Politicians: occasionally they say what they mean

This guest blog comes from Nick Seddon, Deputy Director of the independent think-tank, Reform. In this post he talks about why charities need to be prepared for a radical reorientation if they are to play their part in the Big Society.

There is no more emblematic statement for our times than the words of Liam Byrne’s letter to his successor at the Treasury: “Dear Chief Secretary, I’m afraid to tell you there’s no money left.” It seems to be taking quite a long time for people to get this, but the Government has committed itself to eliminating the deficit and achieving this more through public spending cuts than tax rises. We are going to have to endure a fiscal tightening unlike anything our generation has ever experienced and the spending review over the coming few months will hopefully tell us precisely where and when the cuts will be made.

In return, society will have to do more. Both parties in the coalition have long talked about recharging society. Nick Clegg, now deputy prime minister, has called for a ‘fundamental resettlement of the relationship between the state and the citizen’. As for the prime minister, David Cameron, he has repeatedly said that ‘there is such a thing as society, it is just not the same as the state’. This, then, is the new settlement, or compact, for our times: the Big Society. We are so used to being sceptical about politicians’ words we forget that they do occasionally say exactly what they mean. The words ‘fundamental resettlement’ – not ‘gradual transition’ or ‘steady change’ – were selected for a reason.

Of course, nobody knows what the Big Society will look like. Over the past few decades, we have come to expect governments to give us direction – through blizzards of directives and policy documents – so the uncertainty of not having a big plan is daunting. But let’s remember what the government is telling us: “What we are aiming for,” said Mr Clegg, “is nothing less than a huge cultural shift, where people don’t always turn to answers from officialdom, from local authorities, from government, but they feel both free and empowered to help themselves and help their communities.”

The challenges for civil society are legion, and the tightening of the public finances will be exceptionally difficult. The Institute of Fiscal Studies has calculated that we can expect £3 billion cuts to the public sector. Those who believe that the state should be supporting charity will recognise, then, that a quarter of the funding is about to disappear. With that money concentrated in only 40,000 voluntary community organisations the hit will be concentrated and hard. Where money is still coming from central and local government and departments, there will be an accelerated market for contracts.

Markets are tough places. Charitable and voluntary organisations are generally ill-equipped for this, while the private sector is getting excited about the growth in outsourcing opportunities. Financial advisor Seymour Pierce reckons that it could amount to £140 billion by 2015, around a fifth of government spending. Value for money will be a key concern and this means that the brand won’t be enough: nobody will be that interested in handing contracts to charities just because they are charities: they will need not only to add value, but to be demonstrate that they add value. This will lead to an increased need for transparent and digestible evidence about impact and effectiveness.

The readiness is all, as Hamlet put it. Less enlightened organisations always seek to salami slice when the going gets tough, which means doing less for less. Smarter organisations will reconfigure what they do and deliver more for less. But everyone should accept that there will be less money around and, bearing in mind the government’s words, prepare for a radical reorientation. They need to seek refreshed sources of sustenance and sustainability. This will mean securing funding from traditional donors, it will mean connecting with communities in the widest sense of the word and – making the best of the new capital gains tax rates – building relationships with new philanthropists.