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Friday 18 January 2013 - press release

A new discussion paper by the Third Sector Research Centre highlights that commercial and statutory income has become gradually more important to charities, and now constitutes over half of the sector’s income.

The paper, produced as part of a series of Third Sector Futures Dialogues, seeks to explore concerns about the sector being overwhelmed by the state and the market. It argues that it would be wrong to suggest the sector as a whole is being overwhelmed by these forces.

The Centre’s analysis suggests that while a relatively small number of organisations rely heavily on government contracts and other forms of commercial revenue, most organisations receive little or no income from these sources.

It would appear that much of the apparent commercialisation of the sector is driven by changing relationships with the state. While 55% of total income comes from commercial revenue, over half of this comes directly from government.

However, the paper highlights specific implications for those organisations delivering government contracts, in terms of innovation, inter-organisational relationships and social mission.

Research on both social enterprises and service delivery charities suggests that highly specified government contracts may adversely affect charities ability to innovate. Research on homelessness charities showed that competition within the public service market had a detrimental effect on relationships between charities.

TSRC’s research into the Work Programme raises concerns that third sector organisations may be influenced by powerful pressures to operate in similar ways to the private sector. For example, ‘creaming’ off those easiest to place in the labour market or ‘parking’ those most difficult to help.

But it would be wrong to suggest that third sector organisations are being overwhelmed by these forces. Many are able to strategically engage in markets without eroding third sector identities.

Simon Teasdale, who co-wrote the paper, said ‘Many concerns have been raised about the effect of contracting and marketisation on the sector, and considerable work still needs to be done to understand these processes. But we should wary of presenting the sector as ‘overwhelmed’. While commercial and statutory income has been growing, it is still only relevant to a minority of the sector. What is more, influence goes in both directions. Many of the services now being privatised were originally delivered by the third sector and scaled-up by government. More recent innovations such as co-production or campaigns for fairer tax could also be seen to have influenced the state and the market.’

TSRC asks people to discuss these issues here

Download the Is the third sector being overwhelmed by the state and the market? discussion paper (pdf, 170KB)

This discussion paper is part of the Third Sector Futures Dialogues, being hosted by TSRC between September 2012 and April 2013 based on issues raised by our research. Stakeholders can get involved in each debate online, and a Sounding Board of voluntary, community and policy representatives has been assembled discuss research findings and comments.

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For more information contact:
Naomi Landau, Knowledge Exchange Team 
020 7520 2421