Voluntary sector facing huge shake-up in council funding

Following the government's comprehensive spending review, Sheffield Council has announced that it will be slashing funding for the voluntary, community and faith (VCF) sector by 15 per cent – the same cut that will also apply to all other council departments.

However, rather than reducing the budget for all organisations by 15 per cent across the board, the council instead announced a complete overhaul of the way VCF groups are funded.

From the 2011/12 financial year onwards all VCF organisations will have to bid for contracts from Sheffield Council rather than applying for a grant, which could potentially lead to them bidding against national charities.

All remaining money in the budget would be put together in one pot, which any VCF group could apply to. The council then plans to bring in an external organisation to administer this budget, therefore saving more money on its own "back office" functions.

Coun David Baker, deputy leader of Sheffield Council, said: "At the moment we spend around 73m a year on funding the VCF sector.

"That's 5.2 per cent of the total council budget, which is a significant amount of money.

"The important thing is at the moment this is predominantly balanced towards giving. We have got to restructure the services so that we are actually commissioning more than we're giving.

"We're looking at the whole structure of the whole service."

At present, Coun Baker said, around 1,200 VCF organisations receive council funding ranging from a few hundred pounds a year to more than a million.

He said: "We will be maintaining funding levels for the first six months and we're going to work with the VCF sector to look at how they can reconfigure.

"We'll ask them to consider our corporate plan. We want to fund the outcomes that the council wants as a corporate objective.

"We want to know if the services they are offering are right for the people of Sheffield and if they can offer those services more cost-effectively than the council can.

"The council has got to cut around 200m a year over the next three years – that's equal to 28 per cent of its funding.

"Some areas will probably deliver a high percentage of cuts, some will get more money and some will get less. Some organisations will not get what they expected.

"In February next year we will be in a position to announce the following six months' figures."

Coun Baker added that the changes might even have gone ahead had the Government's comprehensive spending review not taken place.

He said: "I think we're leading the way. This is a radical approach. I don't know of any other authority which has gone as far down this road as we have.

"I'm enthusiastic about this. I do believe it's not a negative exercise."

Laura Moynahan is chief executive of the Zest community development trust, which works to regenerate the neighbourhoods of Upperthorpe and Netherthorpe and is one of those which will be affected by the changes.

She said: "I broadly welcome the move to having proper contracts in place, and I welcome the opening up of the grant funding.

"However, I'm still worried about the commissioning process. I hope that they design it so that our sector has got a chance of getting these contracts and it doesn't go to larger national charities.

"When you open up a process of competitive tendering there's a danger that you might lose the localism of the service.

"If it's designed in such a way that we build in better value for local people and the people who use the service then that will be how our sector can really benefit.

"The devil is in the detail. We want to make sure this is done in as open and transparent a way as possible."