What's in a name?

After the 2010 election, the Office of the Third Sector was quickly renamed the Office for Civil Society. The notion of a ‘Third Sector’ that is neither bureaucratic state nor profit-driven business was not invented by New Labour, but it gained official acceptance during their second and third terms, perhaps on account of its verbal echo of Third Way politics (Haugh and Kitson, Reference Haugh and Kitson2007). The Coalition's rejection of the label Third Sector is indicative of the extent to which definitions in this area are invested with political dimensions and sectional interests (Ridley-Duff and Bull, Reference Ridley-Duff and Bull2011). Alcock (Reference Alcock2010) notes that the government now sometimes refers to the sector with lists such as ‘charities, social enterprises and voluntary organisations’, which he sees as likely to be divisive when some groups inevitably get left off the list. Collective terms such as independent sector, non-government sector or non-statutory sector are all problematic for a group of organisations which derive more than a third of their funding from central or local government (Halfpenny and Reid, Reference Halfpenny and Reid2002; Clark et al., Reference Clark, Dobbs, Kane and Wilding2009). Other labels, such as charity sector or community sector, recognise only some of the diversity of organisations.

Haugh and Kitson (Reference Haugh and Kitson2007) argue that prior to the 1978 Wolfenden Committee Report (Wolfenden, Reference Wolfenden1978), the wide range of VCSOs in the UK were seen as parts of the discrete sectors in which they operated, and in that report they were labelled as a sector for the first time. The legacy is that what we have come to consider the VCS is an extremely broad category, with a vast heterogeneity of organisations within it (Halfpenny and Reid, Reference Halfpenny and Reid2002). The recent momentum gained by ‘social enterprise’ and ‘social entrepreneurship’ has, controversially, expanded the category further to include types of organisation with social goals and characteristics in common with for-profit businesses (Shaw and Carter, Reference Shaw and Carter2007; Di Domenico et al., Reference Di Domencio, Tracey and Haugh2009; Dey, Reference Dey2010).

In US literature, ‘non-profit’ marks a distinction from the profit orientation of the market. In the European Union, ‘économie sociale’ has become an official term, and the equivalent English phrase ‘social economy’ began to be adopted in the UK from the 1990s. ‘Social enterprise’ and ‘social entrepreneurship’ are invoked to denote the use of entrepreneurial skills and processes for social and environmental purposes (Chell, Reference Chell2007). Although these terms are often used interchangeably, ‘social entrepreneurship’ tends to emphasise the motivation and leadership of individuals, whereas ‘social enterprise’ focuses on the delivery of social benefits through the trading activity of organisations (Birch and Whittam, Reference Birch and Whittam2008). Social enterprises are characterised by their diversity and there is no universally accepted definition (Shaw and Carter, Reference Shaw and Carter2007; Di Domenico et al., Reference Di Domencio, Tracey and Haugh2009). There is some consensus that the essential difference between a social enterprise and a for-profit business lies in the primary purpose of a social enterprise to create social value, with commercial activity – including but not limited to tendering for public service contracts – the means by which to achieve that purpose (DTI, 2002; Pearce, Reference Pearce2003; Peredo and McLean, Reference Peredo and McLean2006). ‘Social enterprise’ can be applied to charities and voluntary groups that adopt income-generating strategies, including public sector contracts, but such organisations often do not recognise themselves as social enterprises (Bull, Reference Bull2008; Parkinson and Howorth, Reference Parkinson and Howorth2008). Clearer definition and stronger identity have been called for to prevent opportunistic misuse of the ‘social enterprise’ badge with the political attention now focused upon social enterprises (Social Enterprise Coalition, 2010). In this review we use the term Voluntary and Community Sector (with the common abbreviation VCS) as a non-politicised and broad descriptor of organisations, including ‘social enterprises’. However, we recognise the inherent weaknesses in any catch-all name for the ‘sector’ that Kendall and Knapp (Reference Kendall, Knapp, Smith, Rochester and Hedley1995: 67) famously called a ‘loose and baggy monster’.

Mainstreaming the Voluntary and Community Sector

In most Western economies, voluntary groups pioneered the services that became part of statutory welfare in the twentieth century. Lewis (Reference Lewis1999) identifies three major changes in the relationship between VCSOs and the state in the UK over the course of that century; from independence, to an extension of public services, to a mixed economy and contracting to provide services. Prior to the 1911 National Insurance Act, VCSOs were generally wholly independent of the state, working to their own agendas in fields in which the government made no provision. Increasing interdependence occurred during the interwar period, as VCSOs and the state began to work in connected spheres of welfare, and to this end the National Council of Voluntary Organisations (NCVO) was formed in 1919 (as the National Council of Social Services) with the aim of coordinating VCSOs and developing their ties with the state (Davis Smith, Reference Davis Smith, Smith, Rochester and Hedley1995). The 1942 Beveridge Report proposed comprehensive social insurance, including universal healthcare provision, and was influential in the creation of National Insurance and of the National Health Service (NHS). Despite the highly state-centred nature of the Report, it also acknowledged the role that VCS organisations played in healthcare at that time and would continue to play. By 1945, therefore, there was growing support for the view of the VCS as complementing and supplementing state provision (Davis Smith, Reference Davis Smith, Smith, Rochester and Hedley1995; Lewis, Reference Lewis1999). The post-war welfare state saw a rise, not a decline, in charitable formation (Alcock, Reference Alcock2010).

In the 1980s, governments on both sides of the Atlantic adopted the principles of ‘rolling back’ the state and strengthening markets. Policies and practices that became known as New Public Management (NPM) were based on the neo-liberal conviction that public services underperform when they lack the discipline of competition and profit. NPM is not a single body of theory and its various permutations are beyond the scope of this review. It denotes a cluster of ideas and practices that seek to improve public services through business approaches (Denhardt and Denhardt, Reference Denhardt and Denhardt2000). NPM is significant in the context of government policies seeking to deliver public services through VCSOs, including social enterprises, because it marks, ‘a shift in the way in which governments govern from bureaucratic administration to the encouragement of numerous innovative and entrepreneurial forms of service delivery’ (Curtis, Reference Curtis2008: 227). Wolch (Reference Wolch1990) introduced the idea of a ‘shadow state’ to emphasise the exertion of government power over VCSOs which had come in to replace diminished state provision. In England, the 1990National Health Service and Community Care Act, implemented in 1993, required contracting out of local authority social care services for disabled adults and older people and led to increased VCS provision in the field of social care (Osborne and McLaughlin, Reference Osborne and McLaughlin2004). In 1997, some 44 per cent of home help/care contact hours were provided by non-government providers compared with just 2 per cent in 1992 (Department of Health, 1998). Some commentators in the mid 1990s saw threats to independence and distinctiveness that echo today's debates. Russell and Scott (Reference Russell and Scott1997), for example, urged the VCS to resist pressure to seek contract funding in order to maintain independence from the state and to affirm its developmental role.

It has been argued that the 1990s saw VCS organisations becoming more significant deliverers of public services as the state contracted (Howlett and Ellis, Reference Howlett and Ellis2002; Fyfe, Reference Fyfe2005; Buckingham, Reference Buckingham2009). Kendall (Reference Kendall2000: 246), though, sees this account as ‘overdramatising’ its role during this period. His stance is consistent with the analysis that VCSOs were a safety net to provide for those individuals unable to meet their own needs, and where no private organisation were prepared to act (Halfpenny and Reid, Reference Halfpenny and Reid2002; Haugh and Kitson, Reference Haugh and Kitson2007). Overall, the Thatcher/Major period was characterised by piecemeal and ad hoc attention to VCS organisations – for example in the field of adult social care. This was a sideshow to the main project of rolling back of the state and the strengthening of the markets (Kendall, Reference Kendall2000; Haugh and Kitson, Reference Haugh and Kitson2007). In 1996, the Deakin Commission's Report on the Future of the Voluntary Sector recommended that a formal relationship be developed between the state and VCS organisations, allowing organisations to have a say in policy concerning the services they deliver (Kendall, Reference Kendall2000). This was to be picked up by New Labour after the 1997 election.

Over the first few years of New Labour's governance, the VCS began to move out of the margins of policy into the mainstream (Kendall, Reference Kendall2000; Fyfe, Reference Fyfe2005; Haugh and Kitson, Reference Haugh and Kitson2007). Compacts were introduced in accordance with the Deakin Commission's recommendation. These set out that the government must recognise the independence of VCSOs, including their right to undertake to offer long-term funding to create stability. The HM Treasury Cross Cutting Review (2002) in Labour's second term called upon all government departments to engage more effectively with voluntary sector partners (HM Treasury, Reference Treasury2002). The Public Accounts Committee report, Working with the Voluntary Sector (House of Commons, 2006), criticized the slowness of the take up of public sector commissions by VCSOs. This was tackled on a variety of fronts. The Office of the Third Sector, created in 2006, was tasked with bringing about a ‘a step-change’ in the quality of interaction with government that VCSOs in England could expect. The Office of the Third Sector initiated a National Programme for Third Sector Commissioners, which aimed to improve the understanding of the potential of the VCS in designing, delivering and improving public services. Other solutions were in the form of guidance and training to address lack of expertise and produce more ‘commission ready’ VCSOs, with skills to promote and sell their services (SCEDU, 2008). Similar initiatives were made in Scotland (Scottish Executive, 2004), although there are differences in policy and implementation across the nations of the UK as discussed by Danson and Whittam (this volume). New Labour sought not only to enable VCSOs to take on the provision of welfare, but also to promote civic activism and engagement through involvement in VCSOs (Blair, Reference Blair1998; Haugh and Kitson, Reference Haugh and Kitson2007). Levels of support offered to VCSOs across all four UK administrations post-1997 were without precedent, and represented a major break from previous ad hoc policy and support (Kendall, Reference Kendall2000; Hodgson, Reference Hodgson2004; Alcock, Reference Alcock2009).

Just over a week after the formal Coalition government was agreed in May 2010, the new Prime Minister and Deputy Prime Minister together launched the strategy entitled Building the Big Society (Cabinet Office, 2010). The Big Society aims to empower people through families, neighbourhoods and volunteering so that they ‘feel both free and powerful enough to help themselves and their communities’ (Cameron, Reference Cameron2010: 1). The strategy document, Building the Big Society, declared the government's intention to ‘support the creation and expansion of mutuals, cooperatives, charities and social enterprises, and support these groups to have much greater involvement in the running of public services’ (Cabinet Office, 2010). The post-election Department of Health (DH) White Paper announced the ambition ‘create the largest and most vibrant social enterprise sector in the world’ by giving more freedom to foundation trusts, along with handing over commissioning powers to General Practitioners (Department of Health, 2010: 36). What this implies in practice for VCSOs, including social enterprises, is unclear. It could create further opportunity but GPs may not have the capacity to give smaller social enterprises a chance (Hampson, Reference Hampson2010). Meanwhile the personalisation of social care, enabled by mechanisms to devolve budgetary control to the individual, has been extended to the NHS in a series of pilots. To deliver on the promises of personalisation, there is a need for a much-enhanced supply side, which may be ‘made up of large, small, private, not for profit, and public providers’ (Bartlett, Reference Bartlett2009: 8). The Big Society agenda and the debates around it have intensified interest in VCSOs (including social enterprises) and raised expectations for their capacity to deliver better services in an era of public spending cuts.

Change, continuity and distinctiveness

The above account, which has mainly focussed on England, can be read as a story of ‘progress’ towards greater mainstreaming of VCSOs in public services over a thirty year period. In this section, we turn to the main claims and counter claims around this set of changes and consider some of the conceptual frameworks that can be deployed for analysis and explanation. First, we introduce a note of caution. The scale of change towards VCS responsibility for public services can be exaggerated, as rhetoric tends to outstrip reality (Public Administration Select Committee, 2008). As long ago as 1938, a third of VCS funding was estimated to come from the state (Davis Smith, Reference Davis Smith, Smith, Rochester and Hedley1995). The proportion of all public expenditure with the VCS, although rising, amounts to little more than 2 per cent (Public Administration Select Committee, 2008).

Many VCSOs (and infrastructure organisations that speak for them) welcome opportunities to gain fee income, to improve services and to influence policy (Alcock et al., Reference Alcock, Brannelly and Ross2004; Blackmore, Reference Blackmore2006). Not all, however, concur that this agenda from central government should be wholeheartedly embraced. There are concerns within the sector that by working in partnerships with state agencies and taking up contracts for services, VCSOs are likely to weaken their distinctive organisational values and become more like agencies of the state, or more like for-profit businesses. The latter stance tends to inform current academic debates, as it did in the 1990s. The twenty-year-old notion of the ‘shadow state’ (Wolch Reference Wolch1990) is still resonant, with growing unease about pressure for sameness and erosion of VCSOs’ distinctive characteristics and trusting relationship with clients (Yarwood, Reference Yarwood2005; Milbourne, Reference Milbourne2009; Macmillan, Reference Macmillan2010). Hodgson (Reference Hodgson2004) in similar vein argues that the delivery of public services means working towards a bureaucratic mandate laid down by the state.

The sector's capacity for innovation is one claim that underpins the case for more involvement in public services. Voluntary organisations were the prime innovators of social welfare in the nineteenth and early twentieth centuries (Osborne et al., Reference Osborne, Chew and McLaughlin2008). These authors found from survey work in 1994 and 2006 that innovative activity of VCOs had shrunk, a finding that they explained was because innovation is not always possible when working to risk-averse public policy frameworks (ibid.). In an era of growing mistrust in many public institutions, there is still at least the perception of higher levels of trust in the VCS (Paxton et al., Reference Paxton, Pearce, Unwin and Molyneux2005). Moreover, VCSOs claim to have greater ability to engage with and understand the needs of individual service users and communities than statutory or private sector providers. These are important planks in the political case for increasing the VCS role in public service delivery. Billis and Glennerster (Reference Billis and Glennerster1998) proposed the notion of the ‘comparative advantage’ of VCSOs over other sectors on account of ambiguous and hybrid organisational structures characterised by ‘stakeholder ambiguity’. Stakeholder ambiguity refers to the lack of clear-cut differentiation between the various roles of employer, employee, provider, recipient, volunteer and others. This, they contend, implies a flexible, changing and informal structure capable of responding more sensitively than the state or the market to the disadvantage of service users. Stakeholder ambiguity implies that, unlike innovation, closeness to users is an intrinsic characteristic of VCSOs, but also a fragile one. Alcock (Reference Alcock2009) writes of the risk of incorporation, where VCS organisations become part of the state in all but name, and those delivering public services increasingly come to resemble the public providers they have replaced. This draws upon the concept of institutional isomorphism (DiMaggio and Powell, Reference DiMaggio, Powell, Powell and DiMaggio1991), which sees organisations becoming like each other under various pressures: coercive (when conformity is enforced), mimetic (when there is a need to reduce uncertainty) and normative (with pressures to show legitimacy). Milligan and Fyfe (Reference Milligan and Fyfe2005: 419) report a ‘bifurcation’ of the VCS, with larger ‘corporatist’ organisations increasingly working with the state – and with state funds – to delivery public services, while much smaller ‘grass-roots’ organisations continue to work in the community and to campaign for change and reform. VCSOs have been urged by commissioners to enter into collaborative arrangements to achieve the capacity to deliver large contracts (Mitchell and Drake, Reference Mitchell and Drake2005). This is challenging for some organisations, because of the high value they place on independence and the distinctiveness of their mission and values (Chapman et al., Reference Chapman, Crow, Brown and Ward2006).

Threats to distinctiveness (of individual organisations and the sector) can be discerned in closeness to the market, as well as in unequal partnerships with agencies of the state. VCSOs, it is sometimes claimed, are tending to become more like private sector enterprises, with the need to anticipate change and spot opportunities in response to an increasingly competitive environment for resources (Eikenberry and Kluver, Reference Eikenberry and Kluver2004; Haugh and Kitson, Reference Haugh and Kitson2007). Contracting out services formerly provided by the public sector to the VCS may open up services for contests, which can subsequently be won by the private sector (Davies, Reference Davies2006). To remain competitive, VCSOs are exhorted to adopt entrepreneurial practices, language, behaviour and mindsets associated with the private sector (Peattie and Morley, Reference Peattie and Morley2008; Zahra et al., Reference Zahra, Gedajlovic, Neubaum and Shulman2009; Baines et al., Reference Baines, Bull and Woolrych2010). For Howarth et al. (Reference Howorth, Parkinson, MacDonald and Southern2011) all this can displace radical approaches in ways that can weaken the potential of VCSOs to bring about change through community initiatives. Taking issue with both the isomorphism thesis and the uncritical importing of mainstream business discourse, Curtis (Reference Curtis2008) highlights examples of resistance and recalcitrance when social enterprises refuse (or fail) to perform to the expectations of government sponsors. The alternative social practices that result, he argues, can be understood not as weakness or failure but as what Williams (Reference Williams2002) has called ‘spaces of hope’. Failure is rarely mentioned in the light of the ‘halo effect’ that surrounds the VCS in general and social enterprise in particular (Scott, Reference Scott2010). There is a need to acknowledge and learn from failure, and to raise the critical reflexivity of the field (Dey, Reference Dey2010).

Value and values

In the summary account of recent history above, we noted how policies influenced by New Public Management (NPM) tried to make public sector organisations more like private ones, and how NPM's application in England in the early 1990s led to increased VCSO participation in some welfare services as a largely unintended consequence. An alternative to NPM known as ‘public value’ refers to the things that public services produce, either directly or indirectly, using public money. A ’public value’ framework emphasises outcomes and wider collective objectives (Horner et al., Reference Horner, Lekhi and Blaug2006). Service quality, according to a public value framework, consists of three domains – services, outcomes, and trust/legitimacy (Kelly et al., Reference Kelly, Mulgan and Muers2002). Assessment of public perspectives on issues of quality in all these domains is considered necessary to demonstrate the public value – and hence, quality and effectiveness – of specific public services (ibid.). The similar but rather narrower concept of ‘social value’ denotes the added benefit to the community from a commissioning/procurement process over and above the direct purchasing of goods, services and outcomes (National Health Service North West, 2009). Public value and social value are neutral about whether the public, private or voluntary sector provides a service. The sector as a whole, it has been argued, increasingly needs to work harder to assert its intrinsic value if it is to retain public trust and avoid becoming a stepping stone from the public to the private sector (Paxton et al., Reference Paxton, Pearce, Unwin and Molyneux2005; Moxham and Boaden, Reference Moxham and Boaden2007; Social Enterprise Coalition, 2010).