The Charity Sector needs to grasp the opportunities in the social economy

Charity trustees have taken a bit of a battering over the last few months. During the summer silly season there was the charge that charity CEO pay is out of control; and some of the sector's leading bodies (including the charity commission and the NCVO) felt that trustees needed guiding in order to be able to set pay levels. 

More recently we've seen Panorama's investigation into the investment practices of some of the country's largest charities, and the implication that by investing to prop up the world of big finance they are doing more harm than good. 

The CEO pay issue was a red herring. Trustees are perfectly well capable of setting a market rate for top talent in the sector. Comparisons with business and public sector roles consistently show that CEOs earn less in the charity sector than they would for the same level of responsibility in other organisations. 

The expose on charity investments, however, should come as a major wake up call for the sector. We are all the business of social impact, changing the world for the better and trustees must consider the social impact of all the decisions they make, not just when they are spending their money, but also when they are managing it. Yes trustees have a duty to manage their resources effectively to ensure that they can maximise the impact of their organisations, but we've learned that in some cases the management of those resources may undermine that impact. 

Trustees should stop seeing the management of their money and the delivery of their impact as unconnected. Social investment provides trustees with the opportunity to invest their money for a blend of both a social and financial return. The charity commission has updated its guidance to trustees on how they manage investments, recognising that trustees care about more than just maximising financial return. The traditional understanding of investment risk is changing as investors look at both financial return and social impact. 

Recently a small group of foundations in the US committed 100% of their endowments to investing for social impact. Some UK foundations and large charities are considering moving significant amounts of their money into this space. But the experience to date suggests that charity trustees are being left behind by other social investors. 

Social investment fund managers are creating a range of products into which charities can invest, covering a broad spectrum of financial and social risk and return. Charity trustees need to start demanding that their investment managers are seeking out and bringing them these deals, so that they can maximise their impact in all that they do. 

Abortions, money and missions

Tomorrow the Health and Social Care Bill comes to Parliament, and an amendment to the Bill proposed by Nadine Dorries and supported by Frank Field has brought the issue of abortion rights to the top of the news.

Simon Blake, Chief Executive of Brook has written a great blog outlining some of the key issues.

There is, however, an important element to this debate that affects the broader third sector. The more one looks at these arguments, it becomes clear that Dorries, Field, and their supporters, assume the premise that not for profit providers of counseling and abortions are driven by money rather than their missions.

Take Marie Stopes. It’s a charity (number 265543). It’s vision is "A world in which every birth is wanted". Their website outlines the range of activities which they undertake around the world.

Dorries et al argue that because Marie Stopes receives money from the NHS to provide abortions, it is not fit to deliver impartial counselling as its business model relies on that income. (The same logic is applied to other providers.) The argument goes that other organisations must therefore provide that counselling.

There are many reasons why this argument should be resisted, including the fact, as Simon Blake points out, that both the counselling and the provision of abortions is heavily regulated. There is also the fact that Marie Stopes is also reimbursed for delivering counselling regardless of whether or not the client goes on to have an abortion or not.

However, a key reason to resist this argument is that charities are driven by their missions not by their income streams. To allow this amendment to pass would set a very dangerous precedent that the government believes the opposite. Charities work to build a business model which allow them to deliver their mission, not the other way around. That is the duty of charity trustees and a principle on which the whole third sector is based.

If Marie Stopes were a for-profit organisation then this argument might hold water (although personally I probably wouldn’t buy it as there would still be many imperatives including reputation management that would complicate the picture). But it’s not. It’s a charity and charities put mission before money.

Regardless of one’s views on the rights and wrongs of abortions, the sector must not let the argument that charities are driven solely by financial imperatives stick. The implications would be very serious indeed.

BHF have missed a trick and taken the sector one step backwards

BHF have today managed to secure a remarkable amount of air time for their research into charity collections for clothes, including Today, the Times and Guardian. The publication of this research was timed to fit with the launch of a major fundraising campaign by BHF, of course a good cause. However, I don’t think this was a responsible or particularly productive thing for BHF to do.

Firstly the debate about where money from donated clothes goes and where charity income comes from has nothing whatsoever to do with effectiveness of a charity and is no proxy for comparing different charities. Many charities have no shops of their own nor any network for collecting bags from people’s homes. However, if they are able to make some money from this donation method through outsourcing to a firm which collects those bags then good for them. Clearly they have a duty to look for the best deal, but there are a lot of overheads involved in such a process.

Now you can say that the charity which does have its own shops and it’s own army of staff to collect bags are seeing 100% of the donations go to the charity. But the 100% is not all going to the charity’s mission. Some is going to the overheads of running shops and employing collection staff.

The comparisons get harder if the two charities are doing different work. If I want to give my clothes to benefit a charity which protects ducks but doesn’t have any shops, then I’m not going to be motivated to give to a charity which protects badgers just because they have their own charity shops. I might feel completely fine about say 40% of the value of my clothes going to ducks rather than say 60% which would have gone to badgers, because I don’t like badgers.

These comparisons therefore are misleading and unhelpful.

But there is a much more fundamental problem with the line which BHF have taken, that it will simply perpetuate the same old myths about charities. The overwhelming public feeling to today’s story will not be that we’d better give to BHF rather than anyone else, it will be that all charities end up being tarred with the same brush: we can’t be trusted and all the money we’re given is wasted on bureaucracy. I did a phone in on BBC Radio Sheffield this morning and this was the overwhelming sentiment from people there.

It’s nonsense for any charity to claim that all of any donation goes to the cause. And it doesn’t help anyone to encourage the public to judge us in this way. BHF are right to stress the need for transparency, but with transparency we should also be leading the debate about what is of real value when judging a charity. We should be judged on our impact and the value for money of our work, not on crude measures of inputs. what matters is how much difference did we make for the money which donors invested in us? If BHF wanted to say that they are the most worthy charity to give to then they should have championed the impact of their work, the lives they are saving, the many thousands of people for whom their support has been invaluable. After all they have a great story to tell.

Charities do and should compete for donations, and sometimes that competition will be fierce and even dirty. But as the sector grows and becomes increasingly professional we do all have a shared responsibility to treat the public with a bit more respect and start a real debate about how effective we really are, or we will all lose out.

Big Society is back where it belongs

The resignation of Nat Wei yesterday marks the end of an era of the “Big Society”, but it would be a grave mistake for the sector if we let it die.

New governments have a habit of thinking that they must reinvent the world, and only those who were close to them in the humble days before power can possibly help. For David Cameron and his close friends, this reinvention came under the banner of Big Society, an amorphous and ill-defined concept which has left many both inside his party and within the third sector cold and confused.

Part of the reason why sector leaders have been left cold and confused is down to an inherent paradox in way Big Society as a policy has been developed. For a policy which is all about empowerment and bottom-up decision making, the intellectual framework has been developed in a top-down way, by a group of people that most third sector leaders had never heard of. This group has included Nat Wei, who resigned yeaterday. His ideas have been of interest, but have never been sufficiently policy focused or practical and have never inspired the sector. As a mouthpiece for the agenda he has been a distraction.

So in spite of thinking that Big Society is broadly a good thing (as 64% of ACEVO members agree that it is), third sector leaders don’t believe that the government understands the sector (only 8% agree) or values the sector (25% agree). There has therefore been significant scepticism, or even toxicity surrounding the Big Society brand. This has been a big problem when there are so many important policy agendas for the sector bound up within it (such as giving, public service reform, social investment and volunteering).

This is now set to change. With the departure of Nat Wei, government will now need to listen to those who have real experience, knowledge and networks across the third sector. The Commission on Big Society, which ACEVO hosted and facilitated, has produced the best and most coherent set of policies which both support the clear articulation of what Big Society is about, and outlines real practical policy initiatives which can help to make it happen. The focus being placed on the work of the OCS strategic partners around implementing and measuring aspects of the Big Society will help to drive the agenda forwards too.

It is striking then that the momentum from within the sector to define Big Society in our terms and to drive that agenda forwards is peaking at a time when the Government’s enthusiasm for the brand Big Society seems to be waning. The Cabinet’s progress report after one year in office makes no mention of the phrase. Number 10's poor handling of the anniversary of Big Society this Monday has been derided by the media as just another re-launch, further devaluing the brand. The PM failed to articulate the progress which the government has made on the agenda. Instead he yet again talked about it in brand and all-encompassing terms, and therefore also detracted from the firm commitments in the giving white paper launched on the same day.

So we’ve become the life support for Big Society, and that is as it should be. This is an agenda of the third sector and it is right that we lead the debate. However it is impetrate that we don’t let it die because the current policy alternatives would be much worse for the sector and for our beneficiaries.

If the Tory party abandon Big Society then there would be very little to check the fervour of deficit reduction, resulting in less focus on involving the third sector in public service reform but instead pushing wide-scale privatisation and an expectation that philanthropy will step-in as the state withdraws. Similarly if Big Society disappears as an agenda then the dinosaurs on the left of the Labour Party will have free reign to promote statist solutions. Either of these would be a big step back for our sector.

All this was foreseeable. President Bush Jnr made the same mistakes when he took over in 2001, ignoring the established non profit players and talking only to his mates, mainly from within faith communities. However after a year of lots of talking and no progress he realised that to deliver on his social policies he needed the non profit sector as a partner.

We now must be those agents of delivery in partnership with government to realise the best of the Big Society. There is too much at stake for us to let allow the government’s incompetence in explaining and promoting Big Society be an excuse for its demise.

"Why can't we be more like America?"

Yesterday saw the launch of DCMS’s strategy for developing philanthropy. At the heart of much of the media debate around this was the comparison with the US where levels of giving, especially to the arts, are much higher (see Wednesday’s Today programme on Radio 4). Now I am a big believer in the value of learning from our peers around the world, but that learning has to be within a cultural context.

Avid readers of Fab will know that I’ve spent time in the US, most recently in April this year, picking up ideas about how non profit sector leaders are being supported. While at the GEO conference in Pittsburgh I learned of an initiative whereby foundations support sector leaders in taking sabbaticals allowing them the kind of space for personal development they would never otherwise have and also hugely benefitting their organisations. I was really pleased that ACEVO was able to host Claire Peeps from the Durfee Foundation based in LA which had supported this work at our National Conference to explore how it could be applied to foundations here.

Of course international learning works both ways. Last week I was in Toronto speaking to Philanthropic Foundations Canada about the work ACEVO has done on full cost recovery. The previous day had seen the launch of the Canadian taskforce on social finance which had drawn very heavily on similar work in the UK. It was strange to be sitting in an auditorium in Toronto hearing about the great example of a social impact bond pilot at HM Peterborough being led by the St Giles Trust, but it was a very powerful illustration of how much influence the UK sector has around the globe.

International learning can be really valuable, but an understanding of the cultures concerned is vital if those lessons are to have relevance. My colleagues in Euclid Network, have found this a particularly interesting in promoting networks of civil society leaders across Europe. How does one do this in Germany, where the whole concept of leadership is a fundamentally difficult one?

The Coalition Government has spend a great deal of time in looking at the USA as a model for many of the kinds of reforms which they want to see. Various gurus have come across the pond to help the government articulate the Big Society narrative. In some areas such as policing and welfare to work provision it seems that these will be fruitful lessons.

But giving is different. I’m no expert on the topic, but in my conversations with non profit folk in the US about the relationship between the public, the state and the sector, it’s clear that America’s history and national narrative, going right back to the founding fathers, looms large.

America was created in revolution. It was a reaction against a government, that of King George III, but in many ways that identity has become a reaction against government of all forms. Hence the Tea Party can attract so much support to the bafflement of Europeans.

The motivations for philanthropy in the US need to be understood in this context. The idea of giving as a duty is stronger in the US than it is in the UK because there is less shared expectation or desire for the state to act. It’s not so much that Americans give because the state can’t act, its more that they give because they don’t want the state to act. Therefore the culture of giving has become engrained over generations and become a norm.

This is a very crude generalization, but it is important to understand some of these differences. DCMS want to encourage philanthropy because they have less money to fund the arts. Public spending is going to fall in many areas such as the arts so giving must increase to save national treasures as well as essential services.

Even if people accept this necessity, it’s not quite the same motivation for giving as you find across America. Britons would still rather the state acted in the first place. And therefore the lessons won’t always quite fit. For a change in cultural norms in the UK to result in more giving people need to feel more than a greater sense of altruism or community spirit, and indeed it will take more than people knowing that the state is unable to act. For the culture of giving to better reflect America people will need to feel that they don’t want the state to act, and that’s a much bigger task for the government.

Of course I am all for initiatives to promote more giving, and there are definitely lessons to be learned from the US, but these initiatives need to be in a UK context and not pretend that we just less generous Americans.

The Big Society approach to drugs

I was interested to see that the relative costs to society of legal and illegal drugs has made the news again today. Last week I finally got round to watching the last episode of Our Drugs War, an great documentary series made by Angus Macqueen shown over the summer. In the three episodes Angus follows the consequences of the criminalisation of drugs from the estates of Edinburgh and New York to the poppy fields in Afghanistan to demonstrate that it is the battle against drugs, our societal insistence to treat a medical problem as a criminal one and therefore fuel a huge black economy, which causes far more harm than the drugs themselves.

In the UK alone our domestic policy to drugs is a manifest failure. Penalties get harsher, more and more substances are criminalised, and yet drug consumption continues to rise. Talk to the leaders of charities working with addicts and its clear that it is the consequences of the criminality associated with drugs; with the poverty, the exploitation, the spirals of deprivation, which is the fundamental problem.

I am not coming at this really from an ideological point of view. I completely understand the motive to want to protect people from harmful things by making them illegal. Governments of old made perfectly reasonable assumptions when banning drugs that this would stop people using them. My problem with the status quo is simply that it doesn’t work. In this debate facts simply are not the driver of policy, fear and misunderstanding take the lead.

This government has been clear that it has a response to areas of policy where government interventions don’t work. It’s called Big Society. As I’ve blogged before I think that Big Society is best conceived of as a political philosophy rather than a coherent programme of work in its own right; an approach based on devolving power and building personal and community responsibility. Speech after speech from senior members of the government has declared that government can’t have all the answers for the tricky problems which society faces. Sometimes society itself just has to be left to found the answer. Where government gets in the way it should withdraw and let the people take charge.

The Big Society narrative has of course been used in the context of championing those who work in communities affected by drugs including those who work with addicts. The sector’s record here is outstanding and of course more should be invested in treating addicts as people with a medical problem rather than a criminal one.

However is there not a more fundamental application of Big Society principles to the drugs problem (and I’m really posing the question here rather than being sure of the answer!)? If government is the problem in the sense that it is the criminalisation of drugs which is more harmful than drugs themselves, then shouldn’t the harmful influence of government simply step back. Shouldn’t we decriminalise all drugs and then focus on a social and medical set of interventions to build the communities which have been ravaged by drug related crime? Take away the criminality and you take away the illegal drug trade with all its associated harm. You change incentives and you change opportunities in those communities no longer driving people towards the drug trade as the only available enterprise. You empower people to seek help without the fear of being locked up. In short you change the whole structure of communities affected by drugs to seek solutions rather than be stuck in spirals of harm.

David Cameron is keen to be pictured as the radical. Big Society is his vision for changing the country. The question therefore is just how radical is he prepared to be to empower society to solve the problems that government can’t.

BS

Back home after a very interesting and busy Tory conference, with a whole host of impressions. There were a great many ACEVO members there; all working hard to get a feel for the mood and in particular get a sense of where the Big Society narrative is going.

On that latter point I fear that they will have left disappointed. In spite of roughly half of all the fringes being badged Big Society in one way or another, the difficulties in getting a handle on the policy implications remain.

Lord Wei was a big draw. He spoke at two of our fringe events, as well as the Respublica Big Society reception on the Sunday Night. The audience at each were hanging off his every word, often furiously scribbling down what was being said (some were even recording it). Lord Wei spoke about the Big Society as being a society in which “none of us feel small”. He frequently drew on international comparisons apparently to prove that this is now a global trend. His vocabulary was riddled with jargon, such as his debate about the benefits of “bridging and bonding social capital”. He extolled the gains that there could be if only we all formed more coherent groups – and at one point said that something as simple as learning each other’s names could save the state £billions.

It’s crude to take Lord Wei’s comments out of context. His job is to be the muse and when you listen to him speak you kind of know what he’s getting at. But the fact is that his audience perfectly legitimately want to know what this means in terms of how they do their job differently, what it means in terms of policy, and in my personal view in this particular regard he appeared out of his depth.

Lord Wei’s answer to what it all means, an answer also given by Nick Hurd, is that it’s not government’s job to define it. That’s old thinking. Big Society means devolution and localism, groups and communities taking control. We decide what it means. We make it happen. “Set forth and build the Big Society.”

There is of course some logic to that. If Big Society is simply a political philosophy then this is where we are left. The problem is that there is lots of evidence that government is not actually taking that approach, and therefore it is not a satisfactory answer for a number of important reasons.

Firstly government has been seeking to tie all sorts of policy announcements to the Big Society since it came into office. We have seen the announcements about the four pilot areas where local communities will be given extra support in building big society projects. We have the Big Society bank in the offing. And we have the work of the Big Society network, a new body which, as widely reported this week, is in danger of alienating the established third sector. Far from stepping back and letting society get on with making itself Big, the policy fragments which we do have paint a rather rigid picture of what sort of projects constitute Big Society.

Claire Cox from the institute of ideas spoke at our joint fringe with Policy Exchange on Monday night and gave a highly amusing description of Big Society as sanitised, enforced activism where the civil service decide what counts. We’re left with a feeling that the Big Society can be what you make it, as long as the powers that be agree.

There is an broader link here to the Tories views on campaigning. A colleague working the stand for a big national charity this week reported a lot of hostility from party members that they were there to advocate and campaign rather than fundraise. “We don’t give to charity for you to spend the money on campaigning.” A few indiscrete remarks from people close to the centre of Government who should know better have suggested that ACEVO has been foolish to speak out on projects like the National Citizen Service with which we have disagreed. We of course know Oliver Letwin’s position on this from his remarks to NCVO last year. The sector must be careful to protect its campaigning in face of this hostility and there is a clear contradiction between the ideal of Big Society and government not wanting to hear hostile messages.

The second reason why the laissez-faire argument isn’t satisfactory concerns the government’s approach to public service reform. Amongst the less ethereal parts of the Big Society narrative are the very welcome pronouncements about pushing ahead with market based reforms in public services with a clear commitment that the third sector must be able to play a significant role in those markets. The messages from government about removing barriers to level playing fields, reforming commissioning to focus on outcomes, removing bureaucracy, and accessing capital show a good understanding of the challenges which third sector providers face. But getting these market structures right requires some very serious and very specific policy direction from government. Lack of clarity about what and how government wants to buy would be disastrous.

Again in reality, and quite rightly, government is not leaving all this up to chance. There are some important over-riding messages about needing to focus on outcomes and payment by results in the provision of services and different departments across government are bringing about significant changes to the market structures of services. The government understands that good public service markets cannot be spontaneously created from the grass roots.

A third reason concerns the fact that the most radical change which the government is seeking to bring about is coming from ministers who are showing real political bravery and leadership.

I was struck across many of the government speakers on the fringes by how many ministers spoke like they were still in opposition. Asking for ideas and input. Weighing up arguments on both sides and seeking to come to a dispassionate judgement. The idea that Big Society can just be left to happen rather fits into this mould. However, the likes of Iain Duncan Smith and Andrew Lansley (who in my view was the best speaker on the fringe) have shown quite the opposite qualities, demonstrating real boldness in pushing trough their reform agendas. They understand that they have responsibilities to live up to and that their decisions have consequences, and in so doing leave those who need to understand those areas of policy which a clear idea about the direction of travel.

These bold policy pronouncements where they exist, as well as contradicting the idea that Big Society shouldn’t be defined by government, do also present third sector leaders with further confusions. If one looks at the nature of the these reforms to public service markets there is a fundamental inconsistency in how they are being applied. As Sonia Sodha from Demos argued at our joint fringe, in some public service markets we are seeing consolidation and in others a fragmentation. Welfare to work, for example, is moving to yet bigger regional prime contracts for delivery, with a complex supply chain below. The NHS on the other hand, is moving in exactly the opposite direction, with commissioning being devolved to GPs. This inconsistency will make the joining up of areas of public services, vital if the third sector’s role really does mean doing things differently in a way which can reduce spending on those services, much more difficult.

The point is this: facilitating the Big Society requires a coherent policy framework which all the key actors can understand. I suspect that third sector leaders have left Tory conference none the wiser about the Big Society as a concept. We have no reason to buy the argument that defining the Big Society should be left up to us because government has not in fact been leaving it up to us and nor should it. We need to know the rules of the game in which we are being asked to play. Those working with Lord Wei need to understand that reasonable demand and give the sector some answers, if indeed there are any.