Within living memory, most public sector financial support to the voluntary and community sector and charities more widely was in the form of grant aid. This was the case across central and local government and the wider public sector.
The move towards commissioning, accompanied in many public bodies by competitive procurement, subsequently led to a significant and relentless move away from grants towards contracts, and often contracts based on payments by results.
This has been an unfortunate trend that has too often not been confronted enough by the charity sector or within the public sector. The time has come to challenge it and reaffirm the case for the prudent use of grants to complement and be a viable alternative to contractual payments.
Grants cannot and should not come with ‘no strings and no expectations’ on how they will be applied by the recipient, but neither do they require the detailed, heavily prescribed specifications which contracts are usually based around. Grants allow flexibility and enable innovation in ways that prescriptive contracts do not.
Grants should never imply low probity levels or irresponsible spending of precious public finance. Grants with no accountability and no transparency as to how public money is being used are absolutely not appropriate, as are grants to organisations which do not have adequate governance, sustainable business models and clear public benefit objectives. Recipient organisations can and should be required to report on how they have used the grant and its impact. However, such conditions should not be used in ways that deter new and informal groups, stifle innovation and create an overly risk-averse approach.
Grants can and should complement contracting. For major service provision, contracts will usually be more applicable than grants – but not every time. And grants, increasingly, should make more sense in the context of:
- public sector budgets becoming tighter and austerity biting ever harder
- a resurgence in the desire to involve the voluntary and community sector in building community capacity, delivering services and providing a voice to communities
- an appetite for greater social action
- low public confidence in markets and the business sector
Public sector commissioners and procurement officials should always consider grants as a means of securing their goals. And politicians should see grants as a means of enhancing the role of charities and the voluntary and community sector, as well as strengthening civil society. Accordingly, in my view, politicians and officials should consider the grant option because:
- grants can be awarded without expensive and long-winded procurement processes
- the cost of awarding grants can be more proportionate than the costs of procurement, most particularly when the financial value of the transaction is relatively small
- grant-making can eliminate or greatly reduce concerns about the risks associated with pre-tender dialogue with providers
- grants are more flexible
- grants allow the public sector to fund innovation and services for which outcomes are difficult to specify or which may regularly change
- grants are more appropriate for supporting and investing in new VCS/charitable organisations (including untested ones)
- grants work well for informal community organisations, which would be overwhelmed by formal contracting
- grants are more appropriate for supporting organisations involved in advocacy, place-shaping, community building and developing the capacity of the voluntary and community sector itself – for example, local VCS infrastructure bodies
- grants enable the public sector to fund local community groups or specialist providers, without the risk of the tender being won or a contract award being contested by business sector or inappropriate charitable bodies
- grants are a better way of contributing to ‘match funding’ from charitable foundations and other sources of revenue
- grants are more effective when funding activities, including user-led service design and delivery, and social action projects, compared with contracts with their specifications and complexities, when in fact the public body is wanting the users and/or activists to determine what they do and how they do it
In summary, there is a very strong (and too commonly unappreciated) strategic case for not abandoning grant funding, and indeed for using it more often to secure public outcomes and to support effective civil society organisations.