: I would not interpret that as finding new problems; I would see that more as an organisation that has evolved into working with different groups and perhaps meeting different needs. I suppose this is one of the things that I was alluding to at the beginning, that there is such a diversity and richness within it that it is almost impossible to generalise because at one end you do have the large charities like Barnardo's with a very clear purpose, organisations like Shelter that perhaps have evolved but are still doing a really good job, it is not an invented task that they have got. There are still other organisations working at that sort of coalface area where maybe Shelter started off at, and one of the strengths and the beauties of the sector is that there is often the bubbling up at those points of need with the very small, local organisations that are working very, very closely with the people who need those services and then they can grow and evolve into other things. I do not think there is any suggestion that they are creating needs, but there is a response to need and those needs may change over time.

Q219 Jenny Willott: Can I also ask about the ability of an organisation to be independent when they are receiving a large amount of their money from a government source? I know, Mr Narey, you have written various things that say it does not affect an organisation's ability to be independent and to criticise the funder in any way; is that the case for all organisations or is that when you are a large enough organisation to be able to have enough contracts to cushion the blow if you lose one or two because you have annoyed somebody? Does that same thing apply to much smaller organisations where they might be much more reliant on funding from one source; do they still have that independence to be critical?

Mr Narey: Some organisations may fear that they might be penalised in public sector contracting by speaking out. I have rather more faith in the public sector and in the integrity of the public sector to believe that that will be so. As a public sector commissioner you have fairly limited ability to change a decision, a contract. When on one occasion I did not give a contract for a private prison to the lowest bidder I had quite a hard time in front of the Public Accounts Committee because that had to be disclosed, so there is relatively limited scope to give contracts from the public sector to other than the bidder who is meeting all the requirements of the tender and at the lowest possible price. Generally this has become a bit of a myth about speaking out and there are all sorts of examples of organisations which take public money and have consistently spoken out against government policy. Certainly in the last few months we at Barnardo's have spoken out vociferously about the treatment of asylum seeker children with HIV, about children in care. Very recently we turned the Home Office around about their plans to introduce a Megan's Law; I do not believe doing that will significantly affect our ability to gain contracts either from the public sector or the local authorities.

Q220 Jenny Willott: What about small organisations who are more dependent on a sole source of funding?

Ms Hopkins: Smaller organisations who are in that sort of position who argue their case, have some evidence and can have a reasoned argument about what it is that they are trying to advocate or to be critical of are taken seriously and will be taken seriously, because there is a recognition that these are organisations that do have a dual role and indeed that is one of the benefits of having them. A lot of public authorities and public bodies can learn through that experience and actually there is a bit of ears and eyes on the ground. A lot of third sector organisations worry about the potential that there will be some negative knock-on effects, but we do not have any evidence that that is necessarily a problem.

Mr Narey: Although I do not think there is any evidence to suggest that organisations that speak out will not get contracts, there may be a worry for those charities which take their core funding from the government, which we do not. If you get core funding just to exist then there must be a risk that if you are going to insist on speaking out against the secretary of state on particular policies you might believe that would come under threat. There has been some evidence that in the dying days of the last Conservative government people who worked for Nacro would say that they did suffer and did have core funding removed, partly because they had spoken out against the penal policies of the then government.

Q221 Chairman: Some 55 % of your funding comes from government.

Mr Narey: That is correct.

Q222 Chairman: Is that both grant and contract?

Mr Narey: That is all for contracts; we do not get grants from any agency at all, the only money we take is in contractual exchange for providing services.

Q223 Chairman: Would it matter if that figure was substantially different from 55 %? If it was 85 % would it make a difference?

Mr Narey: I would not like it to grow very much because I would want us to be an organisation that was both a doing organisation, providing services, and a campaigning organisation because the link between the two is very important. I want to have the money and the resources to be able to do research and to speak out and try to influence government, but actually I do not think there is a particular level at which I would start to panic, there are other organisations which take a much bigger proportion of their income from statutory funds and I do not think that necessarily should impinge upon their independence.

Q224 David Heyes: I want to pick up with Martin Narey your earlier statement about a very strong belief in competition driving improvements in services, your personal philosophy that you brought from the Prison Service and now into Barnardo's. You talked about having to look at lots of tender documents from local authorities and you make decisions about whether or not to put time and energy into bidding for them, but even the ones that you do bid for you achieve one in three of the contracts that you go for. This whole business of bidding for sometimes sizeable contracts is inevitably costly, time-consuming and some would say it is a wasteful use of your resources. How do you achieve the cost recovery on what you spend on these speculative and failed bids?

Mr Narey: Ultimately, for most of our bids, the cost of tendering is something which we have to factor into the price.

Q225 David Heyes: My monthly donation pays for that, does it?

Mr Narey: In part, although we are very proud of the very high proportion of our income which goes directly on services because our central costs, for example, despite the recent flurry of advertising, are very low. Yes, there is a cost to the contracted process and the tendering process but there are greater and more important consequences; there is also something about instability. I felt very angry last December when I counted up the number of my staff who did not know whether they had a job on April 1. I was being asked by public sector contractors to do things that they would never dream of doing to their own employees. The short termism of contracts, the fact that right now as the year comes to an end there will be a large proportion of our work which we will not know whether or not will be financed again from 1 April. That is very destructive and makes it very hard to hang on to good staff.

Q226 David Heyes: You tempt me to say that is competition for you, you espouse competition and that is competition at work.

Mr Narey: I espouse competition but I do not espouse contracts which can be terminated at very short notice and I certainly do not espouse short term contracts. I got better deals out of private sector prisons when I lengthened the contracts from five to ten years and even better deals when I lengthened them to 25 years. We are not suggesting 25 year contracts, but contracts have to be for a significant period of time if you are going to bed the work down, do it well and retain and attract very good staff.

Q227 David Heyes: I would like you to expand on this whole area with the failings, the difficulties, the necessary hurdles that are there in the commissioning practice, but before we do that I just want to try and understand what you are saying. You said there were costs involved in abortive bids; is there any way you can quantify that for us? What proportion of Barnardo's income goes on competitive bidding that does not produce a result, does not produce a contract or a service to the public?

Mr Narey: It would be impossible for me to do it in my head here, Mr Heyes, but I am very happy to commission someone to try to work that out and I will let you have a note.[4]

Q228 David Heyes: That is fine; if you can let us know that would be good. Can you not give us a kind of indicative figure?

Mr Narey: In truth it is probably quite small in terms of additional costs because most of our bidding is done at a local level and our service managers do it in the margins of their other job. We do not employ legions of contract negotiators to fill in tenders, we try to share good practice, but most of it is absorbed within somebody's day to day job.

Q229 David Heyes: I guess two of your typical competitors in this bidding process would be, for example, NCH[5] and the Children's Society, they are in the same field as you.

Mr Narey: That is correct.

Q230 David Heyes: They are also incurring all these abortive costs as part of their running costs. In the private sector that is the sort of situation when you might see a cartel emerge and it possibly might even be easier to do that in the voluntary sector where I know there is a friendly rivalry between yourself and the other two major players in this game. Does that happen, do you have discussions with your senior colleagues in the two organisations about which contracts it would be sensible for Barnardo's to bid for because it is more related to your experience and your priorities than it would be, say, for NCH, but you know that you have all got to bid because that is the game. Does this happen?

Mr Narey: Absolutely not.

Q231 David Heyes: Not even informal chats in work?

Mr Narey: Seriously, we have a very close working relationship. Claire Tickell of NCH, Bob Reitemeier of the Children's Society and myself get on very well and do a lot of work on joint policy things, but we have never had a conversation - and I have been at Barnardo's for two years - about whether a particular contract should be bid for. One of the reasons for that is I do not make that decision, I do not have any role in dictating what my staff who are working in the North West of England will decide to bid for. We leave those decisions very much to our six English regional directors and our three directors of the non-English regions, but there is no evidence of a cartel whatsoever.

Q232 David Heyes: You could save a lot of money if there was, you know.

Mr Narey: We could. Public services would not do as well because the competition is sometimes inconvenient for us, particularly when there are multiple funders, and that makes it much worse. I was at a splendid project called Health in Action in Manchester recently which supports families affected by HIV; the last time I looked they had 12 different funders and there is an awful lot of time spent there chasing that money, but overall, however inconvenient it is to us, the outcome of that competition is that the public get very good value for money because we have to price very competitively to win the work.

Q233 David Heyes: Can we go back then to this issue of the problems with core commissioning practice. You have highlighted the obvious example of short termism and uncertainty for the future of employees, but there are other factors. Let us try and get some of those out.

Mr Narey: Rigidity of contractual and legal terms. Some of my staff have shown me pages and pages of annexes to tender documents with, literally, sometimes 70 or 80 different pages of contractual terms which are imposed at the tender stage so there is no opportunity to discuss the contractual terms: very short periods to terminate the contract, sometimes clauses in contracts which say that any part of the contract can be varied at any time by the local authority, things which in a normal contractual relationship you would never tolerate - not always, but sometimes those sorts of things cause problems.

Q234 David Heyes: Do NCC have a view on the shortcomings of current commissioning?

Mr Cullum: Our main one is that consumers are not sufficiently involved in the process of deciding what services are commissioned for. We would agree with the idea of a mixed economy of provision to try and meet the various needs of consumers, but part of the benefit of that diversity is about innovation, so if you are asked to bid for things which are so carefully defined that all it becomes is a debate about who can offer it for the cheapest price, then you are missing a trick in terms of the innovation that can come from diversity and, as I say, the spark between the provider and the user.

Ms Hopkins: One of the other things that came through in talking to commissioners in the research was the lack of strategic thinking and planning within local authorities and health authorities. Commissioners often felt slightly isolated and were not sure themselves that they were necessarily using all the current best practice and real cutting edge sort of skills because they are often left to work away in a very technical, dry atmosphere on their own. Hopefully through the provisions of the Local Government Bill in terms of driving best practice and improving commissioning, and through the training programme with the third sector and IDeA[6], rolling out the training commissioners, there could be some improvements, but it is how to be more strategic and how to get the strategic plans down to ground level whereas, as Mr Narey said, most commissioning is done at a local level and the strategic discussions are too far away.

Q235 David Heyes: It is quite surprising that this continues because the real landmark was about 10 years ago when the Compact idea emerged and there was the national Compact between government and the third sector, and that was mirrored in many areas - I think every area has got a local Compact and it is full of rhetoric and worthy statements about partnership and working to understand each other better and addressing areas exactly like the ones that Mr Narey and yourselves are talking about. It seems to be a minefield for the third sector organisations who are bidding and we do not seem to have seen any positive moves on the part of the public sector on this. All the problems are there that were there 10 years ago and in some ways they seem greater, they seem magnified. Why is that?

Ms Hopkins: I am not sure who knows the answer.

Mr Narey: One of the reasons is the commissioning talent pool is spread very thinly. Commissioning has taken off so much in health service and local authorities, and indeed where I was, and my regional and national managers would say that they sometimes meet commissioners who are not terribly good customers, they are not very expert in what they are buying. They are very good about the contractual terms of a contract but they may not know very much about what quality outcomes for children are and they do very cautious things like prescribe the inputs, prescribe how many staff will be on duty rather than prescribing the outcomes for children. If I was giving advice to any public body on improving public services I would say put your most talented people into commissioning because if they are good commissioners who will talk to potential providers and know the good in creative contracts you could really improve public services. That would really help us.

Q236 Chairman: That does raise the question of why we do not have them because you have the Government saying "We want good commissioning; it is terribly important and we are going to put stuff in to promote better commissioning"; every third sector voice that comes in front of us says the real issue is to get good commissioning, so the question is why do we not get good commissioning?

Mr Narey: I know that when I was recruiting commissioners it was very hard to get very good people to move from the delivery side of an operation to wanting to commission work; I find that difficult to explain. Eventually, in running private prisons, I did manage to persuade arguably one of the single most talented people working in prisons to come and do that job and he had a transformational impact in a few years on remoulding private sector contracts and improving private sector prisons without putting an additional penny into the contracts.

Q237 David Heyes: It is finding the right people.

Mr Narey: Absolutely.

Mr Cullum: There is something about the culture. In my personal capacity I am also a member of the Better Regulation Commission and thinking of some of the lessons from regulation, which is often about public servants being very risk averse and organisations in general, including in the private sector, are using contracts in a very defensive way. We are doing some work at NCC with the Better Regulation Executive at the moment about regulatory requirements around information and we have looked at consumer credit contracts and extended warranties and lots of the terms are really there to protect the provider rather than to help the consumer understand what it is that they are buying, which is allegedly the purpose of some of it. There is therefore some sort of culture of protection, and if I think back to a previous job that I had when I had to write tender documents for a research company for bids, some of the things we were asked to provide in terms of information were complete nonsense and I had to try and explain to a really big regulator once - they were looking for about five or six focus groups - how our values were aligned with their values. The tender document was probably longer than the bit of work that was produced at the end, so it just feels like there is an endemic problem which may be partly about the contracting culture and how organisations use their contracts.

Mr Narey: It is now routine for us to be asked whether we have an environmental policy as part of a bid for running a children's nursery.

Chairman: We may come back to this. Paul.

Q238 Paul Flynn: About 12 years ago in this Parliament there was a backbench debate about the plight of young people leaving care. There was not a ripple of interest from outside, from the press, until about five weeks later when the principal speakers in that debate received letters of congratulation from Princess Diana and from wards of court, and then the issue had a greater potential including organisations like Barnardo's and there was a great push to improve the lot of young people leaving care. Why has it gone wrong; is it the fault of the charities or the Government that it is still, as you said earlier on, a major problem?

Mr Narey: It is very difficult to explain, Mr Flynn. There have been some improvements but the current outcomes for children in care are not good. I had huge admiration for Alan Johnson in saying so obviously how bad things were; I thought the Green Paper he wrote last spring was an extraordinary Green Paper for a Government which had been in power for so many years. Educational outcomes and a number of other outcomes - a number of children in care end up in prison - are dire. The reasons for that are first of all that they sometimes are a very difficult group, sometimes we have almost fostered instability. Sometimes we become rather obsessed with fostering and there is lots of evidence of some children we work with who have been in failed foster placements one after the other, where perhaps the decision should have been made at an earlier stage to give them the stability they need and keep them in a children's home but make sure that residential care is exceptional. We do things like move them to schools far too frequently; children in care have lost out in the education market: while parents like me get our kids into the best state schools, children in care almost inevitably go to the worst state schools in terms of value added. There is a whole host of areas where we have failed them but there is a whole host of areas where pragmatically I believe we could make significant progress over the next few years. If we get children in care to the best schools and if we stop moving them in year 11, those two things alone will have a very significant effect upon their educational outcomes.

Q239 Paul Flynn: Do you think there is a memory of what happened then? It was not that long ago when the whole attention of the nation was on this problem. It had the patronage of Princess Diana and there were meetings in this House, led by your organisation; has nothing improved? Is there a memory of a failure of that period? I know you are new in service at Barnardo's but there seems to be very little improvement if you regard this as a major problem.

Mr Narey: There have been improvements.

Q240 Paul Flynn: We did not realise how bad conditions in care were, but we know that now.

Mr Narey: There have been improvements; the educational performance of children in care has improved but it has still lagged so far behind, and in fact the gap has widened because most of our children have continued to do better and better educationally, so the gap between, as measured by five GCSEs, for example, all children and children in care has widened, even though the performance of children in care has increased a touch. But it is still far behind those of our children and not something which we should accept.

Q241 Paul Flynn: You praised the role of voluntary bodies in prisons in drug treatment - and I presume that is the treatment you mentioned - but there is not a prison in the country that is free from illegal drug use, is there?

Mr Narey: That is correct. I do not think there is a single answer to that question.

Q242 Paul Flynn: You could say that the state imposes a regime in prison on drug testing and knowing what the situation is, that drug use in prison is endemic, and yet the state pretends that we can do something about it with drug testing. What effect do the charities have in prison? Surely it is minor?

Mr Narey: I think it has a significant effect. It is important to be clear that although the drug use is common in prisons the extent of drug use, the numbers of prisoners taking drugs and the depth of drug use is very much reduced. There are still very many prisoners who go to prison and get clean.

Q243 Paul Flynn: Okay, let me give you an example. Two constituents of mine, one a man, one a woman. The man left prison - and this has happened in the last 12 months - he was cleaned up in prison, he left the prison and went out on the day he came out and had a meal with his mother, went down to get his usual dose of drugs and he died because he could no longer tolerate the dosage. Two months later a woman came out of prison and within a week died in identical circumstances. Is that an example of a charity's success?

Mr Narey: I think it would be very unfair to blame whichever charity work and whichever prison it was there. What has happened, though - and it has been a particularly critical phenomena in Scotland - is that prisoners have been taking much lower doses, of heroin usually, and then have over estimated their capacity to cope with heroin when they have gone out and taken it again. It is a tragic ending but actually is a consequence of the availability of drugs. But I am not trying to say that prisons have got it right, and indeed my job is not to speak for prisons any more. I have been to prisons around the world where there are no drugs at all and the cost in terms of treatment of prisoners, their isolation from family and visitors in my view is too big a price to pay.

Q244 Paul Flynn: Is it your opinion that the problem of drugs in prison arises from - from what, would you say? Is it because the prison service is lubricated by a process of corruption by which the drugs come into prison?

Mr Narey: No, I think it is a consequence of the fact that such a vast proportion of young men and women entering prison have been abusing drugs, as they do.

Q245 Paul Flynn: How do the drugs get into prison?

Mr Narey: Drugs get into prison in all sorts of ways; some are brought in, some are thrown over walls and fences, some are smuggled in by staff, some are brought in by visitors.

Q246 Paul Flynn: Visitors turn up with big vanloads of the stuff, presumably?

Mr Narey: No, visitors hand things over in prisons. A large amount of drugs are concealed in bodily orifices, and prison staff - and I am not suggesting they should - have no legal right to search bodily orifices, so with women, for example, it is particularly difficult to stop drugs getting into women's prisons. I am not defending that, what I am trying to suggest is that contrary - and I think you and I might have had this argument before in a different life - to popular belief that prisons do nothing to get people off drugs, I think they do. Three weeks ago I was in Sheffield and I met an ex-prostitute who was doing some work in a European working party on looking at how we should handle prostitution in the UK and Europe, and she explained to me, without being asked, that the turning point in her life was going to Styal - not a very pleasant place - serving a long sentence there and taking that opportunity to finally get herself off heroin and her life had turned round from there. I wish there were many more cases than that, but there are still quite a few. Lots of people use the time inside to get off drugs and some of them succeed.

Q247 Paul Flynn: You mention in your report the example of the Hive organisation you have and you say the people using it are unlikely to use social services. Why?

Mr Narey: As I explained, I think in answer to the first question from Dr Wright, it is rather unfair. When I speak to some of our users who say that they will come to our service but would not go to a statutory service I think it is because they think, rather fancifully, that social services or children's services might be too close in line to the police, that information would be shared with other agencies. I think that is unfair. I do not doubt for one moment the integrity and dedication of social workers working in the statutory sector; they almost certainly have a more difficult job than social workers working for me. But whether or not it is right that there is something about us being trusted because of our brand - and I do not just mean us, I mean the Children's Society or NCH - we are trusted because of our brand and we are seen as a little more distant from other statutory authorities.

Q248 Paul Flynn: You do not get any money from commercial organisations at all, do you?

Mr Narey: We certainly do; we are the Lloyds TSB charity of the year and we hope to take a lot of money from them. We do a lot of work with corporate organisations to support our work.

Q249 Paul Flynn: You do not get any money off the people who make lie detectors?

Mr Narey: No, certainly not.

Q250 Paul Flynn: Why do you recommend them then?

Mr Narey: Because I want to make the lives of children safer.

Q251 Paul Flynn: Are you convinced they work?

Mr Narey: I am. Having undergone a polygraph test, Mr Flynn, I would recommend one to you; I think it would remove any doubts you might have about them.

Q252 Paul Flynn: It might cause havoc in this place!

Mr Narey: I am not suggesting that we use it in Parliament! Most sex offenders, contrary to popular belief, know that their behaviour is reprehensible and most of them want to stop doing it and they need constant supervision to help them stop doing it. One of the things I witnessed in Northumbria where we trialled polygraph testing, in my previous job, was the fact that somebody knew that every week they would face a polygraph test and would have to say whether they had been near a school playground, have to say whether they had been fantasising about a child they had seen on the bus, and instil some discipline into them. It is not a panacea but I think if we want to keep our children safe from dangerous sex offenders when released into the community we should subject them to both satellite tracking and regular polygraph tests.

Q253 Paul Flynn: There is no question of your being influenced in any way, your organisation being influenced in any way by the commercial contributions you get?

Mr Narey: No, absolutely no, Mr Flynn. I have no commercial links with any companies involved in that sort of work. It is not work that Barnardo's would dream of going into, but I do think it is work which will keep children safe. I could introduce you to probation officers who have experienced this in the North East, who believe it has transformed their ability to have confidence in what a sex offender is doing. Probation supervision of a sex offender without technology cover is a myth. Even if somebody is being seen every day for half an hour a day we do not know what they are doing for 23 and a half hours otherwise, and we need to give probation officers all the help they need.

Q254 Paul Flynn: Can we take up the answer that Jenny Willott had about the nature of charities and the public services and the American experience? We went to America and one of the impressions we had from America was that the charities had grown to such an extent that they had become enormous organisations and this reduces their ability to innovate and to compete, and one area that was raised was the question of what happens to charities when the problem they are dealing with shrinks. In New York homelessness has gone down to a tiny amount, 5 % possibly, of what it was a few years ago, yet the great varieties of charities are spending enormous amounts, the same as they always did. Is there not a tendency among charities to expand the definition of what they are doing in order to keep their empire intact, rather than a public organisation who would benefit greatly by seeing the problem shrink, the money spent on it shrink and money to be spent on something else. Is this not something that is part of the character of charities? You acknowledge what is happening in the United States where they have gone further down the road that possibly we will be going in this country?

Mr Cullum: I suppose the most interesting example that we came across was in social housing where a lot of the results were really pretty deplorable, so less than half the tenants being satisfied with the service they are getting, so 46 % of people saying that staff treat you with dignity and respect, 45 % saying they are organisation you can trust, 38 % saying they think they make you feel part of the community, 26 % extras you would not expect. So really poor and in some cases a little bit better than the public sector, but only a little bit. I think one question is: has the social housing sector, which is one that is becoming more concentrated, so more housing groups, more housing associations coming together, lost in some way the essence of what they were originally about and becoming almost indistinguishable from the private sector, a house builder, and not building particularly good quality houses? It is work we have done on this both through our Chief Executive, Ed Mayo, chairing the Tenant Involvement Commission and also our submission to the Cave Review of Social Housing, and to us this is a sector which is just not focused enough on the users and the regulator is not focused enough on the users.

Q255 Paul Flynn: What does conclusion does that lead you to, that it is not the nature of the organisation, whether it is in the third sector, public sector or the private sector? Is it the size of the organisation perhaps, the scale on which they organise it? Do they become bureaucratic because they become a very large organisation.

Mr Cullum: I think that is something that you need to be wary of. You get some very good organisations that provide services very well, just as you get some absolutely hopeless small organisations. You have to try extra hard to be closer to your user the bigger you get and I think the sign is that we have picked up a culture in housing - and we have done other work in the housing sector in terms of bringing in tenants and housing officers together - it is a very confrontational sector. Each side feels rather hard done by - the housing officers feel that they are rather the victims of the tenants and the tenants feel that they are beholden to the housing officers. When we brought them together actually there was more of a common agenda and shared solutions coming out, but there is a problem culture there and having big organisations which have gradually become a bit disconnected from users is not helping to tackle that culture.

Q256 Paul Flynn: Your conclusion is that there is not a great deal of difference when houses are provided for rent by the council or a social housing private body. The problem is, presumably, that people want to have control over their own space and have control over their own houses and that is satisfactory, but there is resentment when they rent them and are told what to do. There really is not any worthwhile difference between the two different bodies.

Mr Cullum: I think social housing is marginally better, but really only marginally and in our research we visited 19 key factors which we developed through the policies of research and they did not really come out much better. There was one quote from somebody, which I thought summed it up rather nicely, who said, "My social landlord asked me when it would suit me to come round to put in a new radiator and so I told them, and they came on a different day." So there is something slightly misfiring there.

Paul Flynn: Thank you very much.

Q257 Kelvin Hopkins: The impression given of the Government raising up the third sector is that it is all part of reversing the 20^th century when there was mass expansion of state provision. The Government now and indeed successive governments have wanted to go in the other direction and move things out of the state into these other sectors. Do you feel in a sense that you are being driven by ideology rather than evidential argument?

Ms Hopkins: No, we definitely do not feel like that at all. Our position has always been that what matters is the quality of the service that is being delivered and the quality of service users' experiences, and in that sense who provides them is less important when we do not have any ideological attachment to any party in particular. There do seem to be some benefits from having a little bit of flexibility within a market of provision if and when it is done properly, so what would be ideal would be to have very skilled, competent and well-informed commissioners within public authorities who knew their local territory well enough to be able to put together very successful mixes of providers, be they from the in-house public sector side, private providers or indeed from the third sector because there are slightly different contributions that come from those areas, both in terms of culture and expertise. Perhaps this is a bit utopian, but the best thing for service users would be to mesh the best of those together and have some across service, across sector learning driving up quality across the piece.

Q258 Kelvin Hopkins: In your opening statement you said it is such a vast area that it is very difficult to generalise about it, you must look at specifics and I agree. You used the word "niche" and I think there are certain niche areas. For example, in my constituency there is an organisation that deals very quietly with youngsters who are self-harming, and there is also an organisation called CALM which helps young men who may have had suicidal tendencies. There are all sorts of areas which perhaps the public sector and private sector would have difficulty with. They are run partly by volunteers, and sometimes by religious organisations, and they are concerned about fringe groups who have difficulties rather than providing mainstream services. When it comes to providing general services, I think Martin was saying that there are areas where the third sector ought to move into where the public sector is generally providing. That is a very different order of things, is it not, and are you convinced that that is a good idea?

Ms Hopkins: I am not sure I am in a position to be convinced or not but our argument would be along the lines of what we have just said really, that actually if it was demonstrated that a third sector organisation, either on its own or in partnership with others, could deliver those services best and deliver the best quality service, good value for money and all the other criteria that were required, then we would not see any reason for that not to happen. But we are not here to advocate that kind of development.

Q259 Kelvin Hopkins: Is not the motivation of people employed in these different sectors - and perhaps Martin can answer this - different, between working for a public service and being employed to do a job, but also having a very strong sense of public service, and a private organisation driven in the end by profit. There are differences there. But the third sector tends to have another motivation, which is often a personal involvement - a relative, a friend who suffers from HIV or something of that kind. So in a sense there are different kinds of motivations. In some areas, keeping things in the public sector where there is accountability and sense of public service is much more important and therefore the profit motive would be inappropriate.

Mr Narey: My experience as a commissioner was that despite my earlier and traditional antipathy to the role of the private sector in prison there was no conflict whatsoever between prisons and between making profits and commitment. It is important to keep an eye on the size of the profits but I think the organisations which run prisons and in the main still do run prisons make modest profits - not particularly large, there is open book accounting to check they are not excessive - and I think run decent, compassionate, value driven services. I am certainly not here to speak for them but I know, for example, that a number of the operators who work in prisons in this country have refused to work in countries where capital punishment takes place, in some South American countries, because they are value driven. While I would say that yes, of course, we employ a lot of people who are hugely vocational and we have the benefit of a lot of volunteers, I think it is arrogant to suggest that just because it is the voluntary sector that somehow we have better people - I do not think we do. Certainly my experience as a public servant for 30 years was that there are lots of people who are hugely dedicated to the job in the public sector every bit as much as the people who I now employ in the voluntary sector.

Q260 Kelvin Hopkins: We are talking about the third sector rather than the private sector, but I intend to move on to that. Lord Adebowale came to speak to us a couple of meetings ago and he said that in reality the amount of money going to the third sector is quite small and that the real drive of the government is towards the private sector.[7] He also said something very interesting, which was that most of today's modern public services started as voluntary organisations, in the third sector, sometimes with religious backing, churches or whatever, and they became so essential for general provision that they became part of the state sector. Some of these niche - and I use the word niche - organisations will not do that. But is there not a case that some organisations even now might eventually find themselves in the state sector? Just one example. The Hospice Movement - there is a wonderful hospice on the edge of my constituency which has been built on large voluntary donations, from wealthy people largely, but the revenue costs are very high and they are increasingly pressing for the public sector to pay the revenue costs of running the place. One can see over a period of 10, 15, 20 years it might find itself in the state sector rather than the voluntary sector - the process that Lord Adebowale was talking about. But the government is trying to drive services in the other direction. What is going to happen?

Mr Narey: There is a compromise in that particular situation. The state could commission that voluntary organisation to continue to provide hospice beds if the health service in this case decides that it needs them and it can provide hospice beds through a committee arrangement rather than through direct management; I think rather than the service being entirely absorbed back into the public services that is likely to happen more in the future. It is the case that much of the work that we do could not be done if there were not a public sector commissioner wishing to pay for it. We would do some of our work but most of our work would disappear. So in that particular example I think what is more likely to happen is that the public sector will have ultimate accountability for that work, as it should for people who are facing death in hospice beds, but they do not necessarily need to deliver that work directly. That is the big change. What I learnt as a commissioner was that I discovered the scope to improve public services more quickly through contract management and commissioning and I found it easier than managing directly.

Q261 Mr Liddell-Grainger: Can I ask you a little about the relationship between the state and the third sector? One of the things we have heard about before is added value. How do you quantify added value to what you do?

Mr Narey: As some of my previous answers, I am cautious about joining this chorus which says that we have some sort of added value. I hear the word distinctiveness used about the service provided by the voluntary sector and I have tried to bury the word distinctive and remove it from the Barnardo's lexicon. What is important is that if we have to be commissioned to run public services that we should provide effective, evidence-based and cost effective public services, that is what matters. I think to concentrate on something with value added is sometimes to mislead.

Q262 Mr Liddell-Grainger: Do you agree with that?

Mr Cullum: Yes, I do and I think NCC as a whole would. It is one of the areas that we looked into before we started doing our research because we felt we needed to understand as far as possible what it meant and was intended to mean. Even talking to the larger organisations within the third sector, like ACEVO[8] and NCVO[9], there is not a very clear definition even for them as to what it means in practice. Certain third sector organisations who are interested in delivering these services have difficulty - they are sometimes asked in the tender document to explain what added value they bring and they do struggle with that when they are trying to describe what it is. That is partly why we are very pleased that the office for the third sector has come out and said that it will certainly drive some more evidence collection and try and build up an evidence base, but I think individual organisations need to do that as well. I think third sector organisations, just as with private organisations, have to be able to demonstrate what it is that they are bringing and I agree with Mr Narey that they should avoid the term altogether and be much more precise.

Q263 Mr Liddell-Grainger: I think one of the problems is that a very small amount of money in the overall pot goes into the third sector - it is tiny, a couple of per cent. If that is to expand, and I expect you would like it to expand, and you want to be more included in what goes on, is not one of the ways of doing it showing what you bring to the table?

Ms Hopkins: Absolutely.

Q264 Mr Liddell-Grainger: If that is the case and you agree with that, how do we prove it?

Mr Narey: We need to draw evidence for the work that we do. I think that the voluntary sector has, in recent years, fallen behind the public sector in demonstrating the evidence of its impact. Although targets have gone very much out of fashion I believe that the target culture forced public services to concentrate very much on demonstrating that they made a difference, and I think that is much less developed in the voluntary sector. I still sometimes go to some of our projects, and I am going to Wales tomorrow to see a number of projects, and I see a project which looks very nice but when I say, "This looks lovely but how do we know it works?" people sometimes look at me as if it is a rather odd question, but actually that is the absolute question because there are lots of things we do in this area which look nice and seem nice but if they do not have a real impact on children's lives we should not be doing them.

Mr Cullum: From our perspective obviously, how consumers and the users of services perceive them in terms of how they have been treated and the quality of the service and the outcome that they see for themselves are absolutely key determinants. Lots of organisations, particularly in providing social services, can come up with lots of stories where people say, "This service has changed my life" because that is what the services are there for, but it is the comparators in that service and other services and who is offering the best. Just to give one example from our research, in employment services we asked people who had experience of each of the three sectors does the service work, as it should? The third sector, 88 % of people said yes; the private sector 69 %; the public sector 31 %. That is a very striking difference.

Q265 Mr Liddell-Grainger: If we do get further we need to open up the third sector more. If we open it up how do we achieve that? We live in the day of media spin - dare I say spin? - and that is what people want to see. I suspect that most people do not know the difference between the third sector and the public sector and they just accept whichever way it goes. First could you, the third sector, explain how you are going to do it?

Mr Narey: First of all, I would preface that by saying that we do not deserve work because we are the third sector.

Q266 Mr Liddell-Grainger: That is not what I am saying.

Mr Narey: And I do not seek work on that basis. I think if we brought the same culture of competition to the provision of public services that we bring to every other part of our lives, where we all shop around, whether it is for cars or phones or whatever, if that element were brought into public service and if we got local authorities, for example, to concentrate on commissioning those public services I think that the benefits of that would become pretty evident pretty quickly. As local authorities started to build and develop services in one part of the country which were better than others and cheaper than others, whoever the provider was, then I think that there would be a tendency for the competition to grow and grow.

Q267 Mr Liddell-Grainger: One of you used - and I think it may have been Philip, and I am sorry if it was not - the words "risk averse". Is that not one of the problems, that you are so terrified at getting it wrong or ending up in the media for whatever reason, that you just do not want to take any risks at all? Without risk we cannot achieve because there are certain risks in all sorts of walks of life. Do we have to redefine slightly what we mean by statutory obligations, third way obligation, et cetera? Do we need to slightly change the values, maybe, of what we are doing, as a nation?

Mr Cullum: Absolutely and this is something, going back to my membership of the Better Regulation Commission, that we have actually pushed on, and calling for a much less risk averse society. I think one of the interesting things from NCC's research is that it is often not citizens who are risk averse, it is not parents and children who are calling for bans on conkers in school playgrounds, it is often organisations and people who are often not particularly senior people who are involved in contracting, whichever side, who are just playing it safe. Martin talked about management and there is something about management both on the commissioning side and on the service provider, which is about getting that message across right into the heart of the organisation. There is a kind of appropriate risk management, but risk aversion actually damages everybody.

Q268 Mr Liddell-Grainger: Do you agree with that, Martin? You have had a slightly wider experience in other sectors as well.

Mr Narey: It is easier said than done sometimes and I do have some sympathy for commissioners who want to be somewhat cautious in what they are ordering. A commissioner who commissioned - it is not a children's service - had a contract which was very light in terms of child protection issues, for example, and was likely to face severe criticism when something went wrong. I certainly think that there is much ground which could quite easily be made in making the commission process much less restrictive. A good tender proposal should outline exactly what an authority wants in terms of outcomes and should be much less prescriptive on how the tenderer goes about achieving those outcomes.

Q269 Mr Liddell-Grainger: One of the points is surely that because there are variations throughout the country that people do not quite understand who is providing what - and rightly so, why should they, they just want a service. Do you think we should make it very much clearer, through various mediums, who are providing that service? Like we have these wonderful signs that say "Funded by the EU" should we have "funded by" to make it synonymous with an organisation - I am not looking at Barnardo's, it can be across the board.

Mr Narey: Sometimes the branding might need to go the other way. I suspect that a lot of members of the public and also our service users who come to our service and see Barnardo's over the door probably do not give local authorities the credit that they deserve. Perhaps the sign should say, "Barnardo's, commissioned and paid for by the local authority".

Q270 Mr Liddell-Grainger: Do you agree?

Ms Hopkins: I would think that most service users do not mind and would not mind, although it is useful to have the information. But more concern is understanding what the lines of accountability are, so if a service is provided by Barnardo's or any other organisation and there is a problem or something goes wrong, what the line of accountability is then - is it the Director of Barnardo's, is it through the funding authority? I think it is in circumstances like that that the relationship becomes much more important. It is something that has been recognised by the local government ombudsman and my colleagues in the other ombudsman services, and in fact they have just released a special study looking at partnerships and contract agreements for delivering public services because they themselves had come across particular problems where there is a split in responsibility or different services are funded from different sources and the lines of accountability and the governance arrangements inherent within either a contract or a partnership agreement have not been made clear. So I think that would worry me more than knowing who is funding Barnardo's or another organisation to deliver the services; it is really being able to track back if a problem occurs.

Q271 Paul Rowen: I was interested in your report and the three examples that you have taken. Is it not the case though that you cannot really draw generalisations from that. If you take the employment service it is relatively new for a third sector to be as massively involved as they are now. The rules for social landlords have been prescribed quite heavily now by the Housing Corporation and have got tighter as time has gone on, and social care has traditionally, since local authorities have been divesting themselves, been the preserve of the private sector. How can you draw conclusions and say that people do not know the difference when you are dealing with, if you like, a spectrum of time and services that are at different ends of the spectrum. One is new and innovative, employment services, and that is where the third sector grant is, and the other are long established and the rules are being set by the commissioners.

Ms Hopkins: In a way we deliberately chose those three services partly so that we could look at services in these different models of delivery and indeed where they have had different experiences and where the third sector was better established ---

Q272 Paul Rowen: You have made the point about commissioning and if you take social housing the rules are very rigidly stacked, what the housing corporation will fund, whereas 20 years ago it was a lot more innovative. Therefore, there is less room for manoeuvre for the third sector to be even better.

Ms Hopkins: That may be true but I think what we would say about that is that even though there are quite well defined rules and regulations in social housing, and indeed particularly in social care, the kinds of criteria for the service users that we are talking about as being important to them are so intrinsic to delivering a decent service that they should be there whether the service is strictly defined or not. Actually that is not an excuse, it is not an excuse to say that the housing corporation says we have to do all these things, but actually being polite and friendly and treating service users with dignity and respect should just be part of the service and should not be something special.

Q273 Paul Rowen: I thought your paper about the needs of the third sector was very good, about the level playing field. A large organisation, 110,000 people, what proportion of your contracts are currently short-term? This year, with the Children's Fund ceasing, how many of them are changing around this year and what level of staff and what level of service provision does that actually affect for an organisation like yours?

Mr Narey: I was in the northwest last week and I asked that specific question and I asked a director of the northwest to do the calculation for me. As things stand in the northwest - and I have no reason to believe that this is very much worse in the rest of the UK - at the moment for about 70 % of our work we do not know whether we will be doing it on 1 April, either because contracts are coming to an end, work is being taken back in house or because local authorities have indicated that they want to continue but they are not sure yet whether or not they will have the funding, and they have within the contracts the ability to give notice to quit if they do not find the money. So it is a very unstable environment.

Q274 Paul Rowen: Do you not believe that that affects the quality of what you are able to deliver? Presumably a lot of your best staff will be looking for jobs elsewhere?

Mr Narey: It can affect the quality of what we are doing. I am sometimes astonished and humbled by the way people hang on and most of this work we will retain, and I think a lot of staff working in the voluntary sector get used to short-termism and have the confidence to move on and do something else. But it is very troubling and it is very worrying for them and we should not be putting employees who sometimes have family responsibilities through that uncertainty.

Q275 Paul Rowen: Taking another point that Ian touched on, and that is if the third sector is going to grow and more services are going to be commissioned, is it not the case that a lot of it is used as a cost cutting exercise by local authorities that have a budget problem and can suddenly see your extra added value is actually saving them money.

Mr Narey: I do not think there is anything wrong with local authorities wanting to save money as long as they are not asking us to do work which is of a very poor standard. If a local authority asked us to do something really cheap and cheerful and we thought the work of, for example, supporting children in care was likely to be ineffective we would not bid. But I think it is entirely legitimate for local authorities that want to drive down costs by getting organisations to compete against one another. I have never managed an organisation in the public or the voluntary sector that did not have a tendency over time to lose a bit of sharpness. The most dedicated people over time, the circumstances of what they are doing will sometimes favour them as opposed to service users. I think that Barnardo's is a tremendous organisation but I do not think we have enough services which open sufficiently at weekends, and a commissioning arrangement, because we are being competitive, would probably drive us to extend opening hours and give a better service to service users than we do at the moment and probably at no increased cost.

Q276 Paul Rowen: Why does it then cost you £19,000 to place a child but £12,000 for a local authority? I know you have VAT but that does not account for all of it.

Mr Narey: Because it is a particular area where we take those who are extraordinarily difficult to place. The local authority will generally deal with an adoption of a child themselves if they can do it; they will usually only call on us when they have failed to find adoptive parents, and this is an area where we do have a niche. We do not deal with the adoption of white babies, we deal with the adoption of very hard to place children from minority ethnic groups, frequently severely disabled or with learning difficulties, and we still find parents for them. But it takes a lot longer and it costs more.

Q277 Paul Rowen: Given that the third sector is so diverse how do you get that level playing field and ensure that there is equality of provision and equality of opportunity across very widely different fields?

Mr Narey: My level playing field concerns are not between ourselves and, say, NCH, I think that is a matter for the organisations. The level playing field I worry about is between the voluntary sector and the local authorities, and I am not sure that when decisions were made to take work back in house, for example, which is happening at the moment, I cannot conceive that that takes proper recognition of, for example, pension costs. We have had to abandon our five star pension scheme last year, so have NCH and I think the Children's Society have already done so. But the cost of continuing with a five star pension scheme in local authorities I suspect is not remotely factored in to the costs of bringing work in house.

Q278 Mr Walker: Very briefly, is your turnover growing year on year? Are you expanding as an organisation year on year?

Mr Narey: Yes, it is, Mr Walker.

Q279 Mr Walker: Given that you are expanding how much of a problem are short contracts because you were saying that you are worried at the end of each contract cycle and this April a number of contracts are up for review and they may not be renewed, but actually in reality what is happening is that you are winning additional contracts every year and the ones you have the vast majority are being renewed anyway.

Mr Narey: Because it is not in the same part of the world. We are losing a lot of work in the southwest at the moment because we do a lot of children's fund work there. We are expending very fast at the moment in East Anglia but you cannot move the staff from one to another.

Q280 Mr Walker: Just following on from my colleague's question, are three-year contracts the norm? Do they form the bulk of your business three-year contracts?

Mr Narey: The bulk, but we have a lot of contracts for 12 months as well. I would say that three years is not long enough - it is better than 12 months but it should be the minimum.

Q281 Mr Walker: Again you touched on it, do you find yourself saying, "Sorry, we are not bidding for that contract because the cost of bidding and the cost of putting the resources in place is outweighed by the risk that it will be terminated in 12 months"?

Mr Narey: That would certainly discourage us from applying for work, yes.

Q282 Mr Walker: So there are contracts where you say, "We are sorry, we are simply not interested in bidding for a 12 month contract"?

Mr Narey: That is correct.

Q283 Mr Walker: Have you ever had a local authority come back to you and say, "Yes, we have re-looked at that actually and we can understand your concerns, how about if we stretch this out and make it a three year contract"?

Mr Narey: I am not absolutely sure, but I believe so, and I believe that has happened in the southeast quite recently. I could check on that point.

Mr Walker: No, I am just saying that the 12-month contracts do seem ridiculously short.

Q284 Chairman: What if somebody said they wanted you to be involved in the design of contracts rather than the provision of the service because that is where they think that the third sector has some distinctive tools?

Mr Narey: You mean and then not be able to bid for the contract? I think there is a job to be had and certainly I think getting the commissioning right is very valuable, and although we are mostly interested in service delivery because we want to work with children, I would not be averse to an approachable local authority which said, "You could not bid for this work, it would have to go to another organisation but we will pay you to help us design contracts and commissioning arrangements, which would provide good public services," we would certainly think about that.

Q285 Chairman: Is there any evidence of that happening at all?

Mr Narey: No, there is some evidence of commissioners coming out to talk to us and say what sort of things work and what sort of things should we include in the tender documents, but I have to say that that is very patchy. For very many occasions tenders arrive in our offices with two weeks to fill them in, with a huge amount of work to do and with little or no scope to say we think it can be done in a different way.

Q286 Chairman: To bring us to an end, let us go back to where we started. I am interested in what you have been saying, all of you, and Martin particularly because you have been very honest with us about this. You have said essentially, do not believe all those people who come in here and tell us about the distinctive qualities of the third sector and value added and all that, none of that stacks up, and indeed is supported in a sense by the NCC research. What you are offering, I think, is simply the third sector as another provider and it is useful to have another provider, and as long as all providers are well run and well managed that is the game. Is that the argument?

Mr Narey: It is not quite as stark as that. I think the voluntary sector can provide exceptional services. I think it is much easier to manage an effective voluntary service organisation than it was in the public sector. I think the stability afforded by working for a Board of Trustees who will take difficult decisions, will look five years ahead - I no longer have ministers who change overnight ---

Q287 Chairman: We know your views on ministers!

Mr Narey: So I think we can run a better organisation, but I think it is quite wrong to suggest that naturally, by virtue of being part of the third sector, we are better and we should have to prove we are better.

Q288 Chairman: Is the government right to want to develop third sector provision?

Mr Narey: Yes, they are, but my advice to the government would be do not just look at the third sector but to look at the private sector as well because competition will make the difference. What will happen in competition, whether it involves just us or the private sector as well, is that a lot of work will stay in the public sector but public sector direct provision will improve dramatically.

Chairman: Thank you very much indeed for a very interesting session.

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[1] Ev 33

[2] Ev 33

[3] The National Offender Management Service (NOMS)

[4] Ev

[5] The National Children's Home (NCH)

[6] The Improvement and Development Agency (IDeA)

[7] Q1-55

[8] The Association of Chief Executives of Voluntary Organisations (ACEVO)

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