Thank you for inviting me this evening.  After the feverish political events of the last few weeks, this feels like a valuable opportunity to pause, draw breath, and reflect for a few minutes on where things stand and what the future might hold.

Crystal ball gazing is about as difficult as it is sensible.  But there are some clues.

There has been all party agreement on greater emphasis on the third sector and its broad role. One aspect of a general assumption that state provision will shrink due to a mix of expenditure pressure and a genuine desire amongst many politicians to see a smaller role for the state as well as a big role for citizens and communities.

What we cannot I think assume is that greater emphasis actually means a larger charity sector.  It’s not at all clear to me that there will be more money overall going into the sector.  It means just that – more will be expected of us.

Secondly there will be a very real and big impact from the deficit reduction package.  The exact scale may have been all but hidden from the electorate during the election campaign but we know that all parties are for very good reasons committed to reductions in public expenditure.  There may be differences of opinion as to when exactly the brunt of the cuts should fall, with the Tories opting for more immediate cuts but the nature and scale of the cuts in public services will be very considerable.  More far reaching than anything we have seen in most of our lifetimes. 

If we think back to the years of the Thatcher administration, when so many communities faced such hardship, there was a real terms fall in public expenditure only in 1985-86 (a 1% fall). Now, the Institute for Fiscal Studies predicts real terms falls in public expenditure every year from now until 2018.  Outside of protected areas there is talk of budget reductions of 20-30% over the next three years. We begin to see the scale of what we are in for.

For the public sector itself this will be profoundly difficult.  At the Commission we do not yet know the shape of our funding future, but we do know that the budget reductions expected of us will go beyond just efficiency savings.  You will increasingly hear from us over the coming months the mantra that we cannot do everything.  We will certainly be asking you increasingly to engage with us online and to self-serve.  And we will have to engage the sector and the public in our thinking about how our strategy for the future develops in the funding context we face.

This will be the repeated pattern right across the public sector, and those spending cuts and changing approaches in central and local government will have very marked consequences for the charity sector.

Of course for some charities the financial and political changes mean increased opportunities. Education, crime prevention and reduction and employment charities are likely to see new opportunities for service delivery. But care and the environment, too, should be big themes.

And the commitment to encouraging diversity of provision – including through the third sector – has been clearly articulated. This is very good news indeed.  Again, increased opportunity.

But having the opportunity is no guarantee of success. There will undoubtedly be intense competition for public service contracts. And the competition won’t just be amongst the charity sector but between the charity and private sector, and between joint consortia bids between charity and private sector. So – more sector blurring and more hybrid delivery.

What might give your organisation a competitive edge?  There are some clues in the manifestos and the early statements from the coalition. The Conservatives put considerable emphasis in their policies for public services on the role of consumers and users of services – in the health service and more generally. Again, where charities are able to demonstrate that their services are more beneficiary focussed: by design, by accountability, by delivery, they will win out.

Perhaps it was sensing these opportunities that led to the high levels of optimism amongst charities whose opinions we canvassed in our last economic survey.  Long may that optimism last.

But perhaps charities simply have not yet felt the full storm force of the economic downturn.  March 2011, when many public sector funding agreements come to an end, is likely to be the real cliff edge.  We noted in our survey that the largest charities tell us they have been hit the hardest and are most likely to predict a drop in funds.  So perhaps you are ahead of your colleagues in smaller charities, in reading the runes that show a difficult period ahead.

Let’s think through the other impacts of the age of austerity. What else might it mean?

• Struggling public sector commissioners will be increasingly keen to pass on costs to charities. Whether it’s delayed payments for services, or extended periods of showing success – there will be assumptions that charities can subsidise. And the truth is that many do.
• There will be increased demands for demonstrated impact. Hard-pressed commissioners want to know you’re worth it. They won’t take your word for it. And actually the sector isn’t great at this.  I hope that in the age of austerity, public benefit reporting will really come into its own as a chance for charities to articulate their mission and their value.  I hope too that the sector will redouble its focus on mapping and reporting impact.  Evaluation can sometimes look easy to cut when budgets are tight and you want to focus spend on delivery – but if you can’t identify how it is that you are delivering successfully, then you can’t win the argument that you should be trusted and funded to do more.
• Your boards and executive leads will feel increased moral discomfort. What do I mean by this? Driving costs down will impact on the quality of service provision. You’ll have to draw the line where your organisation is prepared to go. But be prepared to have the discussion and expect your beneficiaries and volunteers to want to be a part of it.

So, should we be feeling overall optimistic or pessimistic? Is it bloom or gloom? Both are too simple. As with the general election results: it’s all much patchier now. For some the new freedoms to enter service provision will be transformative. For many others the next few years will be lots of blood and sweat and not a few tears.

Much is being assumed about the capacity of the voluntary sector, especially the small and local, to deliver.  The funding for this must be there.  Iain Duncan Smith told me he would like to see the Charity Commission take the reserves of the large charities and put them into small, local organisations.  You’d probably disagree – as would the law, so please don’t worry!  But it is a sign, I think, that we need to be very wary of conflating the undoubted desire and desirability to have more charities delivering public services with the expectation that the community and voluntary sector can pick up the pieces of a decimated public sector.

The Charity Commission has put a lot of effort into helping charities prepare for the times ahead.  We will strive to protect the independence and effectiveness of the sector.  We are mindful of the need to preserve the good name, public trust in charity.  We are after all the sector synonymous with virtue - ex prime ministers aspire to join it! Celebrities polish their credentials through it. It supports all our livelihoods and those with whom we work.

But those are all by-products. The real value of what charity means and does, as you know, is much greater.

As the country goes through the austerity wringer we must protect charity because:

• We must have organisational forms between the individual, the family and the state.
• We need the social focus and connectedness which charities bring at the community level.
• We need independent voices witnessing, campaigning, advocating.
• We need repositories of experience, wisdom, expertise and specialism.
• We need places for visionaries to innovate.
• We need values driven organisations to uphold and exemplify moral integrity.
• We need activity which is allowed to flourish away from the stringencies and exactitudes of full glare public scrutiny.
• We need places where people can bring ‘all of themselves’ to work, where the profit motive is not the ultimate driver of everything.

I’m not naive. I know that your day to day lives are preoccupied by hugely difficult priorities balancing, the pensions crisis, the shrinking reserve, the reduced funds raised. I know many of you have and are facing painful re-structuring, that the stakes are feeling uncomfortably high. We also know that, as a sector, the government will not step in to bail out failures as it did with the banks. It would be laughable to expect that, faced with the dreadful choices between priorities which this government faces, the collapse of even quite high numbers of charities will bring an influx of public assistance. So charities are on their own. We, the regulator can’t save you but we can help you. And regulation itself – done properly and appropriately – is supportive, and helps drive public trust and confidence. The coming years will undoubtedly be very hard. We have some things on our side:

High levels of public trust and confidence

An attractive core ethos. After the expenses scandal let’s not underestimate how important the voluntary characteristic of charity is in driving public trust.

A jobs’ dearth which, especially amongst school and college leavers, means increased numbers wanting to volunteer.

A re-balancing of priorities and the search (both at individual and collective level) for more meaningful and sustainable lives.

And the fact that charities exist for public benefit.  Never will your survival depend on explaining what you do (and doing that really well) more than now. 

And there’s one more thing that, to me, is a source of hope for the sector and confidence for its future. And that thing is you - it’s the people who work for and work with charities. Bright, resourceful and committed people whose ambitions are not limited to the size of their homes, or their cars, or their pension plans.  Many of you have proved in the past that you can adapt the way you provide services to meet the changing needs of beneficiaries. I know you’ll also use that innovative drive to ensure you keep on meeting those needs, even as the battle for resources heats up.

So I have faith that we’ll come to look back at these challenging years – not as a time of crisis for the sector – but as a period of innovation, of renewal, and ultimately of strength.

Thank you.

1678 words – c14 minutes

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