What is the issue?
The relation between income that the sector receives from grants vs. contracts is completely lopsided. Contracts can come with a lot of downsides for charities. For example, they can tie organisations down into services that are not working and do not allow them to redeploy resources where they are most needed. Government grants to the voluntary sector have fallen from £6bn in 2003/04 to just £3.8bn in 2015/16, while income from contracts has risen exponentially and stands at £11.4bn. There is now a new commitment in the new Civil Society Strategy to government grants.
Principles of Grants 2.0
Before the new Civil Society Strategy was released, the previous Secretary of State for Digital, Culture, Media and Sport, Matt Hancock MP, said that he wanted to see ‘Grants 2.0’. In his words, these grants could be made in a way that need not sacrifice ‘the efficiency and focus on outcomes that contracts are designed to achieve.’ As part of the consultation, the supporters of the Grants for Good Campaign provided government with some ideas on what Grants 2.0 could mean in practice. We put forward a set of principles which the government should embed across national and local government.
The Grants for Good campaign supporters regularly describe the problems of contracts and benefits of grants for charities on the ground. The campaign is based on their views and experiences. Grants for Good advocates that grants should be considered on an equal footing to other funding sources. They should be long-term, flexible with broad targets in terms of outcomes and unrestricted by default. They should be used designed in a way that allows for relationship building between commissioners and charities. Monitoring and evaluation has to be proportionate to size of the grant and grantee. Most important, grants should be built in a way that makes them open to small charities.
What does the new Civil Society Strategy say about Grants 2.0?
The strategy now pushes for sharing more data on grants and promoting best practice approaches, good grant-making principles, and guidance for commissioners. We hope that this effort might also reflect our ten Principles of Good Grant-Making, which grant-makers can use to ensure that grants that are fair, transparent and effective. There is also talk about ‘flexible contracting’: going outside competitive tendering requirements in order to work directly with innovative civil society providers.
The strategy also talks about combining the flexibility of grants with the accountability and performance rigour of a contract. But does making contracts a bit more like grants, and grants a bit more like contracts, really work? Bond – the UK’s international development network – pointed out that ‘there is a risk that Grants 2.0 combines the worst of both worlds. Grants and contracts are very different. Where grants give recipients a lot of control over design, outcomes and approach, commercial contracts have tight, predefined objectives that are set by the donor.’ Grants 2.0 can’t be contracts by another name. If they are paid in arrears and their conditions don’t work for (small) charities, then they could end up looking more like a contract than a grant. Whether the strategy will really lead to a revival of government grants has yet to be seen.
No comeback of grants without a reform of commissioning
It is hard to believe that the lopsided relation between contracts vs. grants will change without a reform of commissioning for public services. We currently have a commissioning regime for public services which suffocates charities and side-lines smaller ones – particularly through the use of competitive commissioning models and contracts. Charities face inflexible contracts with unrealistic terms and conditions, and significant barriers to obtaining public funding. Charities are also increasingly subsidising poor contracts with public donations. These are the results of a system that is geared towards price rather than taking into account local needs and environments.
The Civil Society Strategy’s current answer to these issues is a more effective use of ‘collaborative commissioning’ by ‘empowering communities directly’. Through the spread of Citizen Commissioners, local people will be supported to make commissioning decisions on behalf of their communities. A better use of the Social Value Act is also put forward. The Act will be given ‘teeth’. This means departments are expected to ‘account for’ the social value of new procurements, rather than just ‘consider’ it. Again, this might be a good start, but it does not add up to a real reform of commissioning that deals with its negative impact on charities and allows for bringing back government grants.
Those who can make a real difference need to be on board
The Office for Civil Society (OCS) is in charge of implementing the strategy. Will they be able to deliver on their promise to revive government grants and make public service commissioning work for charities? Questions about this have been raised by others. For one thing, it is the Ministry for Housing, Communities and Local Government (MHCLG) which can ensure that local authorities will actually pay attention to the Social Value Act – and make it work for charities on the ground. MHCLG has also a say in how local councils spend their £60bn discretionary funding – an eighth of which is spent with the sector. Given a packed policy agenda dominated by the bankruptcy of councils and Brexit – how can OCS ensure that MHCLG really champions the Civil Society Strategy as well?
Hanging like the sword of Damocles over everything: austerity
Will all these measures be effective in the overall context of austerity? It’s very questionable. Local services have been demolished and funding cut to levels where many local authorities are moving into uncharted territory at the brink of going under. Change is already challenging in easy times. But councils would have to rethink how they commission services in an environment where there is mounting pressure on their finances. Grants can be actually part of the solution – they are often less costly than contracts, and enable innovation that saves money in the long-term.
Grants are a force for getting the best out of charities. We like the change in tone and mood that comes with the new Civil Society Strategy and Grants 2.0 could mean a real revival of grants. But we need a real reform of commissioning and more financial leeway for councils for the tide to really start to shift.
Download the Civil Society Strategy here.
Read DSC’s consultation submission here.
Find more information on the Grants for Good campaign here.
Read more on what Grants 2.0 could mean in practice here.