Charitable bodies can no longer be considered truly voluntary if they adopt the role of state funded contractor, the report Voluntary Action claims.
'Their future place belongs in a growing social market where there will be competition between service providers and where the use of public funds should be subject to stringent audit and evaluation', said author Barry Knight, a former adviser to the Home Office Voluntary Services Unit.
Putting non profit making contractors in a new sector would 'remove much of the confusion that currently exists between the existing charities and the new, so called 'voluntary' bodies being created by legislation - including NHS Trusts, self governing schools and housing associations', he said.
Voluntary Action recommends new non profit organisations should work in partnership with government and compete for funds as part of the increasingly prevalent contract culture.Charitable status would be abolished. Tax refunds would be available on condition that annual performance targets were achieved.
State regulation would be required to ensure fair competition between contractors and common procedures for audit and evaluation. When placing contracts, national or local government could put special emphasis on achieving the participation and satisfaction of service users as well as value for money, it recommends.
It also suggests limiting senior manager salaries to 'discourage opportunists only interested in furthering their careers'. In contrast, what the report calls 'first force' organisations or 'true' and 'authentic' bodies would be supported by charitable donations and work independently of state support.