Newham's voluntary sector - the Trojan Horse for backdoor privatisation?

Newham takes a step closer to the possibility of backdoor privatisation of a swathe of council services in the coming months. Key to this process is what many will see as a surprising potential Trojan horse – the charities, voluntary organisations and community groups that seek to represent, defend and support the most disadvantaged in east London. Their involvement is a central plank of the Blairite agenda for so-called ‘public service reform’, with the Local Government Association suggesting that half of all council services could be outsourced to not-for-profit sector organisations by 2010. And the decision by Newham council to move away from providing grants and towards commissioning services from local voluntary and community groups has left these organisations in a flat spin.

In part this has been because the council is consulting on the services it might want to outsource, but has already started the process of commissioning before consultation has been completed. This has left everyone confused. But mainly it has geared up local organisations for an undignified scramble for money, one that looks likely to shut out smaller groups or make them dependent upon the goodwill and favour of their larger counterparts. In this respect, local groups have already started to mimic the private sector in looking for ways to survive in a market environment, eyeing the competition and keeping their plans closely guarded. But what is most surprising is that a voluntary and community groups, at heart people and community orientated, have accepted this ‘reform’ without question.

There has been almost no debate amongst groups about whether this is really the direction they should be taking or if it is in the interests of those they work with. Nor does there seem to be any recognition of the many failures of the market, from rail privatisation to education and the NHS, where the private sector has demonstrated its inability to apply market methods to delivering public services. As Martin McIvor, Director of Compass (by no means a particularly radical think tank), has argued, “complex services, in which strategic planning, efficient integration and the maintenance of universal standards are at a premium, are likely to suffer when ownership is fragmented, resulting in increased costs and risking the emergence of unaccountable local monopolies.” There is a real prospect that what already looks like a hastily thought through commissioning process in Newham risks exactly this outcome. Not only could there soon be a widening gulf between the larger charities that become the new providers of contracted services and the rest of Newham’s beleaguered voluntary and community groups. But will services suffer as they are split apart, only for those who trying to deliver them to find they are shackled by the contracts they have signed?

The disappear of grant funding will undermine many of the strengths of Newham's not-for profit sector, such as the value its independence from the state provides in encouraging the self-organisation of communities or vulnerable groups to exercise their rights and articulate their concerns, or its ability to experiment and therefore offer alternatives to the way things have always been done. But more competition and dependence on contracts will also force voluntary and community groups to make increasingly commercial decisions that could move them further and further away from their fundamental principles. Will becoming more like the private sector mean cost cutting and depress already lower salaries in the not-for-profit sector? Is there more chance that users will face new or increased charges? Will the cohesiveness and shared vision of the not-for profit sector, and its ability to act together in the face of inflexible and bureaucratic decision-making by the council, disappear forever?

Most importantly, does the lack of capacity of voluntary and community groups to cope with growing levels of contracting out herald the arrival in three years time, when the new contracts will end, of the private sector, ready to step in when voluntary and community organisations are judged to have ‘failed’? Is Newham's not-for-profit sector holding open the door for privatisation by stealth?