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Are TSOs becoming too reliant on state funding or commercial revenue?

By: Naomi Landau, Knowledge Broker at TSRC
Published: Monday, January 28, 2013 - 10:24 GMT Jump to Comments

A Third Sector Research Centre (TSRC) discussion paper asks, whether the third sector organisations (TSO) are being overwhelmed by the state and the market?

Looking at the overall numbers, it is difficult to argue that the sector as a whole is being overwhelmed. The majority of organisations receive little or no money from these sources – only around 35% of organisations receive money from the state, and around 28% receive earned income through contracts or trading. Since over half of the sector’s total commercial revenue comes from government, we can conclude that many of these are the same organisations.

But this is not to deny the state or the market’s influence on the sector. There are a relatively small number of organisations that rely heavily on government and earned income. And trends suggest that the largest TSOs are becoming increasingly reliant on statutory and/or commercial revenue.

For these organisations, this has some quite specific implications. TSRC’s research into the Work Programme, for example, shows that third sector organisations are often influenced by powerful pressures to operate in similar ways to the private sector. They are often drawn into gaming behaviour, for example, ‘creaming’ off those easiest to place in the labour market or ‘parking’ those most difficult to help.

Research with homeless charities shows that increased competition within the public service market had a detrimental effect on relationships between charities and their ability to collaborate.

Just a few days after our paper was published, the Independence Panel reported that the independence of the voluntary sector was under serious threat from government. Our research has been cited as a counter to this, but it does not contradict the idea that certain organisations are heavily affected by their reliance on state funding.

The Independence Panel report focuses specifically on the parts of the sector that receive state funds – the kinds of organisations that deliver services to disadvantaged groups and do not necessarily have a range of income streams to draw upon. Previous TSRC research has shown that large organisations, those working with specific disadvantaged and vulnerable groups, and those located in some of the most deprived areas are most likely to rely on statutory income. For these organisations, the influence of the state will be much greater.

The experiences of organisations across the sector are very different – depending on things like size, scale, activity, ethos, involvement in government contracting. In many ways, the debate about independence applies specifically to organisations operating within the contract regime. The part of the sector that is heavily engaged in commissioning might be seen as quite distinct from the rest of the sector.

Even within the contract regime, the experience of organisations differs greatly. Some organisations have delivered public services for a long time and are well adapted to the requirements of government contracting. Others experience huge tensions in balancing the requirements of this with their organisational values, and those of their supporters.

For many community organisations, on the other hand, ‘independence’ is a different question. While the reduction of grants and other funding may not threaten their independence, it may threaten their survival. Even those that operate with little or no funding from the state often experience knock on effects from cuts to other parts of the sector – losing access to meeting spaces or resources for example. Yet this part of the sector is also extremely resilient, adept at voicing their anger and concern.

It is important to recognise that voluntary organisations also have influence. The third sector pioneered many of the services now delivered by government. Many campaigns – for environmental change, co-production of services, fairer tax – have influenced both the government and the market. This influence may be small comparatively, but it should not be discounted.

Does concluding that the third sector is not ‘overwhelmed’ let the government off the hook? It would be naive to deny the influence of funding – but it would be wrong to overlook the sector’s diversity and strength. Voluntary organisations must always consider whether their values are being compromised, but  seeing the sector as ‘overwhelmed’ or ‘co-opted’ may underestimate the ability of many organisations to speak up for those they represent.

At the same time, if the government wants the third sector to deliver services, it needs to think about why it wants them to do so and how this will be resourced. We may be moving into a time when the sector is overwhelmed less by excessive government control than by increasing demand and reduced resources.

Read the paper and join debate here

Naomi is part of TSRC’s Knowledge Exchange Team, working to ensure that research is accessible to the widest possible audience, and that practitioners and policy-makers can engage in the research process and use research results. The Third Sector Research Centre (TSRC) (http://www.tsrc.ac.uk/) aims to enhance our knowledge of the sector through independent and critical research.

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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