I’m reviewing Third Sector worldviews and have already covered anti-capitalism and the inclusion agenda.
Today I want to consider funding. How do you fund services for clients who cannot afford to pay for them?
State Provision
The most efficient funding is through the state. Basic social services should be provided directly by the state. Privatisation is absurd. How can organisations paying a dividend to shareholders possibly be more efficient? They do it by cutting wages and this disables local economies; as wages decline, spending power declines and localities suffer.
National and local governments plan and deploy resources according to need. This is a big advantage. There is no evidence this is less efficient than private sector organisations. The big advantage over privatised services is that government services are accountable to voters. By passing responsibility for services to private interests, they hand sovereignty over and allow voters say in delivery.
Third Sector Provision
However, no matter how effective state-run services are there will always be gaps in provision. This is where the third sector finds its role. They can champion the needs of disadvantaged groups not recognised by the state. There will always be neglected groups or new services to try.
How do we fund these services? The most common approach is through grants and until the recession and austerity, grants were big business. They still are although perhaps on a smaller scale.
Whilst there is evidence revenue funding for specific welfare projects can be effective, I do not believe grants are in any way effective at regeneration. I have seen many millions of pounds contributed to regeneration projects over the years, Burngreave New Deal is one example. Once the funding runs out the neighbourhood shows little or no improvement. Why is this?
Disadvantages of Grants
- Grants encourage a bureaucratic and not an entrepreneurial spirit. The focus is on reporting to the providers of funding and not on responding to the needs of clients.
- Grants are time limited. They build a resource of expertise and then lose it when the money runs out.
- Many organisations applying for funding do so without awareness of a wider strategy for their neighbourhood. So, for example, a service for a disadvantaged ethnic minority might make a good case but might ignore similar services offered to other ethnic groups in the same neighbourhood.
- This encourages divisions not only between ethnic groups but in my experience within them. To receive a grant tends to concentrate power in the hands of a few people who then become the focus for power struggles within the community.
- Accountability is a major problem especially where there are minority groups involved. If a particular ethnic group receives funding where is their accountability? If it is with the local authority, they are likely to be accountable to members of other ethnic groups. Too often they are not scrutinised because the scrutineers have scruples.
- Time and again I’ve seen the games played where a project’s management plays both sides off in favour of the middle. So, they tell their client group they are accountable to the local authority and tell the local authority to back off because they are accountable to their client group. This is a perfect recipe for the unaccountable community leader.
Business Perspectives
This game playing turns off entrepreneurs. They don’t perceive the third sector as a group of altruistic people but rather as a series of individual fiefdoms. Third sector leaders are too often involved in their work for the power and so do not need to prove they are actually able to get the job done.
Businesses are not immune to similar power games. The difference is that entrepreneurs refuse to play. They will simply walk away because they know how destructive they can be. There are always people out there who value collaboration. The priority is to find them and work with them. Sadly, they are rarely found in the third sector.
Social Enterprise
The question then is how do we support projects for clients who cannot afford the service? Social enterprise is one response to that question and positions itself as much in the private sector as the third sector. This raises some new issues.
Grants are a constant temptation and many social enterprises are able to get grants because they are social enterprises. In other words they are old-school community projects re-branded. The social enterprises that do manage to generate significant income through trade are often regarded with suspicion. What happens when the founder, who could have set up their own business, asks for a share of the profits? They encounter private sector entrepreneurs who have access to their own business funds but as a social enterprise find they are constrained by their founding ideals.
No approach is perfect and I’m not at this stage proposing solutions. The main thing is to be aware of the pitfalls and to seek innovative approaches that might just navigate new paths in this difficult area.