The next few years – and potentially the next decade – will be extraordinarily challenging for the community sector as public expenditure cuts hit income from grants, contracts, funding for capacity building and donations.
The sector relies heavily on local authorities – and most commentators expect local government to be particularly impacted by current/future public expenditure reductions.
Accordingly, there is a serious risk that local authorities will seek to offset their reduced revenues by cutting funding to or via the community sector. And if we are realistic, the NHS and other public sector agencies are likely to adopt similar tactics.
The 'cuts' are already biting
There is already evidence that funding has been cut as area based grant, LAA reward monies and the Future Jobs Fund are aborted. And the public sector is attempting to renegotiate or, in some cases, simply to impose changes to contracts with voluntary and community organisations to reduce payments. Many community organisations are already experiencing cuts in their support from the public sector.
Unlike many business sector providers of public services, the community sector will find it harder to resist the contractual squeeze given that they are committed to support their members and beneficiaries, and will usually not have the necessary contract negotiating capacity.
That said, there are lessons to be learnt from the business sector – check contracts and see if they allow for unilateral or negotiated changes and if they don't, point this out to those who want to impose changes; say no to reductions in payments which would make service quality unsustainable; and in return for anything given up, secure something in return.
Intermediary and infrastructure groups in particular will need to explore how they can provide contract support to local groups facing the pressures of contract renegotiation.
Time for a reality check
Grants and new contracts are going to be offered on lower levels of payment – that much is certain. In their hearts, trustees and staff will want to continue existing service levels for beneficiaries.
Being candid, however, those in charge must also engage 'heads' and be very clear about their organisations sustainability and what can be delivered for the available money. Now is the time for the sector as a whole and organisations in it to seek to influence the decisions of commissioners and the political and managerial leaders in local government and other local agencies.
At the same time, the sector must explain to users and members why any service reductions have to be made - and to clients, the consequences of its financial position. Truthfully, if the funding is unrealistic, organisations will have to be prepared to stop delivering a service.
The challenge and the risks are serious
Previous periods of public expenditure restraint and cuts – and there has not been anything comparable with what the government now plans since the 1930s – have seen the public sector seek to: protect "in house" provision; pressurise the third sector to accept payments for services which fall well short of "full cost recovery"; exclude the cost of capital from fees; and expect the sector to make up the short fall in revenue by dipping further into charitable funds (and where are these to come from?) - and/or by the use of volunteers.
All this at the same time as conveniently ignoring the fact that good volunteering comes at a cost. The sector must deploy every effort to prevent a repeat of these behaviours – but I accept that this will be an uphill task.
The community sector is about to be caught in a 'perfect storm'
It is simply stating a bald fact that the users and beneficiaries of many community and other third sector groups are unfortunately more prone to being the victims of the economic conditions now prevailing, and are also those who are most vulnerable to public expenditure cuts.
This puts more pressure on the sector to provide services and to meet need through services and advocacy – at exactly the moment when the sector faces the severest of financial pressures.
While any organisation has to respond to this challenge in a way that is consistent with its values and principles, its trustees must avoid jeopardising financial viability. These are easy words to type but much more difficult to enact.
And what of 'Big Society'?
The concept of "Big Society" offers great opportunities for the community sector – and indeed this sector more than any other can claim to be the heart of the "Big Society".
It is still not clear what it will mean in practice and where the resources to develop community and voluntary action are going to come from. It is even less clear what the government expects local government's role to be in respect of developing and supporting community and neighbourhood action.
It is even conceivable that it does not see a major role for local government and this manifestation of 'localism' is one that will by-passes town halls. The Coalition Agreement set out a raft of policy commitments to extend social action but how these will be funded remains obscure.
The fact is that many community groups require capital investment to enable them to be in a position to grow their services and to bid and contract with the public sector. This at a time when government policies and decisions in respect of funds such as Future Builders indicates that access to such capital will be even less easy than hitherto.
And all against a backdrop when it has never been easy to raise capital, especially for bodies that are commonly regarded as being "un-bankable" and given the banks are inadequately investing in the business sector, so there is surely little prospect that they will invest in the community sector.
Being optimistic, they could be further 'encouraged' to do so by government, and the moves towards social investment bonds and socially responsive ISAs are to be welcomed as is the idea of the "Big Society Bank".
And the harsh truth is that even volunteering comes at a cost
Volunteering undoubtedly has a major contribution to make but 'effective' volunteering requires investment in selection, training, appraisal and support. The community sector relies hugely on a mix of volunteers and paid staff. The balance may change but volunteering should never be regarded as a substitute for employed activity – rather, it should be seen as a means of complementing it.
And there is no need for conflict between the sector and trade unions on this or other matters. The two sectors should be united by their shared sense of voluntary collectivism and their pursuit of social justice and advancement.
Personalisation and individual budgets offers opportunities for the community sector to be the providers of services, to act as brokers and advocates, and to represent user interests. Again, however, these activities will need to be funded so yet another pressure emerges.
The next decade can be "the decade of the community sector" – but only if the sector balances its "head" and "heart".
England and its thousands of communities benefit from the social capital and contribution of the community sector. The next decade has the potential to be the "decade of the community sector": as we redefine the relationship between the state, individual, and communities; as the state becomes smaller in terms of service provider and even service commissioner; as there is a move away from large providers in the public, third or business sector; and as voluntary collectivism to some extent replaces state collectivism.
The community sector has an enormous opportunity but it has to be ready to apply both its heart and more critically, its 'head' to ensure that it can take advantage and not lose out.
John Tizard is director, Centre for Public Service Partnerships (CPSP@LGiU) and trustee designate NACVA
This article is based on his presentation to the NACVA Chief Officers' conference on 15 June 2010
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