How to rescue the Big Society
14th February 2011
With debate raging around the Big Society, we have launched an action plan for how the Government can ensure the agenda delivers maximum benefits for individuals and communities.
Responding to David Cameron's speech earlier today, Sir Stuart Etherington, our Chief Executive, said:
"We support the idea of the Big Society, but the Government needs to take swift action now to ensure that voluntary organisations survive to deliver it. It should double the Transition Fund and broaden its criteria so more groups can benefit from it. Local government must also be supported to make long-term, intelligent decisions, to prevent the sector from being seen as a soft target for spending cuts.
"Finally, we urge the Government to prioritise reforming Gift Aid and addressing the issue of irrecoverable VAT on shared services. This would help voluntary organisations to weather the financial storm whilst continuing to provide vital services."
Our plan, launched at the end of last week, offers a series of measures which will help voluntary and community organisations to weather the financial storm whilst playing their full part in delivering services and supporting their beneficiaries.
Our recommendations are:
- Doubling the Transition Fund, and extending its scope and scale Under the current proposals, £100 million is being made available to help medium-sized charities deal with cuts in public spending. However, NCVO has raised concerns over the short timescale and restrictive criteria for applying for support. If organisations go bust in the months ahead, the government will need to pick up the slack, so a short-term cash injection could save huge amounts of money in the long term.
- Supporting local government to make intelligent, long-term strategic decisions, so that they do not make the community and voluntary sector a soft target for cuts.
- Getting behind the Private Members Bill on Public Services (Social Enterprise and Social Value) This Private Members Bill, tabled by Chris White MP, recommends that commissioning and procurement processes for public services should focus not just on the financial value of a service, but also the social and environmental impact that it delivers. NCVO believes that this would create a more level playing field for charities, and make services more responsive to community need.
- Simplifying and modernising Gift Aid Gift Aid is an important source of income for the charitable sector, but donor usage has plateaued in recent years. The Government should simplify Gift Aid, shift the system online and ensure that donations through innovative fundraising mechanisms, such as SMS, are easily Gift Aided.
- Investigate the case for making Lifetime Legacies available in the UK, to promote a culture of philanthropy.
- Addressing the issue of irrecoverable VAT, including on shared services Under the current arrangement, charitable organisations cannot reclaim VAT on the cost of sharing services, while private sector organisations can. While we are not asking for special treatment because of who we are, we want the government to make the system fairer, which would in turn incentivise collaborative working. NCVO has raised this concern with the Prime Minister and Chief Secretary to the Treasury.
- Stimulate the social investment market The social investment market will form an increasingly important element of the re-balancing of sector financing as funding from statutory sources falls. Getting the right tax incentives in place is important and government should look at Community Interest Tax Relief (CITR). CITR is the principal tax incentive for social investment. However, take-up has arguably been disappointing and we would encourage government to review and promote CITR and extend the range of eligible organisations.
Sir Stuart said:
"Big Society has had a bad press recently but our recommendations make clear that there are ways for bringing it back from the brink. By taking heed of these recommendations it could signal loud and clear that it wants to support VCOs to play their full part in delivering the Big Society.
"Now is the time to act, otherwise there's a real risk that the organisations at the very heart of Big Society will not survive long enough to see the vision become a reality."
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Comments
Another key issue for consideration is that of capacity within the sector, specifically around skills and knowledge. If volunteers are to play a bigger role in providing public services, as the Big Society infers, then people will need to be trained effectively to ensure that services are delivered to the required standard.
Training can be a significant expense for any organisation, but particularly for those in the civil sector where budgets are under such pressure. Innovative online solutions, such My Learning Pool, can help by providing extremely cost effective training (20+ courses for £25 a year) can certainly help to rescue the Big Society.
I have a 35 year private sector background and strongly feel that voluntary and community sector organisations need to diversify their income streams, do more to engage private sector businesses and become less reliant on state or local government funding.
For example, of the 4,400 CICs registered to date, 74% are limited by guarantee, not by shares. One interpretation of this could be that the majority of voluntary and community sector organisers do not set out to make a profit which in turn, means they are more likely to be reliant on state or local government funding. When you look at charities, many emphasise that they are not profit-making.
Given the current economic climate, doesn't this 'non-profit' mindset need to change? Doesn't the voluntary and community sector need to become more commercially minded? What is so wrong with making a profit? The profit could be transferred back into the community they are helping and / or to other community organisations that are unable to generate profits. Why don't local CVOs partner with one another and establish a Community Fund into which they seek donations from businesses and residents?
I also have 4 recommendations:
1. the NCVO, Councils, Govt etc persuade people who are thinking of establishing a voluntary or community sector organisation to set up CICs ltd by shares rather than by guarantee.
2. the CIC regulator review the current set up which prevents CICs ltd by guarantee converting to ones ltd by shares.
3. the NCVO and others do more to train voluntary and community sector organisations on how to engage businesses and generate income streams.
4. NCVO and others encourage consolidation in the voluntary and community sectors as there is considerable overlap in activities and duplication of cost and effort.
I hope my comments are helpful to the debate.
Hi Nigel
Thanks for your very useful comments. I completely agree that the voluntary and community sector organisations (VCOs) need to diversify their income streams. NCVO's Sustainable Funding Project has been offering training, resources and tools to support VCOs to diversify their income for the past ten years. We work with VCOs to give them the skills to explore income opportunities across the Income Spectrum, including the Gift Economy, Grants, Trading and Enterprise, Contracts, and loan finance. This week we're running one of our Grow Your Own Income training courses, where we help delegates to develop their trading idea, taking them through the key principles of budgeting, pricing, marketing and getting the right legal form.
In recent years we've met more and more VCOs who want to start trading, and who recognise a gap in their skillset. The shift from a more traditional non-profit model to a profit-making enterprise can be a big change for some people, and VCOs need to think through the potential impact ontheir organisational culture needs to . The benefits of trading in bringing in unrestricted income, building independence and establishing new relationships with customers and beneficiaries are significant, but it is not necessarily the right model for every VCO.
The proportion of voluntary sector income that is earned through trading or contracts has grown signficantly in the last decade, and is becoming increasingly important, which is why we're constantly looking to update our knowledge of pioneering VCOs who are using new financial models (such as the new opportunities provided by social investment). We're always keen to make links with the private sector as we recognise that there are many lessons to be learned from the commercial world (we recently published a guide to marketing for sustainable income, based on commercial marketing principles). We've also got lots of case study examples of VCOs that have used different models, such as CICs and community share schemes, to generate income.
We regularly work with experts from all sectors to help us develop new content and tools, such as our trading pages and The Good Guide to Trading, written in partnership with Cass Business School. We're also currently working with our Sustainable Funding Beacons -six infrastructure organisations across England (including Community Barnet) - to improve local knowledge and resources around accessing different forms of finance.
We'd certainly welcome any further comments you might have.
Thanks
Laura Smith, Sustainable Funding Project Manager, NCVO