Taxpayers’ money delivered via vouchers, matched funding and asset transfer can build a voluntary sector that is less politicised and more rooted in the needs of stakeholder communities.
“Charitable groups who are filling the gaps left by government failures should not have to beg for grants from bureaucrats who were the architects of those failures.”
- Iain Duncan Smith
Getting money from government can drag a charity into a murky world of form-filling and politics. Funding might initially come with only a few strings. Then year-by-year, step-by-step, a charity morphs into something different in order to satisfy the government funder’s ever-changing demands.
But if government funding is a problem, no funding is a bigger problem. Public funding is vital to much charitable and social enterprise.
Using two New Labour expressions: stakeholder-directed funding mechanisms are a ‘third way’ between (1) charities being left to fend for themselves and (2) charities becoming dependent upon direct grants from politicians or/and bureaucrats. Unlike New Labour, however, stakeholder-directed funding offers a less politicised future for the not-for-profit sector and the creation of genuinely free charities. It ensures that good voluntary groups still receive taxpayers’ money but without politicians calling all the shots.
Who are stakeholders?
Stakeholders, for this definition’s purposes, are people who have a stake in the success of a not-for-profit entity – whether it be a formally registered charity, a community group or other voluntary organisation.
Stakeholders might be service users – an addict needing to access the services of a rehab clinic, for example. They might be a group of local families who want a new youth club to help keep their kids off the conveyor belt to crime. A stakeholder is not a politician who might soon be reshuffled to a different portfolio. It’s not an expensive consultant who lives a hundred miles from the regeneration scheme she advises, and won’t have to live with the consequences of any failure.
How can stakeholders direct funding?
There are a variety of stakeholder-directed funding mechanisms. Three of the most notable are:
VOUCHERS: Vouchers give service users real power over what kind of service they receive. Vouchers drive school choice and they are also being used within the US government’s Access to Recovery drugs programme. Risk-averse government funders are often reluctant to invest in faith-based or innovative voluntary projects and therefore ‘play safe’. Service users, who may already have been failed by conventional approaches, are more willing to try something new.
MATCHED FUNDING: Matched funding arrangements ensure that projects have to have community support in order to receive revenue. Matching doesn’t have to be exactly proportionate. Social justice might lead matching to be staggered so that, for example, prosperous communities receive 33p for every £1 they raise, whilst poorer communities receive £2 for every £1 raised. In both cases successful start-up projects will have to win the confidence of local people. Matched funding also encourages more local engagement with voluntary enterprises.
ASSET TRANSFER: The transfer of under-utilised public sector assets to local community groups is one way of building social capital and a less politicised voluntary sector. Dependency on short-term grant-based funding does not allow groups to invest in deep community or client relations. Nor does it allow them to borrow, recruit or strategise for the long-term. Ownership of an asset (even for seven or ten years) transforms an organisation’s outlook. They invest in the asset and they maximise its usefulness. The asset becomes security – in the emotional and sometimes the financial sense - for wider compassionate work. Social enterprise is much more likely off the back of ‘ownership security’. The Development Trusts Association is one organisation with specialist knowledge of asset transfer.