My first job nearly 20 years ago was at the NCVO, so I feel a special privilege and special debt in speaking here today. As Minister of Communities and Local Government I feel I have come full circle - from meetings in 1988 about how to tackle Section 28 to a meeting last week with representatives of Black Majority churches about how to tackle, among other things, gun crime.
Over half a million non-profit organisations, including 190,000 charities in England and Wales, and over 6,000 new charities registered each year
A total income from registered charities that now exceeds£27bn, a paid workforce of 600,000 and a volunteer army of 6 million, with more people giving up more of their time than ever before and the NCVO itself with over 4000 members.
The stats do not really do justice to the power of the sector. Across the country, there are examples of organisations that innovate, that adapt to new needs and opportunities, that tackle seemingly insoluble problems. Take Beatbullying, the current Charity of the Year - it empowers young people to lead anti-bullying campaigns in their schools and local communities, and builds the capacity of local communities to sustain the work. Or TELCO, a network of local civil society organisations like mosques, church congregations, schools, trade union branches, professional bodies and community groups, that campaigns on issues which members have democratically identified as being important to their communities. Its recent victories include securing a 'Living Wage' for cleaners in Canary Wharf, and the inclusion of an 'Ethical Framework for Economic Guarantees' in London's successful Olympics bid.
There are frustrations; there are pressures; there are sometimes setbacks; but the voluntary and community sector is strong in Britain, and I want to discuss today how it can become stronger still - diverse in its mission, innovative in its practice, effective in its delivery.
I want to start by setting out why I believe the voluntary and community sector, in all its diverse forms, is critical to the great challenge we face in this country - giving people more power over their lives, as individuals, and together in communities. I then want to discuss the relationship of the voluntary and community sector to government: the sector is thriving through partnership with the public sector not rivalry, and that partnership needs to be strengthened. Finally, I want to set out why the reform of Local Government - the double devolution of power from the central government to local government, and from local government to citizens and communities - will take the partnership between state and the third sector into a new phase.
Bridging the Power Gap
Government, private companies, and voluntary organisations share one thing in common. Unless they adapt to the changing demands of citizens, they will die out. Politicians will be voted out. Companies will go bankrupt. Voluntary organisations lose their membership and their support.
The voluntary sector reflects wider society, as well as shaping it, and I believe it is important that we discuss the future of the voluntary sector from an understanding of the distinctive challenges we face, how they have emerged, and how we must adapt.
The 20th Century was an age of freedom. Thanks to the struggle of our forbears, we are markedly more free to choose our relationships, our life styles, our jobs, and our beliefs than any generation before.
With individual freedom has come more wealth, prosperity and opportunity than ever before; the prosperity has fuelled the freedom, and the freedom the prosperity. But this individual freedom has come at a price.
Many of the traditional institutions that provided care, that nurtured trust, that fostered cooperation have weakened. Families became more fragile. Employment less secure. Churches and religious groups weaker. Trade union membership is down. And greater mobility has weakened our attachment to strong geographically based communities. So though we experience more opportunities, we also face new risks.
We liver richer, freer and less constrained lives. But the evidence suggests we are no more happy. And I believe the roots are a sense of powerlessness: the pensioner worried about anti-social behaviour, the parent juggling work and family, the second generation immigrant well qualified but suffering an ethnic penalty in wages, the disabled person still struggling against low expectations, all these people are in one way or another disempowered, the residents dissatisfied with the quality of a local service. For the most part, they do not lack the capacity to exercise power, but the means to do so.
So if the 20th Century was about enhancing personal freedom, I believe that the mission for 21st century must be to spread power to citizens both to act individually and collectively.
Delivering this mission requires reforms to markets and to government. But the third leg of the stool - the third leg without which the other two are of limited use - is the voluntary sector. The third sector is the supplier of power to individuals and communities:
In its role in providing advocacy for communities, it provides a voice for citizens, campaigning against injustice, tackling vested interests, and challenging the balance of power within society.
In its role as social enterprise and service provider, the best of the sector reaches people below the radar of many statutory services, wins their trust, and tailors services to their needs, aspirations and circumstances.
And because of its voluntary ethos and its roots in communities, the voluntary sector generates trust, cooperation and voluntary action by citizens and communities. In age where we are recognising that better health and education, lower crime, and environmental sustainability, cannot be achieved without citizens' participation - in healthier living, in learning beyond the classroom, in recycling - the ability of the voluntary and community sector to stimulate voluntary action and generate trust is a critical asset.
So we face a clear challenge - if we want to tackle poverty, promote equal rights, strengthen community, we need to tackle the power gap in society. And to tackle the power gap we need a thriving, growing voluntary sector.
Partner not Rival to Government
There are really two schools of thought about how to achieve this: in one corner are those who argue that the third sector thrives as an alternative to Government action, and on the other are those who believe that the third sector thrives in partnership with Government, not at its expense. I support the second view: a strong public sector can strengthen the voluntary sector, and a strong voluntary sector can strengthen the public sector, complementing universality with innovation, public funding with local roots.
International evidence does not suggest a good correlation between a small state and a large Voluntary and Community Sector. Nations with more generous state support, such as in Scandinavia, have higher levels of social capital and trust than those with smaller states. Meanwhile in the USA, states with a more activist governmental tradition, such as in Minnesota, have more vibrant third sectors than those with the opposite small state tradition.
In the 19th century it was the inadequacy and in some cases decline of friendly societies and mutuals that resulted in the expansion of the state, not the state which squeezed out the cooperative movement. It was the growing problems of bankruptcy, inefficiency and patchy provision within the third sector that necessitated the wider pooling of risk and the emergence of a welfare state.
Since 1997, we have seen sustained expansion of public spending and collective action through the agencies of government, local and national. But we have also seen an unprecedented flowering of the voluntary sector. The Government has reformed the framework of support for the voluntary sector, by creating a Compact on relations between Government and the voluntary sector. In the coming weeks, this will be supported by the establishment of a Compact Commissioner. The compact has manifested itself in a series of practical changes.
Thanks to tax changes, the UK now has one of the best tax regimes for charitable giving in the world.
The development of the£125 million Futurebuilders is helping frontline organisations engage in public service delivery, particularly by innovative use of loan and grant finance.
The ChangeUp fund is helping develop the capacity of the voluntary and community sector to deliver quality, reliably and to scale.
Through the Year of the Volunteer, and the Russell Commission, we have promoted a stronger culture of volunteering, with half the population now volunteering, up from 47 per cent, four years ago.
Finally, the Strategy Unit review of 2002 has led to the reforms proposed in the Charities Bill and the introduction last year of the Community Interest Company for social enterprise.
But I freely acknowledge there are big challenges and it is vital that we address them head on if we are to take the next steps in building a strong partnership. First, nearly two fifths of voluntary sector funds come from the Government. We must ensure that the greater opportunities for voluntary organisations to deliver public services and access Government funds avoids compromising their independence, their innovation, their role as campaigners and advocates, and their rootedness in their community. And with two-thirds of income, generated by just two per cent of the sector, we must ensure opportunities for public service delivery are open to small and medium sized organisations as well as larger charities.
Second, smaller organisations - those with few paid staff, often in the most disadvantaged communities - are living a more perilous existence. We must prevent the decline of smaller community organisations, which are critical to fostering trust, cooperation and voluntary action. We must find a way of supporting organisations whose value to society cannot be easily measured by targets or defined in contracts.
The local government reforms we are developing - a double devolution of power from Whitehall to the Town Hall, and from the Townhall to citizens and local communities - are a major opportunity to rebalance the relationship between the state and the third sector. The best of local government has relations with the voluntary sector, in all its forms, that are a lesson to central government; but the best is not universal, the culture is not always positive, the partnership sometimes frayed.
Strategic Local Government
Devolution is a deal. It is conditional on local government taking on new powers from central government, but then sharing power with citizens, neighbourhoods and the third sector, not hoarding it.
I am convinced that we need local authorities whose first task is to map need, second to set goals, third to benchmark best practice, and fourth to seek best value from a range of providers, public, private and voluntary. This commissioning process must promote the innovation and independent outlook of the voluntary sector.
Let me set out where our reforms of local government can and must strengthen the third sector.
When authorities develop their vision for their area through their Sustainable Community Strategies, they need to be open to the views and perspectives of third sector organisation. Sometimes this will involve frank exchanges and disagreements. But the role of local government must be to encourage this dialogue not to stifle it. That is the significance of the consultation currently underway on the future of Local Strategic Partnerships.
When local authorities campaign, successfully and rightly, for three year funding allocations to support strategic thinking, local government must similarly offer longer term contracts to the private and voluntary sector providers.
When local government commissions services, it should develop contracts that set out the outcomes to be delivered, rather than the detailed outputs. Detailed contracts that micro-manage providers inputs and outputs - the 'how' as well as the 'what' - strangle creativity, innovation and risk taking.
Where voluntary organisations cut across traditional professional silos, local government and its partners should look at how to avoid the problem of voluntary organisations having to manage multiple contracts from different parts of the public sector, each with different reporting arrangements and timescales.
I believe that Local Area Agreements (LAAs) are an important opportunity to achieve this. They are helping to rationalise funding streams, targets, and partnership arrangements. They are helping to get a better balance between central and local priorities. I am 100 per cent committed to ensuring that through the LAA process, we maximise the opportunities available to voluntary and community organisations.
But we must go further if we are to capture the spirit as well as the letter of the Compact. Local Area Agreements cover the minority of local government expenditure. Through Best Value, local authorities should be ensuring a level playing field for all sectors, across the whole of its services. The third sector's value often creates intangible benefits - more trusting relationships, more personal care, a sense of belonging as residents participate in the management of their housing. Creating a level playing field for providers must therefore involve better ways of measuring the value created by providers whether this is through user satisfaction surveys, or assessing whether trust, fear of crime, and civic pride have improved in neighbourhoods. And when tendering for services, Local government should use citizens and outside expertise as part of the process of making decisions, so that decisions are based on an independent and user-centred view of Best Value. The local Government White Paper will set out proposals for reforming the process of commissioning so that each sector gets fair access to funding. It will also set out proposals for ensuring more transparency over the level of funding that goes to private and voluntary sector providers so that local authorities can be benchmarked, and weak performers challenged.
We need also to address the risk that many third sector organisations are not 'contract ready' and cannot make the transition out of dependence on grants because they lack the skills, and reserves to bid for contracts. That is the significance of the Future Builders programme run bythe Home Office, which provides loans and grants to enable existing organisations to be replicated, franchised and scaled up. Local and regional agencies must share the responsibility for funding local infrastructure bodies that can incubate new organisations, and provide a link between local government and the sector.
However, even with reformed accountability - a focus on user evaluation and outcome based funding - there is still a risk that providers become excessively reliant on state funding, lose their independent ethos, and are unable to innovate and take risks.
There is a still a risk that smaller community organisations are squeezed out.
Three opportunities stand out to promote the independence of the sector:
First, the devolution of budgets down to individuals - disabled people receiving direct payments - opens up a different form of accountability: direct to the citizen, rather than via the state. Here the third sector can play a role both as a service provider, and as 'choice advisors' or 'brokers' helping to inform citizens, particularly the most disadvantaged, of the services available to them, and negotiate packages of support to meet their needs.
Second, the devolution of power down to the neighbourhood level, opens up a major opportunity for the voluntary sector. Instead of giving grants out at regional or national level to small community groups, we should make more use of local knowledge. Small community groups are a vital part of a vibrant third sector. Grants are likely to remain important for these organisations. As we devolve power down to new neighbourhood structures and build on neighbourhood management, we should look at the potential for neighbourhood based grant giving, for instance, through citizen's juries, Community Empowerment Networks or Community Foundations. And as we create stronger neighbourhood institutions - for example Children's Centres and extended primary schools - we should look at how they can provide a hub and physical base for voluntary organisations, and support the public sector in reaching out to their local community.
Finally, a critical guarantor of independence for the sector in the future must be assets. Assets enable organisations to diversify their income streams, for instance through taking loans to develop social enterprises that trade directly with business and members of the public. They create a buffer for organisations to take more risks and act more independently. National Government, though the dormant assets commission announced by the Chancellor in the Pre-Budget Report last year, will look to channel assets into the sector from dormant bank accounts. In addition, as I set out last year, we must look at the potential to apply the Scottish model of a Community Right to Buy to enable communities first option on the sale of public or private assets. Local government can also take a more active role in asset building. In 2003, we changed the guidance on best value, to enable local authorities to dispose of assets at a discount of up to£2 million, thus enabling some assets to be effectively gifted to the third sector. We need to look at the practical barriers - both for local government, and the voluntary sector.
I value the diverse contribution that different parts of the third sector make to British society:
As social enterprises identifying untapped needs, harnessing under-utilised resources and delivering innovative and value for money services, funded either by sales to citizens directly, or contracts with Government, and business.
As community groups, strengthening the bonds between people of similar faith, ethnicities and interests, and building the bridges between them.
As advocates, campaigners, and protestors - the thorn in the side of Government and the establishment.
Many organisations combine all three functions. I don't agree with Iain Duncan Smith who argued last November that campaigning and advocacy should 'not assume too dominant a role in the work of organisations constituted primarily to care.' The whole point about voluntary organisations is that they defy neat categorisations. They cross conventional boundaries between social care, education and health; between consumer and producer; and between service delivery and citizen advocacy.
The challenges are sizeable. Efficiency but also community roots. Independence combined with partnership. Public service provision allied to voluntarism.
But the prize is great. A voluntary sector with a rising share of Government expenditure earned on merit, a voluntary sector with a stronger asset base, a voluntary sector where the large help the small, a voluntary sector supported by a consistent and engaged culture in local government, a voluntary sector that does help put power in people's hands.
As Minister for communities and local government, I have focused on the role of government in fostering community. But there are also challenges and responsibilities for the sector. For larger voluntary organisations, support the smaller players, do not just compete with them. Do not stop innovating and adapting to new needs and opportunities. Take efficiency as seriously as quality and innovation. Accept that a level playing field in accessing funding means a level playing field in regulation. Find structures that retain your human scale. For the sector as a whole, your asset must be your capacity to innovate and be less bounded by professional or institutional constraints. Your challenge is to create the 'disruptive innovations' that change our whole models and perspectives on delivering services, and to find ways of scaling up and rolling out new models of delivery. That means going beyond the paternalistic roots of Victorian philanthropy, traditions of mutual aid and self, and the professionalisation and service delivery of more recent decades - important though these traditions are to the future of the sector - and developing a genuine culture of social enterprise, that anticipates needs rather than just reacts to them.
John Stuart Mill wrote 145 years ago: 'One person with a belief is equal to a force of 99 who have only interests.' This is the secret of the success of the voluntary sector.
The third sector has a critical role in mobilising the disparate energies of people in this country. But its role as advocate, as social enterprise, as the glue of community, requires partnership with the state, not isolation. That is an exciting mission, and one I feel proud to be part of.