NCVO public services news round up July 2015

Our monthly round-up focusses on the most interesting stories related to the voluntary sector and public services from the last month. If you have any thoughts, questions or challenges then please leave a comment below or tweet us @NCVO @NJ_Davies

The sector’s funding black hole – new report

The voluntary sector will have a £4.6bn gap to fill by 2018/19 if it’s to maintain its current spending levels, our new report revealed (PDF). It appears that the fortunes of the sector have decoupled from the wider economy: while the rest of the economy has grown, the voluntary sector’s income has stagnated over the past five years.

Significant growth in earned income from individuals has, so far, gone some way to offsetting deep cuts in statutory funding. However, if current trends continue then we predict that by 2018/19 there will be annual £1.5bn gap between the sector’s largest growing and falling income streams. Add in the effect of inflation and the shortfall could grow to £4.6bn. Rising demand will further exacerbate the situation.

The report also reveals that cuts have not been spread evenly across the voluntary sector. Medium-sized organisations (those with an income between £100,000 and £1m) have been the hardest hit. Such charities saw an overall fall of 38% in their income from government sources between 2007/8 and 2012/13.

With this in mind, NCVO have commenced a new piece of research, funded by the Lloyds Bank Foundation, which will look in-depth at the experience of small and medium-sized charities since the recession. The results will be published in the autumn.

The Budget – welfare and wages

This month’s Budget saw a number of major welfare changes, including lowering the housing welfare cap, cutting ESA for those in the work-related activity group, freezing working age benefits and limiting benefit eligibility for 18-21 year olds.

But the big surprise was the announcement of a new, mandatory ‘national living wage’ which effectively replaces the existing minimum wage. Starting from next April at £7.20, it will rise to £9 by 2020. Although this is still some way below the UK Living Wage set by the Living Wage Foundation, it will represent a significant additional cost for employers in low wage industries, including charities. The latest Almanac figures show that around 20% of the voluntary sector’s workforce is employed in residential care activities, which tend to be low paid. The big question is whether government contracts will reflect this change or voluntary sector providers of public services will be expected to meet the additional costs through savings elsewhere.

For those who’d like a more in-depth analysis of the Budget I’d recommend this post by my colleague Michael Birtwistle. It is also well worth reading Karl Wilding’s Florence and the Machine-inspired take.

As both Michael and Karl highlight, further reductions will be announced as part of the Spending Review. Scheduled for 25 November, we can expect an additional £20bn of cuts, including clarity about allocations for departments and local government.

Freedom of Information under threat?

The government has announced that a commission of political heavyweights will review the Freedom of Information Act. The commission has been tasked with assessing two key issues: whether complying with the act is too much of a burden for public authorities, and whether the Act adequately recognises the need for a ‘safe space’ for policy development and implementation and frank advice.

This could have significant implications for many of our members who regularly use the Freedom of Information Act to hold the government to account and improve policy and public services.

The commission is due to publish its findings by the end of November. NCVO will be submitting a response to the commission’s call for evidence and will be in touch with members once the consultation timetable has been published. In the meantime, if you have any examples of how your organisation has successfully used the Freedom of Information Act please post them in the comments below.

Welfare-to-work inquiry launched

The contracts for the government’s principal welfare-to-work programmes (Work Programme and Work Choice) expire in 2017 and the Department for Work and Pensions has already started planning for what will replace them, with the re-tendering process expected to begin next year.

While the Work Programme’s performance for those closer to the labour market has been broadly comparable with previous programmes, it has largely failed to support those with more complex needs into employment. In part this can be explained by the programme’s underutilisation of expert voluntary sector organisations, who are often best placed to support those facing multiple barriers to work.

Recognising the importance of fixing design flaws in the programme, the Work and Pensions Select Committee has launched an inquiry into outsourced welfare-to-work programmes. We’ll be submitting evidence based on our Stepping Stones report. If you have thoughts or evidence you would like to feed into this please leave your comments below or email Karina Russell.

Managing provider failure – new report

A key driver of improvement in any market is the ease with which new, innovative suppliers can enter and poorly performing, existing ones can exit. Public service markets are no exception and we have long argued that the high barriers to market entry (large contracts, short procurement timescales, risky funding models etc.) are preventing smaller voluntary sector organisations from delivering higher quality, more efficient services than those currently on offer. Meanwhile, the cases of Serco and G4S, who continued to win contracts despite being banned, show that poor performance and even illegality are not enough to ensure some providers exit the market.

Clearly it is important that the government effectively manages provider failure and the National Audit Office has now published a report exploring the principles that should underpin the government’s response to such cases. It notes that there is often a significant gap between departments’ stated and revealed appetitive for failure, leading to inappropriate delivery models being selected. While the report is aimed at government, it is worthwhile reading for charities already involved in or considering entering public service markets.

Children’s residential care market – new report

The Department for Education has published a fascinating independent analysis of the financial sustainability of the children’s residential care market. This is a particularly interesting public service due to the way in which it has evolved. As with so many public services, it originated in the voluntary sector before being taken on by government as part of the post-War welfare state. Since then it has always been a ‘mixed market’ of sorts with public, private and voluntary sectors all playing a role. Currently around two-thirds of provision is independent yet only around 2% of this is run by the voluntary sector, with the rest in the private sector, much of it private equity owned.

The report finds that the current market, which has largely developed organically, isn’t working well for anyone: commissioners, providers or service users. Unfortunately, uncoordinated, short-termist, price based commissioning isn’t confined to the children’s residential care market. If other public services are to avoid a similar predicament then lessons must be learnt.

Consortium masterclass – still places left

Are you thinking about or in the early stages of setting up a consortium? This consortium masterclass will be an intensive day outlining what voluntary sector and social enterprise organisations need to consider when establishing consortia and the key determinants of success.

Public services impact and evaluation – webinars

The Public Service Transformation Network has published a series of webinars on different aspects of evaluation. These include introductions to ideas such as logic models and impact evaluation as well as an overview of key evaluation approaches.

Have you used the NHS standard contract?

A number of voluntary sector organisations have identified the NHS standard contract as a barrier to having their services commissioned. Simon Stevens, NHS England’s chief executive, has committed to exploring a shorter version of the standard contract for low-value contracts. Regional Voices, working with NHS England, is carrying out a survey to help understand specific issues which organisations have experienced in using the contract and would value your feedback. It should take no more than 15 minutes and closes at 10am on 27 July. If you have any questions please contact Yoshiko Stokoe on 0113 394 2300 or yoshiko.stokoe@involveyorkshirehumber.org.uk.