Downloading PDF. Please wait... Issue 2118

Is the voluntary sector an ‘acceptable’ face of privatisation?

This article is over 13 years, 4 months old
The government’s attempt to use ‘third sector’ organisations like charities to provide public services is yet another attempt to introduce the market, argues Esme Choonara
Issue 2118

Many people were shocked last week to hear that prison reform group Nacro, along with other well known charities, has teamed up with private security and construction firms to bid to build and run two new prisons.

Yet the bid, should it be successful, will be just the latest stage in the expansion in the number of voluntary and charitable organisations running public services.

Since New Labour came into power there has been an incredible growth of what is known as the “third sector” – voluntary, charity and community organisations, and so-called social enterprises.

The workforce in the voluntary sector alone has risen by 26 percent in the last ten years, whilst in social care it has almost doubled. The rise of the third sector has coincided with the government’s wave of “reforms” to public services.

One aspect of this process has been an attempt to redefine these services from those that are provided by the state, to those that are funded by the government but which may be provided by a voluntary, or even a private organisation.

A government-commissioned report by economist and one time CIA adviser Dr DeAnne Julius in July this year revealed that a third of public services in Britain are now run by the private or third sectors.

It also found that Britain is leading the way internationally in the outsourcing of services. Britain spends a larger proportion of its GDP on this than the US or any country in Western Europe with the exception of Sweden.

The report called for the outsourcing to continue. Yet despite business secretary John Hutton claiming that the “ideological battle” between public and private sectors is over, privatisation remains deeply unpopular.


The third sector offers a more acceptable face – charities and voluntary agencies are far more credible and trusted than grubby businesses that are trying to get their hands on valuable services.

So handing services over to the third sector can offer what PCS civil service workers’ union general secretary Mark Serwotka has described as a “soft cover” for privatisation.

Tendering services to the third sector can help establish a marketplace within public services that opens the door to further privatisation, leading a senior CBI official to refer the third sector as “the weapon of choice” in restructuring public services.

In 2006 the government displayed its enthusiasm for the third sector by setting up a dedicated cabinet office.

It also identified five areas with the greatest potential to increase outsourcing to the third sector – correctional (criminal justice) services, employment services, children’s services, including training and education, health and social care and “other local services.”

Currently the biggest area of third sector involvement is in health and social care, where about a third of all services are provided by the third sector, non-profit making organisations, and social enterprises.

Social enterprises are a deliberate attempt to blur the lines between the public and private sector. They vary massively from small co-operatives to huge profit making companies. The government defines them as businesses “with primarily social objectives whose surpluses are principally reinvested for that purpose”.

In some areas, such as employment and training where the government is pushing very hard to contract out services to the third sector, many of these enterprises are making huge amounts of money (see » Big profits behind privatised services).

But the financial motive is not always blatant. In health, for example, there is growing pressure for groups of workers to form co-operatives that sell their services back to the NHS.

This form of reorganisation may at least start with better ideals, but the end result is the same – fragmentation of public services, the creation of a market, and pressure on those bidding for ­services to keep down costs. Keeping down costs almost invariably translates as low pay, poor pensions and target driven services.

These are just some of the reasons why there is so much opposition among public sector workers to being transferred out of the public sector.


It’s easy to see what the government gets out of the third sector. But what does the third sector get out of its growing role in public services?

The main answer is money.

Government funding to the third sector has grown massively in the last decade. The National Council For Voluntary Organisations estimates that around £7.14 billion a year now goes from the government to voluntary organisations and charities alone. More than a third of charities now receive the majority of their funding from the state.

The form of funding has also changed, with a shift towards contracts to provide services rather than grants.

Of course there are thousands of voluntary organisations and charities that receive no state funding and struggle to get by on donations.

Many of these organisations play an important role campaigning against government policy, or picking up the pieces that cuts in state provision have created.

But one effect of the growing relationship between the government and the third sector has been to create a group of super-charities that swallow up the bulk of government funding.

According to a survey by the Charity Commission in 2005, the top 1.6 percent received an astonishing 68 percent of the total income.

One of the effects of the shift in funding from grants to contracts has meant that many of the largest third sector organisations have started restructuring themselves in order to win more bids for government contracts.

This means applying the same logic as any private firm – cutting costs, streamlining “efficiency” and concentrating resources on areas that are likely to be wanted by the government, rather than those that are important to clients and user groups.

These were some of the issues behind a series of strikes at the Shelter housing charity last year. Many strikers at the time told Socialist Worker that they were worried that changes in funding and restructuring had led not just to attacks on their conditions but on the service offered and the ability of the ­organisation to criticise and campaign against government policies.

The government often promotes the third sector organisations as more “sensitive” and “user-friendly” than state providers, saying that they are “innovative, flexible and user-led”.

Ed Miliband, when he was minister of the third sector, went so far as to suggest such organisations could be the “voice of the voiceless”.

It is true that many who work for charities and the wider voluntary sector are dedicated to progressive goals – as are most of those who work in the public sector.

But in practice the third sector provides little new “choice” or “flexibility” in public services, as those who win contracts are forced to deliver services to the precise standards and guidelines laid down by the government.

These organisations are not, it must be added, uniformly radical and empowering organisations. The magazine third sector carried out a survey of the boards of the top fundraising charities in Britian in 2006.

It found that “a blind eye is being turned to institutionalised prejudice,” and that the “privileged still make the decisions”.

All but one chief executive in the top 50 was white. Not one of the 50 top disability charities had a disabled chief executive. Around 35 percent of the chief executives went to public schools and a similar number studied at Oxbridge.

The survey concluded that the typical charity chief is still often “the polar opposite of disadvantaged”.

There is also a question of basic democracy involved in this form of privatisation – third sector organisations are not legally accountable to the public in the same way that the state sector is.

New Labour is hiding behind the third sector to pursue an agenda of privatisation that threatens the future of all public services.

Every contract handed over to a “not for profit” group opens the door to future competition from “for profit” firms that are itching to grab a portion of the government’s money.

Service users and workers in all sectors have a vested interest in coming together to defend the principle of public services provided by the public sector.

The alternative is a free market disaster in which workers are set in competition with one another, and in which those organisations that enter the lowest bids will win contracts to run public services.

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