“What impact does Central and Local Government policy changes have on

the sustainability of small charities such as Disability Network Hounslow?”

Third sector organisations1 have many advantages to offer citizens. They are
flexible, user-focused, have complex local knowledge and are viewed as
trustworthy by citizens. Over the past decade, Central Government has
worked to improve partnerships and encouraged the whole public sector to
pass on financial stability to third sector organisations through longer
contracts. Local government is one of the most important partners to the
third sector as councils are providing an increasingly large amount of
funding: In 2000/01, councils were responsible for around £1.3 billion funding
for local third sector organisations and by 2003/04, this had increased to 3.2
billion2. Engaging local government in the process of reform is increasingly
important.

Disability Network Hounslow (DNH) is a member-led, pan-disability charity and Hounslow’s

longest serving pan-disability organisation since 1987, providing information, advice and
advocacy to service users. As a charity, DNH exists to improve our service users lives by
helping them gain independence, freedom of choice and opportunities for full participation in the
community: opportunities that their able bodied peers take for granted. The DNH Advice and
Information Project alone supports over 3,000 disabled people per year living or working in the
borough of Hounslow through a mixture of telephone support, drop-in surgeries, outreach clinics
and booked appointments.

The voluntary sector has evolved immensely since the 1990s and more and
more organisations are changing the way they operate. Pressures on local

1
The third sector comprises non-governmental organisations which are value-driven and
which principally reinvest their surpluses to further social, environmental or cultural
objectives. It includes voluntary and community organisations, charities, faith groups, social
enterprises, cooperatives and mutuals. The third sector is large and growing, particularly in
the area of social enterprise, and plays an increasingly important role in both society and
economy. (HM Treasury Review 2006)
2
Audit Commission, Hearts and minds: commission from the voluntary sector (July 2007), p
16
government from central statutory bodies to cut spending and increase
efficiency has meant third sector local charities such as Disability Network
Hounslow are being forced to operate more business like.3 Local government
is acting more strategically to meet national indicators, i.e. NI7 which is an
indicator for building a thriving third sector. The focus is to fit the business
sector model into the voluntary sector and in practice this should improve
quality of services and lead to a better structure however, in reality small
charities simply do not the time to operate like this as the voluntary sector is
run on volunteers who give up their own time or more importantly do not
have the knowledge of governance, i.e. legal issues to compete with a
business-like approach and this leads to a clash between business and
offering a service.

Let’s consider Bill E. Landsberg “The Nonprofit Paradox: For-Profit Business

Models in the Third Sector”. Landsberg states that “in a competitive
business environment, with shrinking support from both government
contracts and private donors, and with society’s increasing need for its
services, the nonprofit must embrace the best practices of the commercial,
for-profit world in order to survive”4. This sentiment is the focus of local
governmental policy and approach to new funding methods, i.e.
commissioning, however the business practices the nonprofit embraces to
assure survival threaten to undermine its culture, mission and public image.
Looking at the dynamics of the Nonprofit Paradox “there can be no doubt
about the general trend of nonprofits embracing the concepts and
techniques of for-profit business and industry”5. The reliance on for-profit
model stems from the financial uncertainty in which nonprofit organisations
have found themselves in past decades. Government budgets have been cut
even while needs have continued to grow. Organisations under stress look to
3
Clare Nezerali, CVS Hounslow
4
Bill E. Landsberg “The Nonprofit Paradox: For-Profit Business Models in the Third Sector”
(The International Journal of Not-For-Profit Law: Volume 6, Issue 2, January 2004)
5
Bill E. Landsberg “The Nonprofit Paradox: For-Profit Business Models in the Third Sector”
(The International Journal of Not-For-Profit Law: Volume 6, Issue 2, January 2004)
outside models they perceive as successful and promising6. At Disability
Network Hounslow the adoption of a business-like approach was unavoidable
however the structure of the organisation is still very much service-user
orientated which reinforces the core values of a third sector charity.
However, according to Ryan, for-profits entering the social services industry
enjoy four distinct advantages: size, capital capability, mobility,
responsiveness7 and it’s these characteristics that DNH need to embrace in
order to be sustainable especially in an environment where these qualities
are desirable and favourable when commissioning and tendering.

The goal of a commercial business enterprise is profitability, not the specific

product or service it provides. This differs fundamentally from a nonprofit
organisation that exists solely to accomplish its mission, i.e. DNH and here
lies the clash between both sectors. For-profit business models have
emphasised efficiency, flexibility, innovation, quality, and a disciplined focus.
However, adoption of for-profit management models have not been without
consequences: more business people recruited for boards of directors,
resulting in a greater emphasis on financial concerns over mission related
issues and senior management staff with greater business experience and
skill, but less emotional connection to the mission of the organisation. The
challenge for Disability Network Hounslow is to find the balance between for-
profit models and maintaining the service-user mission. The recessionary
effects of the past year have increased pressure on local government from
central bodies and thus more and more organisations such as DNH are
becoming less sustainable due to the clash between business and service.

Established in 1998, the Central government Compact is a partnership

document promoting better partnership working and creating better
outcomes for individuals and local communities. The Compact is an

6
DiMaggion and Powell, 1983
7
Ryan, W.P. 1999. The New Landscape for Non-Profits (Harvard Business Review)
agreement between Government and the voluntary community sector in
England. It recognises shared values, principles and commitments and sets
out guidelines for how both parties should work together8. The Compact is
not legally binding but is built on trust and goodwill and this was the
government’s first steps at working in partnership and cohesively with the
third sector. This is a good concept and strengthens the relationship between
the third sector and government but in terms of Disability Network Hounslow
and similar size organisations it is difficult to create effective working
partnerships as larger, umbrella organisations yield their power to become
more favourable and have a more potent voice.

This sentiment echoed until the introduction of the Hounslow Voluntary

Sector Compact. The Hounslow Compact 2007 provides a framework for the
development of effective working partnerships, this framework sets out
aspirations and targets for best practice in our working relationships.
However it is almost inevitable that high standards are sometimes missed
when delivering in the real world, the compact can be used as a tool to
manage these situations9. This is the first time that the LSP (Local Strategic
Partnership) has agreed the adoption of a local compact, and will bring many
positive benefits to all partners on the LSP, and those voluntary
organisations that work with them10. The Hounslow Voluntary Sector
Compact provides a clear action plan for the implementation of principles
that will improve relations between sectors. From Disability Network
Hounslow’s point of view, the strength of the Compact lies in the partnership
that will strengthen through the implementation phase and the ability to
liaise with more organisations that will bring positive results for the residents
in Hounslow.

8
http://www.thecompact.org.uk/information/100018/about_us/
9
Hounslow Voluntary Sector Compact Review, Pg. 12
10
Councillor Peter Thompson- Leader of the London Borough of Hounslow and Chair of
Hounslow Local Strategic Partnership (Hounslow Voluntary Sector Compact Review, Pg. 1)
Let’s consider the impact of the Compact on the sustainability of DNH and
similar organisations. Local compacts aim to improve relationships in their
own area between voluntary sector, local authority, and other local public
and private bodies. Therefore, DNH will benefit from closer interaction with
similar orgnaisations and it should open up more funding streams through
closer partnerships. The compact should act as an agreed Code of Practice to
develop effective and agreed principles for joint working across the sectors,
which ultimately is the benefit for all local residents and DNH’s service users.
From my contact with the local CVS (Council for Voluntary Services) DNH will
benefit from effective partnership working, including better involvement in
best value, community planning and a local strategic partnership and this
can be seen through local government involving DNH and the VCS (Voluntary
Community Services) in the make up of regulatory bodies to keep everyone
informed. For example, Disability Network Hounslow attends regular
Disability Community Forum meetings and have combined with Age Concern
and the Equality Council to form the Hounslow Equality Partnership.
Therefore, the implementation of a local compact can be seen to strengthen
the sustainability of DNH and other small charities as working partnerships
encourage closer relationships and ties with organisations which can be seen
at DNH as we have had successful working partnerships with The Star Centre
and Middlesex Association for the Blind with whom we have successfully
secured a joint tender bid.

Whilst the introduction of a local compact has encouraged closer working

partnerships this does not guarantee funding, stability or sustainability.
Voluntary organisations and charities are overwhelmed with demand for
their services, but funding cuts are making it hard for them to keep up, plan
for the future and prove their worth11. At DNH working partnerships have
been formed and are successful however this only secures certain aspects of
11
http://www.guardianpublic.co.uk/third-sector-funding-cuts-roundtable-navca
our services therefore current funding streams have tightened especially in
an election year. For example, some reports suggests local authorities are
planning are planning to slash their core funding by at least 20% and up to
50% and from DNH’s experiences the council are only handing out grants on
a yearly basis reducing the 3-5yr confirmed grants. On the whole pressures
on public spending are expected to impact on councils contracting out
services, which has driven much of the third sector’s growth in recent years.
Looking at the sector, charities are seemingly asked to do more on less,
achieve cuts but also the same outcomes. The danger here is that charities
such as DNH cannot be sustainable in uncertain periods such as this and
more and more smaller organisations are getting together to win contracts
but they’re doing it to chase the money, and partnerships are not based on
strong foundations which in the long-term could be detrimental to the sector.

The recent Central and Local governmental policy driver has centered on
commissioning. Councils are being encouraged to join forces to bulk-buy
specialist services, including services for disabled people and inviting
organisations to tender. The West London Alliance, which comprises Brent,
Ealing, Hammersmith and Fulham, Harrow, Hillingdon and Hounslow
councils, has agreed a joint procurement and commissioning plan for £220
million worth of adult care services each year12. The WLA estimates this plan
will result in savings of 5%, or £11m a year thus paving a way for a sector
run by one’s ability to commission for a service. Let’s consider how the WLA
will impact on smaller charities such as DNH. It should create more
opportunity for partnerships and targeting new projects but as Janet
Crompton, National Commissioning lead for the Department of Health’s older
people’s programme, says “some providers have taken the decision to stay
small so they can remain responsive to the individual needs of service users.
But this can leave them at a disadvantage if their local authority teams up
with several others and expects them to bid for huge contracts. They are
12
‘What Joint Council Commissioning means for service providers and users’ (Mark Hunter)
being pushed and pulled in opposite direction. The danger is that, if only
larger care providers go for these contracts, you end up with one
bureaucracy dealing with another”. At DNH service-users are the priority and
again it raises the argument of business against service because in an
environment controlled by commissioning small organisations such as DNH
simply do not have the power or knowledge to compete with larger
providers.

Commissioning is one of the principal ways Government is mounting its

assault on the voluntary sector. However, here lies the problem especially for
smaller charities like DNH: there has been an unseemly rush to comply,
despite the reality that in many places no two people seem to have the same
idea of what procurement and commissioning actually means. One council
officer asked why the authority was moving to commissioning told, “because
everyone else is doing it”13. This is one of the main problems, i.e. DNH
recently submitted a PQQ for the Health and Well Being Tender and the
council cancelled the bid following hours of work due to the inexperience and
lack of knowledge at dealing with the commissioning process. Moreover,
commissioning approaches based on competitive tendering encourages
tension, secretive behavior and competitive relationships between VCS
agencies which undermines the capacity for joint working and strategic
approaches to tackling local issues or providing services which is detrimental
to the sector. Decisions will tend to be driven by cost and budgets available,
rather than quality or appropriateness which DNH has experience of as it lost
a bid to a rival organisation seemingly on the basis of budget when DNH had
better practices in place and much more experience follow past success in
the specific field. To smaller charities commissioning encourages the rise of
large, predatory, mostly national, corporate voluntary agencies who can offer
‘economies of scale’ and who have the resources to mount the propaganda
of their own ‘goodness and quality’ and to drive negotiations with funders,
13
‘Say No to Commissioning’ (http://www.independentaction.net/?p=1703)
speaking their language14. Undoubtedly, DNH and similar organisation have
to move in this direction and we have, being successful, the tendencies
identified presents a serious threat to the future sustainability of DNH and
locally-based, small/medium-size voluntary agencies and community groups
that have sprung from local needs and circumstances, especially those from
communities kept at the margins. In the long-term improving local authority
approaches to procurement and commissioning will help to surmount these
barriers and issues.

As we can see central and local government policy has shifted towards a
more competitive voluntary sector. Government has often yielded its
authority over the sector however small/medium sized charities like DNH
continue to believe in their mission/service over the business. In September,
Benefits and Work released some alarming news about the proposed axing
of disability benefits, such as DLA and AA. ‘The Shaping the Future of Care
Green Paper published by the DWP and the Department of Health on 14th
July sets out government plans to get rid of attendance allowance and,
depending on public reaction, also leaves the way clear to end the care
component of DLA’15. From DNH’s point of view this will not be a good thing
as government intend to give the funding and responsibility to Social
Services instead. This change will only mean less independence and more
paperwork for elderly and disabled people who are not always in a position
to deal with it. Policy changes such as this have long distanced the
relationship between government and small charities especially when such a
move contradicts the whole idea of closer relationships and working
partnerships between sectors. DNH opposed to such a change as well as the
disabled community, Peter Hand of Mencap formed a petition urging
campaigners to sign the DLA and AA petition on the No 10 website and
defend the mission of charities to cater to its service-users. Alongside the

14
‘Say No to Commissioning’ (http://www.independentaction.net/?p=1703)
15
Benefits and Work (www.benefitsandwork.co.uk)
petition Benefits and Work ran an 100 day campaign and within hours of
announcing it, news of the danger to DLA and AA spread across the internet
on blogs, forums and social networking sites and disabled community voices
where making their voices heard. Contributions to the Big Care debate
website went from a few hundred to over 4,000, almost all hostile to the
plans for disability benefits. Almost 22,000 people signed a petition
protesting against threats to DLA and AA on the No.10 website and virtually
every MP in the UK received faxes and letters from people expressing anger
and concern. Questions were asked about the future of DLA and AA in
debates in the House of Lords and House of Commons and Lord Ashley of
Stoke warned that “any attempt by the Government to withdraw these
benefits, or any benefits at all will be strongly resisted by disabled people,
their orgnaisations and my many Members of both Houses of Parliament”.
This forced in to the open by the growing clamor, Health Secretary Andy
Burnham announced that he had “heard the concerns and worries about
disability living allowance” and “I can state categorically that we have now
ruled out any suggesting DLA for under-65s will be brought into the new
National Care Service”16.

This act of defiance from the voluntary sector and small/medium sized
charities in just one hundred days without the support from media, forced
the government to rule out an hopes of snatching DLA for under-65s to fund
the National Care Service and forced them to disclose that DLA for people
aged over 65 and over as well as AA, is still under threat. This highlights that
despite the move for a more competitive sector and more oversight with the
trend moving towards procurement and commission and more partnership
working, DNH and similar minded organisations continue to lobby and put
pressure on government to consider policy changes to the sector especially
when there is little or no knowledge of the disabled community opinion and
needs. In the long-term DNH sustainability may not be affected by such
16
Benefits and Work Online Newsletter (www.benefitsandwork.co.uk)
changes by it brings to light again the debate between services and business
and this victory highlights an overwhelming success for the sector and more
importantly its service-users.
Let’s now consider the key policy drivers and implications for the voluntary
sector in Hounslow over the past few years. ‘The Strong and Prosperous
Communities White Paper October 2006’ highlighted a key role for VCS in the
future of local government. It included a strengthened role in setting
priorities through the community plan and increased emphasis on
partnership with the VCS for performance measures17. The Hounslow
Community Plan sets the vision for the development of Hounslow over the
long term. Then plan, which has been prepared by the Local Strategic
Partnership, reflects the efforts of the public, private and voluntary sectors
working in partnership to deliver between services and outcomes for
residents18. The white paper and characteristics highlighted help to create a
more sustainable environment for Hounslow’s third sector as organisations
such as DNH have more opportunity to liaise with other organisations and
more support on hand to aide the charity and its service users. In addition
the ‘Comprehensive Spending Review October 2007’ offers more opportunity
to Hounslow’s voluntary sector. It outlines £85m for Capacity Builders for
infrastructure support, £117m for youth volunteering, £80m grants
programme for community action and voice, £65 for Futurebuilders for loans
and grants and £50m endowment match fund to provide sustainability in
future grant making19. From DNH’s perspective this offers more avenues to
gain funding whilst at the same time creates a clash as these services will be
subject to the commissioning process and as identified earlier this has
created problems on its own. Nonetheless, government has been committed
for VCS to be involved locally and this can be seen through the Local Area

17
‘Key policy drivers and implications for the voluntary sector in Hounslow’ (Rachel Fryatt-
CVS Hounslow)
18
The Hounslow Community Plan 2007-2010- ‘Building a strong, Vibrant and United
Community’
19
‘Key policy drivers and implications for the voluntary sector in Hounslow’ (Rachel Fryatt-
CVS Hounslow)
Agreement, Sustainable Community Strategies and Local Strategic
Partnership. Disability Network Hounslow will have to be more competitive
when invited to tender and must embody the new voluntary sector methods
in order to maintain sustainability over the long-term. The future for DNH
and the VCS is Hounslow is to be well supported by the CVS, the ability to
access infrastructure services as needs, participating in representation and
communicating with each other though the CVS.

To conclude, a wave of reform to the voluntary sector since the 1990’s has
changed the way organisations like DNH operate and created a more
competitive sector. Local authorities with pressure from the centre have
opted to commission for services and form joint-council partnerships to offer
more contracts. This might have encouraged an extension of partnerships
between third sector organisations and local government but barriers such
as knowledge and size of the organisation threaten to leave small charities
such as DNH lagging behind with examples identified earlier. However, the
introduction of a local sector Compact, the persistent challenging of
disadvantageous government policy to charities and through close
relationships with the CVS and VCS, DNH and similar organisations
sustainability will be maintained for now through maintaining core values.
The challenge to local government and third sector organisations on the
whole is to strengthen relationships in advance in new frameworks. While the
role of commissioning is valuable, only through local actions that build
capacity, improve communication and collect better data can the necessary
trust be fostered. Central government has laid its strategy and it is now up to
those the local level to take on the challenge of making change happen 20.
Similarly, it is up to Disability Network Hounslow and like-minded
organisations to embody these changes, i.e. fitting the business model and
efficiency over services and important to learn about the new methods of

20
‘Local Government/Third Sector Partnership: Making change happen (e-pamphlet by James
MacGregor)
funding and business structure rather than waiting until its to late. And at the
same time central and local government must be aware of the challenges
smaller organisations face especially in such testing financial times even for
the larger organisation and only when the new framework has been properly
introduced and defined to all third sector organisations, large or small, will
organisations such as DNH be sustainable in the long-term.