VOLUNTARY sector organisations should refuse to take on work for the public sector unless they are properly funded and paid a premium for their expertise, according to the head of the National Council for Voluntary Organisations.

Stuart Etherington wants charities to be more “robust” in their dealings with public sector commissioning bodies. It is, he says, time for charities to stop underselling the “unique added value” that they bring to the delivery of public services.

“When voluntary sector organisations are negotiating with the public sector, it is a very powerful tool to be able to say, ‘We know more about this than you do, so we are dictating the terms’,” he says.

“Voluntary organisations should not take on contracts on the terms that local authorities offer. They should say: ‘This is the price of the added value that we have to offer — you can take it or leave it’.”

Etherington’s comments betray not so much an incipient militancy among charities as a growing feeling of confidence in a sector that is increasingly relied upon to deliver public services to parts of the community that local authorities and care trusts are simply unable to reach.

Earned income from the state is now the fastest- growing source of funding for voluntary groups. It now represents 16 per cent of the sector’s annual £15.5 billion income.

While he is keen to encourage the public sector to commission more work from voluntary sector organisations, Etherington would like to see a shake-up in the procurement system, including the scrapping of this notion of “core costs”.

For years the public sector has allotted an unrealistically low figure, usually 10 per cent of the fees they pay, to cover charities’ overheads or core costs. “Private sector companies don’t ask for a certain amount to cover core costs,” he says. “They just say: ‘This is our price’. Charities should do the same.” He also believes that purchasers need to move away from the setting of rigid targets and benchmarks.

“Voluntary organisations are brought in precisely because they are better than the public sector at innovation and working in high risk areas with unpredictable outcomes, such as helping drug users on a difficult-to-reach estate. If performance indicators are based on designing out risk, then they will fail.”

He already detects signs of target-driven regimes being rolled back — not least in the Audit Commission’s new emphasis on “strategic directions” and “target reduction”.

There are encouraging signs too that central government has accepted the need for a robust new approach to funding. The guiding principles of the Treasury’s new £125 million “futurebuilders” fund — drawn up in close consultation with the voluntary sector itself — is to build up both the capacity and the independence of voluntary organisations by moving from grant-funding to longer term investment and a broader range of finance, including loans.

Futurebuilders should also open the door to more creative forms of voluntary-sector funding that would enable charities to invest in income-generating projects. It could be the key to better joint working between the voluntary sector and public sector commissioners, Etherington believes.

“I see futurebuilders as a gateway to financial and other expertise that charities themselves might not have. If it works, it could be a way of making everybody — on both sides — more creative.”

Alexandra Frean is the social affairs correspondent of The Times

Born: February 26, 1955, Dorking, Surrey

Career: He has been chief executive of the NCVO since 1994 and was previously chief executive of the Royal National Institute for Deaf People. He trained as a social worker and has worked in housing and mental health.

What they say about him: On receiving his honorary degree from Brunel University in 2000, he was commended as “a distinguished member of the voluntary sector, where he has devoted his career to the management of various charitable organisations”.

Little known fact: If you see him flying over Buckinghamshire, don’t panic. He’s a glider pilot.

What he says: “Cricket is an art form, particularly batting. Hope springs eternal in a shot well played.”

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