The coalition - pain or gain for the third sector?

David Cameron has been preparing everyone for gloomy times ahead, with large-scale cuts in public spending announced in the emergency Budget. The cuts will have an enormous impact, and charities that depend on public sector funding face great uncertainty. But it is not all doom and gloom, and there are many opportunities appearing through the haze of new policy.

Numerically the coalition government is Conservative dominated. But, despite media suggestions that the Liberal Democrats have little influence within the government, the coalition's theme of decentralisation, with its accompanying agenda of local empowerment, has been a long-term Lib Dem ideology. It is now shared throughout the new policies of different government departments. This is good news for many charities, which operate effectively at grass roots level and are often more responsive to local communities than either the state or the private sector.

The government's so-called 'Star Chamber' also demonstrates a significant commitment to finding new ways for public services to be delivered by the private and third sectors. This represents a clear and major opportunity for charities and social enterprises involved in service delivery to benefit. In many cases these opportunities may well outweigh the potential reductions in income faced by the sector.

In terms of 'best value', the government is placing much tighter scrutiny on public money. The third sector is well placed to demonstrate this. When it comes to changing the way services are delivered, the public sector can be inflexible, although its role as a good commissioner of modernised services is essential. Meanwhile, the private sector must always deliver profits to its shareholders, which means diverting some of the funds available for public services into shareholders' pockets. The third sector is not constrained by either of these issues, and can exploit this by offering the greatest value for money.

Social action

It was almost impossible to miss the emergence of the 'Big Society' theme in the Conservatives' pre-election campaign, with its riposte to the popular recollection of Margaret Thatcher's statement that 'there is no such thing as society' - only, ultimately, individuals. At the heart of the coalition's vision of a Big Society is 'social action'. One of the key policy pledges is a National Citizens' Service Programme. This is a voluntary scheme which will mix 16 year olds from different social backgrounds in a range of team-building and community service exercises, with the aim of creating relationships across social boundaries. Another headline policy pledge is the promise to create a Big Society Bank - essentially a social investment wholesale finance provider to help capitalise existing social lenders, like Charity Bank.

Other commitments include a national day to encourage community action, an assessment of 'civic service' in civil service appraisals, and nationwide training of community organisers to help build community-based voluntary networks in underprivileged neighbourhoods.

Keeping it local

The engagement of local councils, communities, neighbourhoods and individuals is pivotal to the coalition's agenda. The proposed Decentralism and Localism Bill gives greater financial autonomy to local government and community groups, granting communities the right to take over local state run services. Large numbers of third sector organisations already provide public services at a local level and the well-run innovators stand to gain from increased autonomy in service delivery. Social entrepreneurs will be able to present new ideas to local authorities who will have powers to advance projects which they consider likely to benefit their areas and the people that live in them.

The coalition plans to explore how empty homes may be brought into use, and to create new trusts so that it is simpler for communities to provide homes for local people. The Sustainable Communities Act will require local authorities to consult with service providers including those in the third sector to create proposals for how taxpayers' money is spent in their community. Local authorities will also be given the incentive to deliver sustainable development, which third sector organisations are ideally placed to provide.

The government has maintained the pledge to spend 0.7 per cent of gross national income on international aid by 2013 and enshrine this commitment in law. Other key themes are a commitment to the moral responsibility of supporting aid, which is also seen as being in Britain's national interest. Also, a move towards greater transparency and ensuring aid funds are spent most effectively.

The government is establishing an independent body to scrutinise UK aid spending. It has committed to the 'UKaid Transparency Guarantee' to ensure that full information on aid spending is published online.

Priorities for funding are supporting action to achieve the Millennium Development Goals, particularly on maternal health, and work in post-conflict and unstable situations. The government has also pledged to work in a more joined-up fashion with the Foreign and Commonwealth Office and the military in such situations. Aid to China will be ending, while spending in Afghanistan and Pakistan looks set to increase.

There is an immediate freeze on new UK-based awareness raising projects, and we have first-hand experiences from our client base of some organisations which have had existing projects cut already. However, the government has said it sees an important role for charities and NGOs, including smaller UK-based charities, in delivering aid and opening up new opportunities in preference to spending through larger multilateral bodies.

Schools and education

The coalition's education policy continues the idea of reducing state control and increasing local involvement, seeking to give parents and teachers more control over how schools are run.

The new academy programme differs from that set up by Labour, which only involved failing schools. The new programme enables 'outstanding' schools to become academies without finding a sponsor or any promise of additional capital funding. Failing schools will still need ministerial approval to become an academy.

All new academies will be charities which are exempt from the requirement to register with the Charity Commission. However, concerns have been raised about accountability as they will also be exempt from Charity Commission regulation with no alternative regulator appointed in the Academies Bill.

There are still unresolved issues to be considered including the critical question of whether there will be a state-sponsored indemnity fund, or an underwriting of the pension deficit, to cover the pension liabilities transferred when a school becomes an academy.

'Free' Schools

Parents, companies, charities and community groups are being encouraged to open new 'free' schools, which are expected to be all-ability state-funded schools set up in response to parental demand. 'Free' schools will be free from local authority control, be able to set their own pay and conditions for staff, will not have to follow the National Curriculum and will be able to change the lengths of their terms and their school days. However, free schools will still be accountable, like other state schools, through inspections and tests.

The government has said that it will relax planning laws and the Department of Education's school premises rules and an initial fund of £50m has been earmarked to assist the setting up of free schools.

Green schemes

The coalition government has stated that its aim in this area is to be the 'greenest' government ever. The localism agenda comes through clearly, with an increased role for community and local authority decision-making. Top-line policies include possible lobbying for more challenging carbon emission reduction targets at EU level and an increase in targets for renewable energy capacity. Practically, small-scale renewable energy will continue to be supported with incentives, communities will be encouraged to run their own renewable energy projects and new legislation will enable a 'Pay As You Save' energy efficiency scheme.

A review of the governance of national parks, with a view to increasing local accountability, is planned. Additionally, a green investment bank is promised, although its mandate is not yet set out. A great deal of detail is yet to come. Without this it is hard to determine whether the high 'green' aspirations can be met within the reality of reduced budgets.

A sporting chance

The indications so far are that culture, media and sport is a low priority for the coalition government, and funding cuts have begun and look set to continue in every area except the Olympics. The coalition has declared its commitment to a successful Olympic Games and the creation of a lasting Olympic legacy. The Olympics and Cultural Olympiad will continue to create wide opportunities for the sector, including for arts, sports, cultural and volunteering organisations, particularly through partnerships with the London Organising Committee of the Olympic and Paralympic Games.

The government has indicated it will encourage a reform of the football governance rules to encourage the cooperative ownership model. The government is also keen to support sports at a local level, including school and local sports club activities. The same cannot be said for the art world. Many arts organisations have already suffered as a result of the four per cent cut of Arts Council England funding '“ and the funding outlook is bleak for the next few years. There is concern in the sector that while many established arts organisations may survive, the cuts could seriously harm the frontline and less traditional arts.

Culture, Olympics, media and sport organisations will note the government's commitment to increasing the pot of National Lottery funding through cutting costs and tax paid by the lottery '“ which may increase the number of lottery grants available. There is likely to be further relaxation of music licensing laws to encourage live music performances, which will benefit organisations performing live music.

Medicine men

Although NHS funding is ring-fenced and will escape the ravages of budget cuts, coalition polices may lead to some radical change in the NHS over the next few years. There are some clear opportunities for the third sector.

The coalition government has been clear that it will give every patient the power to choose any healthcare provider that meets NHS standards, within NHS prices. This includes independent, voluntary and community sector providers, and the coalition has stated its commitment to quality 'through greater involvement of independent and voluntary providers'. This is a clear signal that provision of NHS services will be fully open to third sector organisations which are able to win contracts.

The previous government's push for the commissioning of key services to be moved away from Primary Care Trusts to GPs is set to continue. A widely recognised strength of the third sector is its ability to provide new and effective answers to problems because it works directly with people and groups on the ground. This type of innovative approach is just what GP commissioners will be looking for and should be exploited by new and existing third sector organisations working in this field.

Decentralisation presents a great opportunity for the third sector to be involved in delivering positive change in publicly funded services. It may even lead to the squaring of a circle by achieving improvements at a lower cost. We must now wait to see how the proposals are implemented and whether the sheer scale of public expenditure cuts will outweigh the gains from the new policies.