In the balance – The relationship between the public & social sectors

Lord Gus O’Donnell

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By Lord Gus O’ Donnell, Chair of Trustees of Pro Bono Economics and a former Cabinet Secretary and head of the Civil Service 20 June 2022

For 20 years NPC has been helping philanthropists and charities to maximise social impact in the lives of the people they serve. To mark our 20th birthday, we’ve been talking to leading figures and people doing things differently to ask: Where next for social impact? In this essay, Lord Gus O’ Donnell explores the relationship between the public and social sectors. Opinions are the author’s own.

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As a country, we’ve spent a lot of effort over the years trying to get the state and the market to work in tandem. At the same time, our business community has developed a growing interest in social purpose – naturally bringing it into more regular contact with charities and community groups. But the third side of the triangle – the relationship between the social sector and the public sector – is under-explored. 

In seeking to “unleash the potential of civil society in the 2020s”, the Law Family Commission on Civil Society, which I chair, very deliberately brings together actors from the public, private and social sectors. We contend that civil society’s future (and indeed Britain’s) is best served by a focus not just on the health of each sector in isolation, but on the balance that exists between them.  

Between a decade in Downing Street, the Cabinet Office and HM Treasury, and six years as Chair of Pro Bono Economics, I’ve been granted an unusual perspective on how the public and social sectors interact. What’s clear is that when the gravitational pull between them is well-aligned, good things can happen. 

Where the state stops and the social sector begins is a hard question to answer. By creating the conditions for each to exert the right gravitational pull on the other, we can let them find their own equilibrium. #20yearsofNPC Click To Tweet

Take the activities of a small sample of the estimated 26,000 children’s charities that operate in the UK. A hypothetical child living in an area of economic deprivation may wake up on a mattress funded by a grant from a charity like Buttle UK, dress in clothes from a Salvation Army school uniform bank and eat at one of the 1,000 school breakfast clubs provided by Magic Breakfast. They may go to a school which is part of an Academy Trust, governed by volunteers who may have been found by Governors for Schools. Their teachers may include some of the 12,000 that Teach First has trained and placed. 

Our child might also benefit from additional arts education by a charity like Artis or have extra individual support from one of dozens of tutoring charities. They might be involved with Young Enterprise or the Duke of Edinburgh Award. After school, our child might play at one of the tens of thousands of grassroots football clubs in the UK or be part of one of the 7,500 Scout groups. They might do their homework using data provided by Good Things Foundation and have their tea from a foodbank or community pantry. And they might do all this to achieve a goal inspired in them by a visitor from the Speakers for Schools programme. 

But how can we determine where the state stops and civil society begins? Is the foodbank visited by our hypothetical child’s family a powerful demonstration of communities looking after each other, or is it the epitome of the state failing at its most basic function of keeping people fed? 

It’s a difficult question to answer, and thankfully it may not be one we have to. By focusing instead on creating the conditions for the two sectors to exert the right amount of gravitational pull on each other, we can let them find their own equilibrium. This operates through two key mechanisms: financing and policy. 

The balance between the social sector and the state comes down to two key mechanisms: Finance and Policy. #20yearsofNPC Click To Tweet

Turning first to finance, it goes without saying that the resources provided by government are of central importance to the social sector. But it’s not just the quantity that matters, so too does the form. We saw that with the shift that occurred in the relationship between the sectors when New Labour introduced a “Compact” designed to establish a partnership with a new “third sector”. The move boosted the role and influence of the social sector, spawning new institutions and investment in sector capacity. But it also turbocharged the shift that had started in the 1980s towards a sector defined in no small part by its ability to bid for, and deliver against, the delivery of public services. The gravitational pull of state financing altered what the social sector did.  

That pull dwindled with the onset of austerity after 2010. As government funding declined, so organisations within the social sector sought a business model built more on earned income and influenced less by the gravitational pull of state financing. Yet this process played out differently across different parts of the sector and in different parts of the country. The average charity in the most deprived decile of local authorities has faced a 20% drop in local government financing since the financial crisis, while the average charity in the least deprived decile has experienced little change. That is one of the reasons why our child is only hypothetical: the support they enjoy is not universal or equally spread, and the majority of charities providing it have far more demand than they can supply.  

Turning now to policy, the picture is again a complex and changing one. With powers over regulation and its implementation, the state can smooth the road between charities’ intentions and their impact. It may at times feel like bureaucracy and interference, but it establishes the framework within which the social sector can operate and the standards to which it must adhere. The volunteers supporting our hypothetical child as tutors, scout leaders and school governors personify this dynamic. Employment law and the definition of work, the transferability of DBS checks and safeguarding approaches can all enable or frustrate how much help they can give. 

Yet the gravitational pull of policy is far from a one-way street. The state would be weaker if the social sector did not pull it in the direction of social reform. That is what helped lead to the creation of the NHS in the early 20th century. More modern examples would include same-sex marriage and the rapid – if belated – rise of climate change up the national agenda. Those within government may not always be comfortable with the pressure brought to bear upon them by the social sector, but it is a key component of our nation’s progress. 

For the two sectors to strike the right balance, it’s important that all actors acknowledge the importance of the co-dependency that exists between them. Rather than fighting against the gravitational forces pulling in sometimes opposite directions, public and social sector leaders should value the interaction.  

The co-dependency between the social sector and the state makes the balance between them critical to our country’s success. #20yearsofNPC Click To Tweet

Think once again about the life of our hypothetical child. For many in-school services to succeed, schools and charities must work hand in glove. Teachers need to identify those children with most to gain, groups need to be provided with physical access to school buildings, and flexibility must be baked into lesson timetables. Other state actors are crucial too, such as the library where the scout clubs and community football clubs might be advertised, and the GPs and social workers who make referrals to vital charitable services. 

This symbiosis is where, I believe, the most impact can be had. It is also how I suspect most people working in the two sectors would prefer to operate. Recent polling by the Law Family Commission on Civil Society demonstrates this. MPs, councillors and civil servants all acknowledged the importance of the social sector in delivering a better Britain, and a majority within each of these groups said they wanted closer relationships between charities and government. 

Importantly, the state has both the greater mass and the greater centralisation – in the UK at least. Its approach to financing and to policy has a profound effect on the shape of our charities and community groups – with the potential to pull them in directions they don’t want to travel. But the social sector has its own mass: the people involved and their collective determination, which can change the government’s direction in turn. The co-dependency between the two (and, in turn, the private sector) means the balance between them is critical to our country’s success.

What should NPC be doing? 

For the social sector and the state to strike the right balance, all actors should acknowledge the importance of the co-dependency that exists between them – something which NPC might play a role in. Rather than fighting against the gravitational forces pulling in sometimes opposite directions, public and social sector leaders should value the interaction. 


We hope you find these essays and interviews engaging and thought provoking. We’d love to hear what you think the future holds, and what you believe NPC should be focusing on. You can join the conversation using the hashtag #20yearsofNPC or through our events. As a charity ourselves we rely on the generosity of those who value our work to help us to continue to produce research and guidance to support the sector in maximising social impact. Visit the 20 years of NPC page to find out more. 

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