Grants, lobbying and voluntary organisations

Voluntary organisations make an important contribution to democracy

The issues of campaigning and government grants for voluntary organisations are once again in the spotlight, and once again the source code is the IEA’s Sock Puppets report. This rails against the funding of ‘so-called charities’, or sock puppets as the report would have us called, for using grant funding to influence the development of legislation and/or regulation.

I don’t agree with the report’s conclusions, or its use and interpretation of the evidence, but this is debate and there are clearly those who do.

A bit of a Pickle

One of whom is Eric Pickles, the Secretary of State for Communities and Local Government. For those who weren’t watching, last week Pickles, via a written statement to parliament instructed his department to insert a standard clause into all grant agreements that any lobbying should not be funded. The statement was as follows:

The Institute of Economic Affairs has undertaken extensive research on so-called “sock puppets”; they have exposed the extensive practice of taxpayers’ money being given to pressure groups and supposed charities, in turn being used to lobby the Government and Parliament for more money and more regulation. This is an issue which needs to be addressed. My Department has set an example to the rest of Whitehall by amending our standard grant agreements to impose a new anti-lobbying, anti-sock puppet clause. The simple, short but effective clause says: “The following costs are not Eligible Expenditure:- Payments that support activity intended to influence or attempt to influence Parliament, Government or political parties, or attempting to influence the awarding or renewal of contracts and grants, or attempting to influence legislative or regulatory action”. We hope this can and will be rolled out more widely across the public sector.

This statement raises problems for both government and the voluntary sector. And it didn’t go unnoticed by us, but more of that in a minute. It’s first worth a cursory glance of the evidence as it pertains to government funding and then at government policy towards grants more broadly.

The evidence: grants are in decline

Whether you agree with government making grants to charities and voluntary organisations or not (I do, but I acknowledge others don’t), the very clear evidence is that grantmaking has been in decline for some time. Ah, the naysayers will respond, but overall income from government increased substantially over the last decade.

Yes, because just like the private sector, charities are delivering more services under contract. And all my experience is that those contract terms are pretty clear on what is being done with the money: it is delivering service outcomes specified by commissioners.

grants contracts

The policy: grants, and influencing, are legitimate

It’s not without irony that today’s story broke more or less at the same time that NHS England has published its model grant agreement, together with its Bite Sized Guide To Grants. One of the core principles of the guidance is that grants help government to hear from people who traditionally it finds it difficult to deliver services to:

VCS groups are often trusted, accessible and skilled at outreach and engagement. A grant award can support an organisation to reach out to people who aren’t often heard and offer a vital source of insight, both about issues and possible solutions. They have knowledge of the needs and strengths of their beneficiaries, are aware of current issues, can represent the voice of their beneficiaries and support them to be more directly involved in health and wellbeing strategies and plans.

And if this isn’t enough, read this compelling paper from a group of trusts and foundations including Lloyds Bank Foundation on the importance of grant funding. Or this blog post from Paul Streets on how voluntary organisations’ voice and representation functions improve public services.

Sorry for the inconvenience, we are trying to change the world
Adapted from a photo by Jasleen Kaur

For all those that think NHS England has gone native, let’s turn to that hotbed of radical socialism, the, er, National Audit Office. In their guidance on successful commissioning, the NAO argues that grants are a perfectly appropriate tool to fund activities that the voluntary organisation wishes to undertake. Moreover, the NAO recommends that any management of grants should be at ‘arm’s length’. And, of course the NAO references The Compact principles as central to effective commissioning. The Prime Minister himself has committed to the Compact between the government and the voluntary sector. In doing so, government has committed to:

Respect and uphold the independence of civil society organisations to deliver their mission, including their right to campaign, regardless of any relationship, financial or otherwise, which may exist.

Oh, and by the way, this is the opening paragraph to a consultation on Best Value that Eric Pickles’ own department published on 2 March 2015:

This Government is acting to remove barriers to more open and efficient local public services by freeing local authorities from targets, prescription and duties. We want to encourage public agencies and civil society to collaborate more, including greater involvement for voluntary and community organisations as well as small businesses in the running of public services.


I think the government has a ‘left hand, right hand’ problem now on policy towards partnerships with the sector  generally, and grant funding specifically. This applies to other policy initiatives too: the cross-government initiative to remove red tape; and particularly glaringly, the open policy making agenda. Not good.

So what?

Any move to implement this in DCLG or the wider public sector presents problems to both government and the voluntary sector. Top of the list for me are:

1. Increased burden of regulation (1)

The risk of post-event clawback of grant funding for spending on the wrong things. This will increase administration costs for grant recipients, particularly as any definition of the wrong things is subjective and therefore likely to be a matter of interest to m’learned friends. This is bad value for money for taxpayers.

2. Increased burden of regulation (2)

It is a complete fallacy to argue that voluntary organisations only lobby to increase the burden on the public purse. Indeed, this may come as a shock to some, but charities might actually be trying to improve public services by removing bureaucracy and, in some cases, unnecessary regulation. This statement forbids them from using grant funding to support such work. This is bad value for money for taxpayers etc…

3. Poorer policy

There’s a whole lot of evidence that more open policy making is better policy making. This proposal sends a message – nay, an instruction – that the involvement of voluntary organisations in policy development is a public bad. It will no doubt increase what political scientists call the ‘transition costs’ of policy implementation. All of which limits government effectiveness.

4. Disempowered citizens

I don’t wish to start shroud waving by referring to some of the scandals faced over the last few years by public institutions, but what seems to come up time and time again is the need to give those without a voice more say in the services they use. And the need to hold those institutions to account.

5. One more thing

I’ve talked to literally hundreds of organisations about the Lobbying Act in recent months and the message I’ve had is consistent: it is a deterrent to people speaking out who in a million years would never be near the threshold for registering with the Electoral Commission, never mind breaching the limits on spending. In other words, the messaging has had a chilling effect.

I don’t have any evidence, but my concern is that this will have a similar effect, and will no doubt compound the impact of the Lobbying Act. That’s not just bad for voluntary organisations and the people they serve, that’s bad for wider democracy.

Now what?

NCVO, as you would expect, has already taken action in response to this statement and has aired this issue with DCLG staff and the Secretary of State. In doing so, there are a number of policy issues that we will pursue:

1. Defending campaigning and lobbying by the voluntary sector as a legitimate activity

NCVO staff have written extensively on this site about the right of charities to speak truth to power. We will continue to press all political parties on this issue and remind them that constant sniping at this role is undermining that legitimacy.

2. Pushing government to make transparent data on funding it is providing to charities in the form of both grants and contracts

At present, our Civil Society Almanac relies on individual charities’ accounts given to the Charity Commission. This evidence base of official statistics would be strengthened enormously if the government was to disclose which grants are being won by charities through the simple addition of a charity/company number to the awards notice on Contracts Finder. We also need to know what role smaller charities are playing in supply chains and provided it is designed in the right way, we think this could be achieved through a standardised transparency clause in the government’s model services contract.

3. Campaigning for a stronger role for grants in the government funding mix

We consistently call for a greater role for grants and mixed funding arrangements in the government funding mix as opposed to the current dogmatic attachment to large, payment by results contracts. See for example our recent submission to the VCS health review which makes the case for grant funding of voluntary sector organisations, especially smaller ones that are addressing the wider determinants of health and delivering personalised and preventative services as well as wider social value.

4. Pushing for a culture change in commissioning to make contracts work for the voluntary sector and the people with whom we work

Commissioning practices continue to be characterised by a focus on cost and price instead of quality and added social value, short timeframes, limited opportunities for dialogue, and disproportionate paperwork. We have actively pursued culture change in this area – for example see our evidence to the Social Value Act review – and continue to push for more reforms going forward.

Postscript: some responses from twitter

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Karl Wilding Karl Wilding served as NCVO's chief executive from September 2019 to February 2021.

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