Stuart Etherington's Annual Conference speech (2012)

The State of the Sector
Sir Stuart Etherington
Chief Executive, NCVO

Martyn, thank you for your introduction, and good morning everyone. I understand that coming here today represents a commitment of both time and money on your part and I would like personally to thank you for joining us.

By now I had hoped to be addressing you in more optimistic circumstances, but the conversations I have had with NCVO members over the last year have been a constant reminder that there is a long, hard road ahead.

Not all have made it or indeed will. I was particularly saddened to hear about Young People in Focus, which folded recently.  After serving young people and the organisations that support them for over 22 years, Young People in Focus sadly found itself unable to continue trading. I hope that there will not be too many more cases like this.

I have worked in many organisations in my time. I have built them up and scaled them back. And like many of you I understand that now is neither the time for despair nor for misplaced optimism. Much as I love Dickens, I feel little empathy for Mr Micawber, who forever hoped that something would just turn up. I am instead drawing on my experience that we can do something to help ourselves and that it is often in times of adversity that we are at our best.

I would like to talk to you this morning about these times and what we might do to move forward, the theme of our conference. And finally, I would like to explain to you why I am confident about the future of the voluntary sector and why I believe we can renew ourselves so that we are ready for the future.

The people in this room and the organisations they represent – from the Sailor’s Society through to Barnsley Hospice - are a catalyst for voluntary action. And it these organisations that are behind the trends today published in the Civil Society Almanac. This is an outstanding piece of work and I urge you to read it. I would also like to thank Civil Society Media for their support for the Almanac.

The Almanac reports the end of what you might call a golden age, with the sector’s income peaking in 2007/8. The recession that followed is, of course, the villain of the piece. And the Almanac charts something quite interesting during this time - amidst rising need from users and beneficiaries, voluntary organisations expanded levels of service provision in the full knowledge that their own income streams were falling.

The evidence is clear: the sector swum against the tide. It rose to the challenge.

And this is exactly what I would have expected it to do. And I include trusts and foundations here, who we know supported the front line despite their own falling income.

Pressure on income and increased demand for services were not the entire picture. In what was a toxic mix of circumstances, rising inflation relentlessly increased costs and reduced the value of our income.

In the closing two years of the decade, inflation cost the sector £2.3 billion. That’s an extra £2.3 billion just to deliver the same level of support for our users, never mind meet the additional need we are facing.

These are massive numbers to comprehend. But the message is clear: it is not only middle Britain that is being squeezed. Voluntary organisations are being squeezed too. So NCVO will continue to remind funders and commissioners that cuts and rising costs are biting hard and reducing our capacity.

There is little, if any, fat left to trim in many organisations.

The public have done their best to support us in these times. We remain a generous society. But it is proving surprisingly difficult for us to build upon our culture of giving, with levels of involvement stubbornly flat. One in four people are now volunteering at least once a month; just over half the population are giving to charity in a typical month. And what of major philanthropists? There are fewer than 100 donations each year worth over £1million. That is simply not enough.

I worry that we are now relying upon a ‘civic core’ of committed individuals who are giving a disproportionate share of time and money. This suggests to me that building a ‘bigger society’ based upon greater levels of citizen engagement will take time, commitment and resources.

Sustainability will also require an entrepreneurial culture, and there is evidence we in the sector have such a culture. Most of the growth in the voluntary sector over the last decade has been from enterprise activity, not philanthropy. Many voluntary organisations now are in effect social enterprises, earning more from trading with the public and contracting with the government.

And this is no surprise. The sector has a much bigger role in the delivery of public services than a decade ago. We are doing more, and delivering in more areas. Income from the government for service delivery has increased every year over the last decade.

Some people do no not like this. I already can hear the complaints about taxpayers handouts to charity. This is nonsense. For every £1 of income that comes into our sector from government, 79p of that is for a contract to deliver a service. Nobody is suggesting that the big outsourcing firms are getting government handouts. Nobody suggests that they are an arm of the state. So why are we? NCVO will stand up to accusations of fake charities and explain to all comers that working with government, delivering high quality services for users is part of what a modern, independent voluntary sector does.

This is not to say that I do not believe grants are important. They are.

Grants also deliver value for money for taxpayers, despite what some people think. They fund innovation at the very time when there is premium on finding and testing new ideas. And for small organisations they are an appropriate mechanism when contracting arrangements are overkill. But I believe that the pendulum has swung too far away from grants to contracts. In the recession year alone we recorded a £500 million reduction in the real value of grants.

Five hundred million pounds.

How many voluntary organisations lost their grant that year? How many users lost the services that they relied upon?

I understand the argument that the increase in contracts has more than compensated for this loss but we are in danger of replacing one monoculture for another. Public bodies need to recognise that sustainable service delivery means that they need a diversity of funding mechanisms.

The best commissioners know that they don’t know everything. They understand that voluntary organisations identify need as well as meeting it, intervening at an earlier stage to head off more expensive problems later on. Grants are often the best way to support this work, but in the haste to cut I worry that commissioners are losing this important insight. So, NCVO will continue to argue for a diverse funding environment that builds your capacity, not drains it.

Sadly, I think the government funding picture will get worse before it gets better. Danny Alexander has just given us an insight into this. And this is not a political point: I understand that whichever party had been in government post-election that cuts in spending would be implemented. And we of course know that the sector cannot dip into its reserves for ever.

Unsurprisingly, our forecasts for government spending on our sector are grim. By the end of this parliament, if cuts are implemented proportionately the sector will be £1.2 billion worse off each year. And as voluntary organisations in Nottinghamshire will tell you, cuts are not being made proportionately.

I know that saying no to any cuts is not an option. But I am convinced that these decisions, particularly where they are sudden and disproportionate, are delivering poor value for money for taxpayers. They are saving taxpayers’ money in the short term, but at a cost over the long term. They are knocking out voluntary sector capacity that will build the government’s bigger society of the future.

So, using the Compact and the best value guidance we will tackle disproportionate cuts. But we need you to tell us about them. So spread the message: give us the evidence and NCVO and Compact Voice will help fight your corner.

I urge you too to use the Compact. No.10 has told every government department that the Compact must be reflected in their business plans. It is one of only 6 cross cutting priorities, up there with growth. This thing is being taken seriously by Government, so let’s stop sniping about it and get behind it.

So, we will fight for you. And we know that many of you are in for a fight. There are now 70,000 fewer paid staff in the sector than a year ago. That’s nearly 200 staff losing their jobs, every day, for a year. As NCVO member Newcastle CVS recently wrote to us, we have only got through the last year by using the 3 Rs: reserves, reorganisation and redundancy.

There are some bright spots – donations are recovering, for example. But we haven’t just had one annus horriblis, we’ve had a succession of horrible years. Let’s hope it’s not going to be a decadus horriblis. Perhaps my most telling statistic is that at the end of the decade the voluntary sector’s free reserves are, in real terms, lower than they were at the beginning.

We are most certainly a bigger voluntary sector than we were 10 years a go. But are we a stronger sector?

This is, in many ways, a dispiriting analysis. The economic crisis and the subsequent years of little or no growth have been accompanied by social problems and shifts in public attitudes that threaten our aspirations for civil society. In the last year we have seen social unrest on the streets of our towns and cities, the like of which has not been experienced since the early 1980s. Some of our poorest communities have been tearing themselves apart.

But it is in such circumstances that we see how important voluntary action and voluntary organisations are. We saw that people do care about their communities and that they do want to get involved. The memory that will endure for me is not the scenes of destruction in London or Manchester, but the vision of people coming together, with brooms held aloft to clean up the damage, rebuild and get back to normal as quickly as possible. Voluntary action is alive and well in the towns and cities of Britain.

Voluntary organisations also played their part. And when we brought people together in the aftermath of the riots, we saw foundations such as the Retail Trust and their High Street Heroes campaign help small shopkeepers get back on their feet, one of a number of examples of the voluntary sector helping businesses. We saw NCVO members Leap Confronting Conflict bringing together youth charities to undertake post-conflict work in the affected areas. Voluntary organisations are dealing with the difficult issues long after the cameras have gone away.

It is not just in the UK where we have seen the power of citizen action. In Libya, Egypt and Syria we have seen citizens come together to challenge oppressive regimes over the last year. I believe that the next step for these nations is the development of voluntary organisations to take forward the concerns of citizens.

It is our responsibility as part of a global civil society to support them, and in doing so learn from them. We only need to look at countries where civil society is weak or deliberately marginalised by the state to see that citizens are oppressed. And back home, NCVO will do everything in our power to defend the sector’s right to campaign. It is a fundamental principle that we are able to hold government to account.

In many respects the struggles of citizens in north Africa put our own difficulties into perspective. We have much to celebrate. We are resilient. Despite the pressures we are all under, our work and values are woven into this country’s social fabric. And I believe that there is a latent desire for participation and engagement out there to build the bigger society that the Coalition government wants to see.

So what of our politicians, and their role in creating a framework for positive social action and a stronger voluntary sector? Government’s relationship with the sector is of course led by Nick Hurd and Francis Maude in the Cabinet Office. Their agenda for social action, making it easier to run a voluntary organisation and making it easier to do business with government is, I believe the right one.

But the Office for Civil Society has a difficult task. It is significantly smaller than it was. And much of its agenda for the sector is ultimately delivered by other departments, who as we know work in their own policy silos. Take, for example, the drive to increase the value of giving and philanthropy, expressed in last summer’s giving white paper. OCS has implemented two small but important funds for innovation and social action. And it is using its convening power to organise a summit of major players to get them to do more.

But we need to do more. Now don’t get me wrong, I like summits. I’ve called a few in my time at NCVO. But if we really want to increase the value of giving, we need to do the difficult things too, like modernise Gift Aid.

Along with the Charities Aid Foundation we have been asking government to push on with this for some time, yet little progress has been made on dragging this expensive, paper based system into the twenty first century. This is not a failure of policy. It is a failure of delivery.

Government talks about the need for game changers in this area. But I would urge government to get on with the cold, hard slog of implementation.

In public services, there are challenges for policy and implementation. Government wants greater voluntary sector involvement. And quite right too: you only need to look at the results achieved by hundreds of NCVO members in getting people back into work and back into the mainstream of society.

So the open public services agenda is the right direction of travel. Government’s pursuit of the mutual model is a vote of confidence in the values and models used in civil society. But I fear we may be seeing a slow motion car crash in the form of the Work Programme. And I shudder at the thought that other government departments believe that this is the model for the future.

We have to do better than this.

Bigger and bigger contracts are leading to a situation where involvement in public service delivery may exclude all but the largest charities with the strongest balance sheets. To learn lessons, we need to have the right information. I call on the Department for Work and Pensions to lead by example and release more data on the work programme, in line with the government’s welcome and otherwise solid commitment to open data and transparency.

More widely, it seems to me that current commissioning and procurement practices are not compatible with the government’s aspirations for a bigger society. Neither are they are compatible with the service innovation and user involvement that will be critical to the future.


It is perfectly reasonable for taxpayers to expect more value for money. But government has to accept that the implementation of a payment by results model is shifting the burden of risk in the system to those least able to bear it. They also have to accept that organisations will need significant support to manage the transition.

In heath care and NHS reform the government is also encountering problems. NCVO’s position here is clear. The sector has always worked in partnership with the NHS. I hope this continues. Our future surely lies in collaborating with the NHS, not competing with it.

We instead need a commitment to new approaches that see the voluntary sector as a solution, not as a problem. David Robinson’s Early Intervention Task Force is an excellent example of how we can help government achieve its aim of saving the taxpayer money by reducing demand for public services. We will support David on this agenda.

And we will push for the effective implementation of Chris White’s social value bill. We are lobbying on your behalf at EU level for better procurement rules that value the role of small and medium organisations so that we move away from the ‘blame it on Brussels’ excuses.

We want to practice what we preach and build genuine partnerships between government and the voluntary sector so that we can understand each other better. This is why we are significantly expanding our successful work shadowing scheme so that more civil servants get first hand experience of the voluntary sector.

To its credit, this government has created opportunities for the voluntary sector.

The Localism Act, still in its infancy, presents some of those opportunities. The continued development of the social investment market, and the establishment of Big Society Capital, will I hope lever in new money to a sector starved of working capital. But I believe government can do more, which is why we are leading calls to reform the tax and regulatory frameworks for social investment.

And the government’s commitment to more proportionate, sensible regulation, led by NCVO’s president Lord Hodgson, is the right direction of travel. My view remains that we must balance this de-regulatory thrust with the need to maintain high standards of transparency and accountability. It is important that we as a sector continue to enjoy the high levels of public trust and confidence we deserve.

So the policy environment is a mixed bag. The government will no doubt say it is doing what it can, particularly given the fiscal constraints within which it must work. I also think government expects us to look more to ourselves to address the challenges we face. So, if we are to renew ourselves and move forward, where might be draw support and inspiration from?

It may well be our young people, many of whom are facing a difficult future without work. This is a future none of us want. It is a waste of talent and of young peoples’ lives. Yet many young people are driven by an interest in social outcomes, not just profit. And some of them are the next generation of social entrepreneurs.

We need also to better connect with the current generation of social entrepreneurs who are at the leading edge of social innovation. They are developing new business models. They are deploying the new technologies. And they are often sector blind, looking at problems simply from the perspective of the user, bringing in resources such as pro bono support wherever they reside.

The new social entrepreneurs are finding new ways to encourage and harness social action that better fit the lifestyles and attitudes of today’s people. Initiatives such as the Good Gym, which connects joggers with isolated older people, or Givey, which enables people to donate by text are great examples.

Many of these calls to social action are asking millions to give a little more time or money. We still need to do more to build a culture of large scale philanthropy, or what NCVO’s funding commission referred to as more giving millions. But we won’t achieve this by bashing bankers or the private sector. Yes, we should challenge irresponsible capitalism and socially useless finance. And we should hold business to account. But if we want a more civil economy or the UK equivalent of billionaire Warren Buffet’s giving pledge, we need a more mature relationship that appeals to people’s need to feel good about their giving.

Renewal will also require better relationships with government, particularly local government. I know that Ministers are big advocates of nudge theory – well, I would like to see a bit more nudging of councils when we come across bad funding practice and disproportionate cuts. But nudging will only take us so far, as Eric Pickles’ letter to Nottinghamshire County Council might suggest. I think we need a few more shoves.

But government can only do so much. It is what we do to help ourselves that will matter. Rising costs mean that we can’t just be good fundraisers. We have to watch every penny of every pound. Our donors and funders expect nothing less. And NCVO will help you to do this.

We are constantly told to merge in response to rising costs, but mergers are not the only answer. Technology is enabling the sort of collaboration that reduces costs. Our own KnowHow Nonprofit is leading the field here. We will shortly be launching a web-based platform that enables organisations to collaboratively write and edit support materials, the voluntary sector’s own Wikipedia. Even I have heard of Wikipedia! We believe that this will enable people in the sector to share their knowledge and expertise like never before.

In short, we are living in a time of great social innovation. I want more established organisations to understand and engage with this world and NCVO will help them to do that.

So, I would like to conclude.

I suggested at the beginning that we may have come to the end of a golden age.

But I think it’s clear that a better future is possible.

We can renew ourselves if we stand together, not fight amongst ourselves or fight with our partners in the private and public sectors. And we must continue to draw upon the roles and values that make us distinctive, that remind me every day that we are the voluntary sector.

Who else is holding governments to account? Who else is articulating what a better, fairer society might look like? Who else is arguing for a society built upon social justice? Who else is a voice for those least likely to be heard?

We are.

We are resilient.

We are innovative.

We are entrepreneurial.

And above all, we are trusted. It is no accident that the public trust us, much more so than government or business.

So, the challenges are there. NCVO will work with you to help you through them. And together we will emerge a stronger sector, a voluntary sector still driven by shared values and common goals.

Thank you.