A Compact for working with the Private Sector?

Tom calls for a Compact between the third sector and business in an article for Guardian Voluntary Sector Network to mark National Compact Week


Agreements between government agencies and a growing battalion of not for profit service provider partners will be ever more crucial in a future of cost-conscious, diverse service provision. Saying what you mean and meaning what you say in commercial agreements has always been vital and the Compact, since 1998 the memorandum of understanding between Government and voluntary sector, promotes that process. Compliance with the Compact will be even more important in the future than it is today.

When Ken Stowe, Paul Boateng and I sounded the fanfares at the Compact’s launch Full Cost Recovery in contracts was not even mentioned. Within five years pressure from charities made its inclusion inevitable, then the new government undertook its own Compact review in 2010.

The absence of ‘Big Society’ from current headlines does not mean that transfer of risk away from the centre is no longer happening. With cash cuts and changes in local authority personnel rampant, in an increasingly competitive service delivery environment, the Compact is one of the few defences the third sector has – yet confidence is regularly undermined by consultation timetables which make a mockery of Compact guidelines.

Local authorities are bearing the brunt of spending cuts, the speed of which is leaving their staff and organisers of service-delivering charities dizzy. Relationships between commissioning officers and service providers, built up over years, shatter as Council personnel lose or shift their jobs. Nationwide, the cuts have had unpredictable, non-strategic impacts allowing Government to say ‘It was up to councils to decide their priorities’.

Yet this is a dip from which services will bounce back as the economy stabilises. We will see a change in the balance of devolved power as the fruits of localism take root. Cash going into the third sector by then is likely to be at a similar level to five or six years ago, though things will look very different.

In future local authorities will be the principal coordinators of service provision. Their role will be to ensure standards, value for money and equity (especially for those in most need and the most isolated) and to ‘carry the can’. They will be the principal commissioners of services but will often be providers only where there is a lack of suitable quality or capacity available from elsewhere. Service delivery will be increasingly focused on the needs of individual users and localities, a ‘retail’ approach rather than ‘wholesale’. Service-providing partners will be from all sectors with increasing contributions from consortia of smaller charities, private / third sector partnerships, social enterprises and mutuals, especially in-house employee mutuals. Organisations who mentor or increase the capacity of charities and voluntary organisations will be needed and will flourish.

The 2010 Compact was compact indeed compared to its predecessor; memoranda of agreement between future councils and charities will be longer. Service level agreements will take on contractual status, KPIs will move to centre stage and innovative ways will emerge to relieve charities of the high risk endemic in Payment By Results contracts. Commissioning guidelines, such as those developed by DWP, will need to be revisited – any assessment which suggests that the current Work Programme is either fair to charities or sustainable clearly fails.

From next year the Social Value Act will ensure that those local authorities who wish to be explicit about the public benefit of their contracts will be able to pursue best practice; whilst those who do not so wish may merely note the possibility.

One lesson we must learn is that any contract is only as good as its weakest clause. A council which is not committed to justice, equity and community capacity building will not tie itself tightly enough to the spirit of that contract; a private sector operator which prioritises base values external to those of a partnership to which they are supposed to be committed will avoid such ties like the plague. A private/third sector Compact is ever more necessary.

It will be a cost-cutting, nit picking, book-driven environment for a while. There will be failures. Regulation will be imperfect. Whether we like it or not we are in a state of transition and the public service ethos of the future will be different to that of the past. Only by keeping our nerve, choosing our partners carefully and making Compacts and other agreements truly address the needs of service beneficiaries will we ensure that the future ethos of public service is better than the sometimes grey one of the past.

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