By Andrew Passey and Mark Lyons

Six and a half years of Blair government has seen a program of third sector policy review and reform that is unprecedented in the UK, and perhaps in the world.

The program is being pushed by four key players in government:

• The Home Office, which has responsibility for the voluntary and community sector;
• The Treasury, responsible for fiscal and monetary policy;
• The Department for Trade and Industry, responsible for leading government strategy on stimulating business;
• The Cabinet Office, which is in essence the PM's 'department'.

Our analysis of almost 30 initiatives breaks down into three components.

Philanthropy

The Chancellor (equivalent of the Federal Treasurer) has used annual budgets to stimulate giving through adjustments to the tax system. Measures have simplified existing methods and increased ways that people can give tax-efficiently. The latter has cut through the bureaucratic process of having to prove a donor’s tax status in favour of a trust-based system.

Government has also introduced measures to build confidence in fundraising. It has invested £2.9 million in Guidestar UK, a free access web-based database designed to enable donors and potential donors make decisions about whether, and how much, to donate to a particular charity. It is an attempt to open up and rationalise giving, especially as government encourages larger donations.

The voluntary and community sector (VCS)

Here government has undertaken two major reviews. From the first, conducted by the Treasury, has come a new £125 million fund called Futurebuilders, designed to build the capacity of the VCS to deliver public services. It will 'buy' physical and intangible assets, and provide development funding through a range of funding including grants, loans and guarantees. On the back of the second review, by the Strategy Unit in the Cabinet Office, the forthcoming Charities Bill will consolidate the broadening of charitable activities, improve regulation, and provide frameworks for charity mergers. Government too has increased the funding of the Home Office unit that supports the sector. Underpinning these initiatives and a general improvement in relations between the government and the voluntary sector has been the Compact negotiated between the voluntary sector and the new government in 1997.

Social enterprise

Initiatives here are designed to stimulate a broader range of organisations, including social businesses, co-operatives, and friendly societies, as well as social entrepreneurs. Government has formed a new Social Enterprise Unit, and introduced a range of new funds to support small social enterprises, especially those working in communities facing multiple disadvantage.

Government has proposed a new form of incorporation (the community interest company) that would seek to link the virtues of company legislation (to attract venture capital and entrepreneurs) with guarantees to lock in assets (to attract social investors and aid such organisations’ contributions to community regeneration). CICs will use their profits and assets for the public good. This new organisational form maps out the limits of the British government’s efforts to shape and develop the third sector.

Conclusions

These initiatives did not come of out of thin air. Many are embodiments of Blair’s third way philosophy of a middle way between the market and the state, and illustrate his aspiration to open up 'entrepreneurial organisations ... driven by a commitment to public benefit'. They reflect growing public concerns over the demutualisation of member-owned organisations, and stem too from the 1980s shift in government policy from community development to community economic development – the latter highlights the role of third sector organisations in generating jobs in economically marginalised communities.

This all contrasts with Australia, where there has been few initiatives. The Commonwealth government has legislated to encourage donations of money and in-kind gifts, though predominantly from high-income individuals. There was the rather confusing review of charity definitions forced on the government as part of the introduction of the GST, and the PM's Business Community Partnership is tasked with fostering closer links between business and nonprofits.

However, while governments here can certainly do more, we would not advocate looking to them for the lead. We would argue that the crucial factor in the UK was the role of the third sector itself in providing much of the intellectual ballast for these changes. Through the Commission on the Future of the Voluntary Sector, the Social Investment Task Force, and the Co-operative Commission, elements of the third sector committed themselves to a programme of institutional reform and renewal, which government has generally supported and further stimulated. It is time for similar third sector actions here.

This paper summarises a working paper to be released by the Australian Centre for Co-operative Research and Development (ACCORD) in early 2004.