The Opportunities and Challenges of the Changing Public Services Landscape for the Third Sector in Scotland: A Longitudinal Study Year Three Report (2009-2012)

CHAPTER 3: IMPACT OF POLICY CHANGE ON THIRD SECTOR ORGANISATIONS

3.1 This section summarises how the key policies and changes to the funding environment impacted on TSOs over the course of the three years of the research. This includes an examination of key Scottish Government policies such as localism, personalisation, the Christie Commission and Change Funds and other policy priorities. At UK government level, the policies explored include the Work Programme and the Welfare Reform Bill. There is then a brief overview of other employability policies, issues raised around disconnected policy, volunteering and regulation. One of the key policies of the UK Coalition Government has been reducing the UK deficit, of which reductions in spending on public services has been a key component. This section examines the extent to which TSOs in Scotland have experienced funding cuts over the course of the study as well as trends experienced in tendering and some of the new opportunities that may be opening up in the changing environments.

Localism

3.2 In year one, one of the key policy changes that had occurred at that time was the Concordat, which included the principle of more local control over planning and services, 'localism'. While this was in principle often supported, the impact on TSOs in practice had been more problematic:

(a) Practically, negotiating with numerous individual local authorities and CPPs could be difficult in terms of time and resources for those TSOs delivering local services across multiple geographical areas

(b) Some felt that devolving greater decision-making to local authorities had resulted in policy that was unclear and lacked cohesion and resulted in an 'accountability' gap where it was not clear whether Scottish Government, local authorities or CPPs had responsibility for policy

(c) Increased 'localism' and the focus on local needs may have resulted in a decreased ability to see the 'bigger picture' of policy and provision across Scotland, including limited sharing of good practice across areas

3.3 These issues remained on-going throughout the three years, although other emerging policies became more prominent for TSOs as the research progressed

Personalisation

3.4 Personalisation (also called 'self-directed' support) has become increasingly important in the UK and Scottish policy agendas. This gives adults with special needs direct control over designing their own services by sharing with them, or giving them, responsibility for the funding of their services. There is an unresolved debate about whether this is a model that empowers individuals by giving them direct control over the finances of their services, or disempowers them by disaggregating and isolating individual service users. Although 'direct payments'^[6] have been around for over a decade^[7], the development of personal budgets is more recent and was given a boost with the Convention on the Rights of Persons with Disabilities which came into force in 2008^[8]. In Scotland, The Changing Lives report considered the role of social work in supporting this change, not just for disabled people, but for all who require care and support^[9].

3.5 The Scottish Government defines Self-directed Support (SDS) as: 'The support individuals and families have after making an informed choice on how their Individual Budget is used to meet the outcomes they have agreed'^[10].

3.6 The same report states that 'SDS is often described as the personalisation of social and health care' (page 9). We use the term 'personalisation' in this report since that this how most of the respondents referred to it.

3.7 For TSOs working in health and social care, personalisation became increasingly important to the way in which their services would be delivered in the future. This was mentioned by some in year one, although became more prominent in year two. With the re-election of the SNP government in Scotland in May 2011 (for which it is a key policy), the agenda gathered more momentum in year three.

3.8 Many of those who discussed personalisation were supportive of devolving power to service users and many had been preparing for personalised and self-directed support for some time, particularly running up to year three.

3.9 Personalisation had the potential to redefine the balance of power between local authorities, care providers and service users. As service users increasingly become purchasers of care services, the role of local authorities may be reduced to one of oversight although they will likely continue to have a role in maintaining a list of approved care providers and on other aspects of the process related to quality and price.

3.10 Personalisation also represented a challenge for many health and social care TSOs in terms of: moving from institutional care provision to personalised care; the potential for greater complexity in the management of staff rotas and payments for the provision of services, and adapting to the different way of funding presented by personalisation may require major changes to the way some organisations currently operated, although the exact nature of these was sometimes uncertain.

3.11 Some TSOs felt that personalisation had the capacity to change the way in which care was conceived, allowing more people to be supported in the community rather than in institutions (e.g. independent living) and to have care tailored to specific needs. However, some were concerned that personalisation was being used explicitly by some local authorities as a cost-cutting exercise and was not about a genuine reform of services^[11]. As a result they were concerned that less finance would be available to clients.

"This is a Scottish government policy which has the best of intentions but in a changing environment is being used in some situations in a negative way, to cut budgets… Personalisation has, as a policy, the capacity to make significant improvements in service delivery and be the catalyst for positive change but the policy is being used to fast track change in a way that is having a negative influence on those who use services and those who deliver them... Having choice is great but it is limited by the resources that are available financially".
(Senior Manager, Health and Social Care Focus Group, year two)

3.12 Personalisation was changing assumptions formed at a time when large tenders had been issued by local authorities. Large tenders gave organisations the opportunity to make long-term plans by ensuring that infrastructure and fixed costs associated with care delivery could be met. Under the new personalisation agenda, TSOs were less likely to be able to rely on large tenders to meet fixed costs. Instead, individuals became purchasers of care in a marketplace made of multiple smaller income sources. This change was perceived to make long-term planning more difficult as individual purchasers of services were less likely to make long-term commitment regarding their care package.

"My view is that there will be constant change driven by the funding situation but also the expectation of the disabled person. Local authorities may have a five-year plan but individuals may prefer to do things monthly. If for example Glasgow were going to give 30 individuals £10,000 each and half those individuals decided not to spend the money with us then the whole infrastructure will have to change. Services have been forced to close because they just don't have that security that their infrastructure and fixed costs are covered".
(Senior Manager, Health and Social Care Organisation, year three)

3.13 Local authorities are responsible for rolling out the move towards personalisation. In year two, TSOs pointed out that there were disparities across local authorities in the conceptualization and implementation of personalised social care. By year three, TSOs also noted varied approaches within LAs, with some planning to run with the policy later on in the year and others planning to wait several years before rolling it out, while a small number had already been preparing for the move toward personalisation of services.

3.14 For those organisations affected by the policy move towards personalisation, there was a lot of uncertainty about how it would work. One organisation who operated within Glasgow was preparing for the move towards personalisation of services. This included changing staff terms and conditions and hiring more part-time staff so that staff could work more flexibly in order to meet demand.

"I think most people who buy personalised services, they're not going to say 'I want to buy 10 hours from you a week'. They're going to say 'this is what I want to achieve, some weeks I'll want two hours, some weeks I'll want 10 hours, how are you going to respond to that?' That's going to be a challenge for us and everybody else".
(Senior Manager, National Health and Social Care Provider, year three)

3.15 This process was underway in year three and represented a challenge for managers and staff alike, especially when the policy itself was perceived to be unclear. One manager described trying to put the policy into practice as "wrestling with the clouds".

3.16 The move towards personalisation was perceived to be both an opportunity and a challenge. It potentially means a very different way of contracting services and being more client-focused. However, there were concerns about the ability of clients to navigate and choose the most appropriate services for their care, as well as concerns about moving to a way of working flexibly enough to meet potential demand.

Christie Commission and other policy priorities

3.17 No organisations had accessed the Change Funds which was unsurprising since the Funds were very recent. While many were aware of the Christie Commission and the move toward the preventative agenda, organisations were not clear what the impact would be. One, in particular, was supportive of the principle, but concerned that the practicalities of implementation had not been considered:

"The idea's fantastic…there's a lot of Scottish Commissions [e.g. Christie Commission] that are great, the principles and the ideas, but the practical stuff is just none existent, so what could be a good initiative I fear could just be lost because the practicalities are not being thought out".
(Senior Manager, Local Learning Provider, year three)

3.18 There was also a wide range of other Scottish Government policies that impacted on the TSOs that participated in this study, although these were often specific to the area within which a TSO worked. The year one report noted that there had been general policy shifts towards employability on the principle that work offered individuals positive outcomes, and this priority appeared to continue. Shifts in policy could favour some organisations to the detriment of others. For instance, one organisation perceived that the greater emphasis within policy on early years could have a detrimental impact on their work with teenagers and young adults, whilst for another, the policy focus on sexual health had resulted in greater resources for their work. This raised issues for organisations about the extent to which they adapted their work to fit with changing policy priorities and this is discussed further under 'Mission, focus and identity'.

UK Government policy

3.19 Until 2010, there had been relative stability in the UK government, with one of the key policies being 'back-to-work' programmes^[12] and employability. This was noted by TSOs in year one. With the formation of the UK Coalition Government from May 2010, significant policy changes were put in train that would have potential impacts on TSOs, particularly those involved in the provision of employability.

The Work Programme

3.20 The introduction of the Work Programme replaced existing employability funding streams^[13]. The programme aims to get long-term unemployed people back to work with the use of third-party suppliers. A small number of large 'prime contractors' have been contracted to deliver services in specific regions across the UK. The prime contractors need to have substantial resources in order to operate the programme because the programme is based on payment by results (e.g. a client gaining and/or keeping a job), so the majority of payments to providers would only be made, for instance, after a person previously on benefits starts work. The prime contractors then sub-contract specific areas of work to other organisations, generally smaller specialists.

3.21 At the time of much of the year two fieldwork, the outcomes of the Work Programme bidding process were unknown. However, many had been involved in developing partnerships with a range of potential 'primes' since funding through the Work Programme could only be accessed by a relatively small number of very large organisations, and this had created the need to develop both new and existing partnerships in order to tender for the contracts. Some felt that this had been particularly time-consuming and there was also a lot of uncertainty among the TSOs who were hoping to get funding from the Work Programme.

"The whole process [contracting via the Work Programme] has been really drawn out and incredibly complex because of the numbers of potential primes you are dealing with and I sincerely hope that the DWP don't do further tenders in this way".
(Senior Manager, Local Employability Provider, year two)

3.22 When the results were announced in April 2011, the two prime contractors in Scotland were both private sector organisations and there was some concern expressed by interviewees that the third sector had been side-lined; a sentiment echoed by the Labour party and others in Scotland^[14]. As a result, one interviewee felt that the Work Programme was leading to a contraction in the third sector:

"The impact of this programme is the increasing presence of the private sector and has resulted in contraction of the third sector. It's not that they have both filled into a gap, one has come in and the other has contracted".
(Senior Manager, Employability Focus Group, year three)

3.23 One TSO who had put in a bid to be a 'prime contractor' was disappointed to have been unsuccessful.

3.24 By year three, a number of organisations had engaged with the Work Programme as sub-contractors. However, referrals received by these organisations through the Work Programme had been very small^[15]. For instance, the following comment was commonplace:

"We have the agreement but we're not actually getting the referrals, they are not actually taking up that offer".
(Senior Manager (1), Employability Focus Group, year three)

3.25 It was commented that:

"I think we've been through quite a long period of them trying to get their head round how it's going to work at their end and never mind sorting out the issues it is creating for the sub-contractors".
(Senior Manager (1), Employability Focus Group, year three)

3.26 A number of sub-contractors felt that they had received very little information from the primes about the clients they would receive, although it should be noted that there are two separate private sector prime contractor organisations in Scotland and some interviewees who were sub-contracted to both reported different levels of engagement and support between the two. Communication can also be complicated by the fact that some of the TSOs were sub-contracted through another sub-contractor.

3.27 Some also perceived a reluctance to engage with subcontractors as the primes in the private sector wanted to create an end-to-end service:

"They're trying to create their own end-to-end provision; they're trying to put a private sector layer on what would traditionally be a third sector organisation's responsibility. They presumably believe they can do it more efficiently, and they presumably believe they can create more profit by doing the work".
(Senior Manager (2), Employability Focus Group, year three)

3.28 Very few organisations had received any payment through the Work Programme because of the limited referrals to date. Despite this, a number of TSO sub-contractors had invested in order to meet potential demand (e.g. recruited or re-deployed staff). This had left some organisations in the position of not being able to cover their costs (depending on the payment method^[16]). Contracted payment methods for the TSO sub-contractors took a variety of forms including: a flat fee payment per engagement; payment by the hour; a fixed amount irrespective of number of referrals received; and sustainability payments based on outcomes. In addition, it had taken a lot of work to meet the subcontractor requirements and organisations hoped that in the longer term this would prove to be a worthwhile investment.

3.29 Some interviewees expressed concern that the Work Programme would 'cherry pick' clients who would be easier to get into employment, fearing that very vulnerable clients would be left without the support and help they needed. Some felt that the Work Programme did not allow for complex support needs and was not geared for the long journey required to get these clients into employment. There also appeared to be some confusion about where clients with complex needs could be referred:

"[The] DWP's [has been] making a lot of assumptions about what the Work Programme is already dealing with. We say there is a need…around disability or we need more job brokerage funding; and DWP will say 'No [the] Work Programme does that'… Well in theory the Work Programme maybe does that but in practice on the ground it's not happening and the service is still required".
(Senior Manager (3), Employability Focus Group, year three)

Welfare Reform Bill

3.30 There were also changes to policy related to the UK Spending Review, and later the Welfare Reform Bill (February 2011), such as changes to benefits for lone parents and disabled people and changes to housing subsidy. The reforms include, amongst other things^[17]:

• the introduction of the Personal Independence Payment to replace the existing Disability Living Allowance which requires existing claimants to be reassessed for the benefit
• restricting Housing Benefit entitlement for social housing tenants whose accommodation is larger than they need
• caps on the total amount of benefit that can be claimed
• the introduction of Universal Credit to replace different and separate existing benefits, such as employment support and housing benefit
• changes to the child support system

3.31 The impacts of these policies had started to filter through to TSOs by year two. However, the impacts were mostly focused on certain client groups, in particular, TSOs mentioned single parents, carers and people with disabilities. For instance, they reported that some clients had experienced loss of confidence and increased anxiety, as well as being distracted from their activities with the TSOs. Some people with disabilities had been reassessed as fit-for-work, but still might have other significant issues.

"We're seeing…people coming through the Work Programme…who in my…opinion are not work-ready".
(Senior Manager, Local Employability Provider, year three)

3.32 In an example given of one client with mental health problems, their condition was observed to deteriorate under the pressure of being reassessed as fit for work.

3.33 Welfare benefits reforms, including work reassessments, housing benefit caps and the movement towards a single benefit payment were still on-going and it was not clear what the ultimate impact on clients or organisations would be until these reforms had progressed further.

Other Employability Programmes

3.34 There were a number of other employability programmes in addition to the Work Programme. For instance, in year three, the Work Choice Programmes^[18] as well as individual local authority employability programmes. Interviewees reported that one city council was integrating existing separate employability project funding into one bigger tender. However, the overall funding pot of money had reduced - a point noted in relation to other funding pots that had been merged. There was some concern about how employability programmes at different levels complimented each other's work. Some felt that some clients would slip through the gaps, in particular the most vulnerable and far from the labour market. In theory these groups were covered through the Work Programme, although in practice, as we have seen above, this was questioned. Other services, such as those provided through local councils, may seek to avoid duplication of Work Programme services and therefore these vulnerable clients may not get access to services via this route either.

Finance, regulation and competition

Tendering

3.35 The year one report identified tendering as an important issue for many TSOs because increasingly this was the main way in which funding was decided. For many TSOs the era of grant funding from government was a historical one, largely being replaced by tendering for public services either on a negotiated or competitive basis. This was true across a range of funding sources including the EU funding, the UK Work Programme and Scottish Government and local authority funding in Scotland. By year three, many TSOs identified a trend of funding increasingly being contracted through competitive tendering, although this varied depending on local authority area.

3.36 While tendering created opportunities for TSOs it also created challenges. For example, many TSOs noted different approaches to tendering in different local authorities, creating problems for TSOs that worked across a number of authorities. One participant also noted that a couple of smaller local authorities had limited competitive tendering opportunities because of the cost of the process during a time of local authority cuts, whilst another pointed out that there was no standard on what services would formally go out to tender and local authorities operated different policies. By year three, some had concerns that some large contracts were made up by pulling together several existing funding streams into one and reducing the overall budget. However, the expectation among funders was that the same level of service would be maintained. One organisation who had submitted a bid for one of these contracts had included the actual cost of providing the service in their application, even though this was not required by the tender specification. They stipulated that they would raise the additional money from elsewhere, such as through fundraising. The senior manager said they "made a bit a point because it's extra strain on organisations", in order that the true cost would be recognised.

3.37 As well as the reduced funding available, merging funding pots created difficulties for some smaller organisations that had difficulties leading on large funding projects because of their more limited capacity and financial situation.

"One of the big difficulties that we have is that the bigger the pot of money, the less organisations like ourselves are able to actually lead on the tender".
(Senior Manager, Local Employability Provider, year three)

3.38 At the same time, another larger organisation had been disappointed that one major local authority had not gone down the route of pulling together numerous funding pots into one.

3.39 Some interviewees were also concerned that tendering did not encourage creativity in the design and development of services. Tendering was seen to hamper creativity, as TSOs could not feed into service design:

"Sometimes the design of these tenders leaves me pulling my hair out because you have someone trying to tell you how best to do your job and that can be really frustrating if you know there is a better way of doing it that probably costs less and can be done quicker and more efficiently. But because the tender lays out in a particular way without any room for creativity, any movement or change, they can be very frustrating".
(Senior Manager (2), Employability Focus Group, year three)

3.40 In year one there was a common perception that funding decisions were based disproportionately on cost rather than quality and this was a trend that some felt was becoming increasingly so over years two and three. Several were particularly concerned about the impact of cuts on the quality of services, particularly since many felt quality was an integral part of the ethos of their organisations. Some perceived that cost savings would need to be achieved by making a choice between quantity and quality, e.g. reduce front line hours but keep service quality or keep the hours but compromise on quality by reducing level of staff training or tie-in services^[19].

3.41 In contrast to some organisations who perceived an increase in tendering, senior managers within one large national TSO care provider noted a decline in the number of large tenders for care work being issued by local authorities. Three senior managers interviewed separately each noted "a huge reduction in the number of tenders over the last year" (2011-12) and that "we are not seeing tenders coming out just now for services so that is maybe an indication, but I can't see big services being tendered anymore. But I think that it will be a fairly gradual change'" The decline in the number of tenders being issued by local authorities was perceived as the beginning of a shift to self-directed care.

3.42 Personalisation (self-directed care) has the potential to significantly reduce the use of tendering in the longer term. As the transition from volume-based tenders to self-directed budgets takes place, care packages are likely to become more diverse and less generic. Individuals are being given the opportunity to shape their own care packages and choose the activities that they would like to do. A senior manager within a large national TSO care provider described how in the context of self-directed care "there is not a place for a generic tender". His view was that generic tenders do not have the flexibility to enable large numbers of service users to receive flexible and varied care packages.

Funding cuts

3.43 In year one many participants experienced 'anticipatory anxiety'^[20] about possible future funding cuts. However, at the same time potential opportunities were emerging, through new areas of funding opening up. Prior to April 2011 only some of the organisations had experienced actual cuts. However, participants reported other ways funders had attempted to save money before this date. For instance, as noted in the year one report, funding continued to not cover the costs of inflation (standstill funding), cuts were made to existing contracts half-way through the contract period, underspends were re-appropriated by some local authorities and some funders had changed the terms of the funding agreements, so for instance, in one case this meant that only certain types of clients were now eligible to access the service.

3.44 In years two and three, actual cuts tended not to be as high as some had feared in year one. The maximum funding TSOs generally received was standstill funding (e.g. no inflation costs covered), while others had received up to 30% cuts, with around a 5% cut being common. However, there was some concern over cuts to core funding and the impact on long-term sustainability and capacity. One organisation had lost a major source of funding in year two which resulted in a significant drop in total income.

New funding opportunities

3.45 Despite the challenges faced by standstill funding or funding cuts, many TSOs also felt that new opportunities for funding were emerging. A number of TSOs had secured significant new funding in years two and three, including picking up contracts where previous providers were no longer able to deliver the service.

3.46 Shifts in policy priorities at UK and Scottish Government level also created opportunities in new policy areas, although the potential of some had yet to be realised, e.g. the Work Programme, the Change Funds and personalisation.

Core funding and internal capacity

3.47 In year one, some mentioned that maintaining core funding would be important in order to maintain internal capacity of the organisation in the future. This was still a concern in year two with fears that less funding would mean less money to cover overheads and core costs. This could lead to reduced organisational flexibility as well as the potential loss of expertise as skilled staff left the organisation. In some cases, cash reserves were being eroded because they were being used to cover funding gaps and a number of participants reported that some local authority funders were reluctant to award money if a TSO had good financial reserves.

3.48 By year three a number of organisations had experienced budget cuts to core funding. In addition, a number of organisations involved in the study were in receipt of core funding from the Unified Voluntary Sector Fund (UVSF)^[21]. However, this fund was under review and there was concern that the number of organisations receiving core funding through this means would be significantly reduced. There was a good deal of concern over the potential implications of either a reduction or withdrawal of support from this fund, which would not be known until later in 2012. The uncertainty over future core funding support created problems for organisations:

"If funders think your core's not secure, they get very nervous about continuing the project funding. You lose staff before you need to lose them…it's really quite a destructive circle".
(Senior Manager (1), Equalities Focus Group, year three)

3.49 In addition, cuts to core funding affected the capacity of organisations to bid for and deliver future projects. Organisations were cutting costs and becoming more streamlined, but this too had implications for the capacity of the organisation. For instance, one organisation had downsized, but now faced the issue that they were perhaps too lean:

"[When] we downsized, there was a big change in staff…and we went through all that pain and we're probably now saying we're a really lean organisation and there are issues of capacity and we're probably now saying too lean".
(Senior Manager (4), Employability Focus Group, year three)

3.50 Another organisation that had downsized significantly in the last year was also concerned about the implications for its ability to tender for larger contacts in the future due to reduced capacity. At that stage they did not wish to go down the route of tendering for a large number of smaller projects because they considered this as losing economies of scale, as well as being complex to administer (as has been the experience of other smaller organisations with multiple funding streams).

3.51 One small organisation had recently been reduced to seven members of staff and they were concerned that this number might not be enough to remain viable in the future:

"We may have hit a crucial point at which it's no longer feasible to be an organisation and I think we might actually need to look very carefully at what we mean when we say "[name of organisation] is a national organisation" because in reality we're not performing at that level. We only have a presence in Edinburgh and all our other work is by taking our services there - physically taking our service there - so we're working in 11 LAs at the moment and all of that is by taking services to them".
(Senior Manager (1), Equalities Focus Group, year three)

Regulation

3.52 TSOs are required to comply with regulations and monitoring requirements, some of which vary depending on the nature of the work with which they engage. These include, for instance:

• Regulation, e.g. Care Commission regulation for those dealing with children, Scottish Social Services Council regulation for those providing social care
• Legislation, e.g. Health and Safety Compliance, Equalities and Employment Legislation
• Monitoring and compliance, e.g. related to funding requirements (also see 'Performance and Outcome Measures')

3.53 However, in year two, a couple of TSOs noted that increasing regulation required additional resources that were not provided for by funders. In the context of ever-tightening resources these exercises could become increasingly onerous, particularly for small organisations.

Competition

3.54 The year one report looked in some detail at the challenges TSOs faced from potential competitors, including the private sector and public sector providers. In year two, some were still concerned about potential competition, particularly from local authorities. However, there appeared to be a great deal of variation between local authorities in their practices, including some reporting that local authorities were 'cherry picking' less expensive-to-run services or keeping work in-house.

3.55 By year three, there was some concern that private competitors had been favoured in the Work Programme, with the two prime contractors being private companies and minimal sub-contracting to the third sector.

Volunteering

3.56 Another key policy area for some TSOs was that of volunteering, though it was by no means universal. For some TSOs volunteers were at the core of their organisational philosophy whilst for others they were felt to be a distraction from professionalised service delivery. Volunteering was also perceived to be low on the Scottish Government agenda, although by year three there was a perception that although policy on volunteering was still not clear, progress was being made through the Volunteering Round Table^[22].

3.57 This dichotomy was reflected in the workshop carried out with study participants in June 2011. Some third sector attendees felt that there was a lack of focus on volunteers in the study, despite this being a core aspect of TSOs, whilst others felt it was a minor issue that distracted from the main concerns of the sector. The paradox between the expressed 'added value' of volunteers to the work of TSOs and the pressures towards professionalisation of public service delivery by TSOs were highlighted. In TSOs where volunteers were a significant element of their organisational workforce, they were described as having high expectations of what they might gain from a TSO (e.g. experience, training, qualifications) but were not necessarily regarded as a reliable element of service delivery.

3.58 Prime Minister David Cameron's 'Big Society' agenda was not raised as a model that had especial resonance for Scotland. There was little dissent from the aspirations of the agenda, though some did object to what they saw as the co-option of these ideas by the Conservative Party led UK Coalition Government for their own ends. Further, many TSOs also felt either that the mechanisms outlined for the achievement of the 'Big Society' were, at best counter-productive and contradictory (such as arguing for an increase in third sector involvement in public services delivery whilst at the same time cutting funding to that sector) or that they were primarily an English policy and had little resonance with public policy in Scotland and the needs of Scottish communities^[23]. However, one organisation did think that the 'Big Society' agenda meant a recognition of the value of the ethos and philosophy of the third sector.

3.59 In year three, experiences of volunteering were followed-up with a small number of case study organisations for whom it was an issue. Experiences of volunteering varied depending on the local area. One senior manager felt that more people may be coming forward to volunteer because they had more time and there was more incentive to improve skills in a competitive labour market. However, experience on the ground sometimes differed. In one area, an interviewee reported that fewer volunteers were forthcoming because of a cut in resources at the local volunteer centre resulting in fewer volunteer referrals. Another felt that volunteers had less time to make available for voluntary activities because many had paid jobs where they were experiencing more pressure. In this organisation, volunteers were required to have high level skills in order to work with the client group and went through a rigorous selection process to be accepted.

3.60 This organisation was awarded the Investing in Volunteers standard by VDS. However, they paid for this from reserves because the cost of the award was not covered by funders. It was perceived as valuable in demonstrating its commitment to volunteers as well as maintaining standards for volunteers, particularly in the context of reduced funds for other volunteer support.

Impacts of policy change

3.61 There was some concern among TSOs about the impact the policy and funding situation and, to a lesser extent, the economic climate, was having (or may have) on services, clients and staff.

3.62 Table 2 (below) illustrates some of the areas on which key impacts were felt which include: changes in demand for services; the impact on service provision; the impact on clients and the impact on staff.

Table 2: Key Impacts Experienced by Third Sector Organisation

3.63 Major policies such as the Work Programme and personalisation are likely to significantly impact on the demand for services as well as on the way services are provided, and on clients and staff. However, at this stage, it was not clear what those impacts would be. This section focuses on known impacts, therefore these policies are only referenced where an actual impact has been noted.

3.64 In year one, many TSOs had experienced some impact from on-going standstill funding, including staff salaries being frozen. At that time, they were concerned with the implications of future potential funding cuts, and many potential impacts were anticipated rather than a reality. Concerns included the impact on service quality; that some client groups might become marginalised; and that there may be a loss of skills, knowledge and capacity within the sector. Into years two and three, actual impacts became more apparent, although longer-term impacts were still unclear.

Impact on demand for services

3.65 The pattern of changes in demand for services was mixed. In year two, only a small number of TSOs noted any significant changes. These included a couple of cases where demand had decreased due to problems with referral agencies identifying specific client groups. In other organisations, however, an increased demand for services was reported resulting in waiting lists.

3.66 In year three, the high demand for services continued in some areas and had, in some cases, become normalised. Other organisations working across areas noted a decrease in demand for services in some areas. It was not possible to ascertain exactly why there had been changes in demand because of the multitude of services and areas covered by participating organisations. However, decreased demand in some areas may reflect differences in patterns of referrals from agencies. One organisation had found partners more reluctant to 'share' clients because of an increasing focus on outcomes and targets. Another felt that agencies were saving money by only referring clients with particularly acute needs. Increased demand may be down to a number of factors. For instance, it was suggested that more people were looking for work (due to benefits reform and increased unemployment) and so were wanting to access employability and support services. In addition, there was some increase in the numbers of vulnerable clients being referred to some organisations and interviewees suggested that this might be because other agencies were less willing to work with these groups. In some cases it may be because of partners closing down. There may also be some issues, as yet unclear, in relation to the Work Programme.

Impact on service provision

3.67 As noted above under 'Funding cuts', standstill funding was common, with other services receiving up to 30% cuts. As in year two, this had led to reductions in the number of hours of a given service in some cases.

3.68 In year two, some TSOs indicated that they were able to negotiate the degree of cost savings to be achieved, either by reducing the quantity of care front-line hours while keeping the quality (which was not favoured by local authorities) or by keeping the quantity of front-line hours and reducing the quality (i.e. reducing tie-services or the level of training of staff). Reducing the quality of the service involved recruiting staff with lower levels of training and qualifications who could not provide the same standard of service as highly trained staff, for instance, or services being less tailored to individual clients, relying instead on a generic support package.

3.69 In years two and three, some organisations were covering shortfalls in funding through other means, such as funding from charitable trusts, using money from reserves, making cost savings elsewhere, and fundraising. However, using reserves was only a short-term solution and there were limits to the extent costs savings could be made elsewhere.

3.70 However, some TSOs had been successful in winning major funding which created new services, excluding those linked to the Work Programme. These included the provision of a helpline and policy service; a regional service for workless families; as well as several other new services in specific local authority or NHS areas. See case studies for The Wise Group, Rosemount and Lead Scotland (Appendix A).

Impact on clients

3.71 In years two and three, many TSOs were keen to minimise the impact of cuts or standstill funding on clients or the quality of the services they provided. For instance: "it shouldn't impact on service users". However, this could be challenging, especially where there was less available time to spend with clients.

3.72 Some felt that they could not provide the same level of choice and flexibility to clients, for instance, provision of services was restricted to particular times and places, or in one case, it was necessary to 'manage client expectations' because they did not have the resources to provide more intensive support. In addition, the provision of outreach services^[24], particularly in a client's own home, was becoming increasingly difficult since this was more expensive to provide. One organisation had also experienced difficulties accessing additional services for clients because partners were less able to provide the same level of services.

3.73 Across years two and three, there was concern that generally it would be the most vulnerable clients who would have most difficulty accessing services. In year three in particular, some were concerned about the impact the Work Programme might have on clients, particularly those who were reassessed as fit for work but who still had significant issues, or vulnerable clients with complex needs who may have more difficulties accessing support.

Impact on staff

3.74 In year two a number of organisations had carried out redundancy consultations^[25], and a number had made some staff redundant. A number of other TSOs had instead gone down the route of cutting staff hours. By year three, these same organisations had experienced minimal further staff changes. However, two other organisations had made redundancies, in one case reducing staff numbers by over half.

3.75 In year two, some TSOs had made changes to the terms of conditions for staff. By year three, some continued to make some more minor reconfigurations to jobs, such as slight changes or additions to roles. One organisation was managing the process towards personalisation and was moving towards more flexible working. However, it was not clear how this might work or how it would ultimately impact on staff.

3.76 Most organisations had not given inflation-related pay increases for several years. Of the small number who had given a pay increase in year two, these were currently under review for the 2012/2013 and there was limited expectations that these would actually be awarded. An interviewee in one organisation that had not given pay rises in year three, but had received one in year two, said that the lack of a pay rise had been "disappointing". Some staff felt that a lack of financial reward was "quite demotivating" particularly where third sector salaries were perceived to be "slipping further and further behind" in terms of parity with the pay scale they are supposed to be aligned to, or with other sectors.

3.77 A number of interviewees in years two and three noted that staff were working longer than contracted hours. In some cases, working hours had been reduced, but the workload had not:

"I'm in every day but I finish at 3 o'clock so sometimes if there's something happening I'm not getting the opportunity to speak to parents like I used to when I was here…and you do get phone calls at home…when you're not working but I'd rather they phoned me and asked than not".
(Manager, Local Learning Provider, year three)

3.78 Another interview said staff were "giving more and more for less and less'"and said this was because funders were increasingly expecting more. However, there was a sense that staff "just have to get on with it".

3.79 In years two and three, there was a great deal of uncertainty and anxiety among staff in the TSOs, which had an impact on staff morale. One project worker noted that they were just "trying to stay sane" and there were a number of examples given of conscientious staff trying their best to provide a good service to clients at the expense of their own well-being.

3.80 As a result of these issues, a number of managers raised concerns over retention of staff, particularly in year three. It was felt that it might be hard to maintain competitive terms and conditions with the downward pressure on pay and increased workloads, as well as staff seeking other employment due to continuing uncertainty for their future. However, one organisation who had recently recruited, noted an increase in the pool of qualified applicants because of (a) recent redundancies in the local council, and (b) a lack of alternative suitable employment opportunities.

3.81 Many organisations wanted to maintain levels of training for staff, because "Your most important resource is your people", although this could be challenging since project funding did not usually cover this cost and core budgets were being reduced. One organisation who last year experienced the loss of a major contract resulting in significant numbers of job losses, felt that the organisational impact had been lessened because in previous years they had invested in the culture and staff through an 'investing in excellence' programme which senior managers believed improved loyalty, positivity and effort from staff at a very difficult time for the organisation.

3.82 Likewise, at a time of significant organisational change, a number of organisations noted the importance of communication in maintaining good staff morale and relations. One organisation had learnt this through experience. In year two, due to costs, this small organisation did not hold its annual two-day staff conference which brought together the small staff workforce that operated in different areas across Scotland. At the same time, support from head office was being reduced due to cuts in core budgets, and project staff in different parts of Scotland were feeling increasingly isolated with reports of discontent amongst staff. It was felt that communication from head office had not been adequate in managing this process. However, in year three, this had been recognised at head office, and in doing so they were very keen to improve contacts and communications. Even without funding, the organisation had decided to go ahead with the annual staff conference (albeit for a reduced single day), and had made significant efforts to meet staff in the field on a regular basis. These efforts were recognised and appreciated by staff, and communications and relations were reported to have improved and even to have resulted in a renewed energy. A senior manager in the organisation reflects on the process:

"Of everything that happened I think that [not having the annual staff conference] was the single most destructive thing in the organisation in the past year and I can't emphasis enough how that's impacted on staff...it's been a hard year but we're just understanding a little bit right now of how hard it's been and I think that's a lesson for me going forward that sometimes you have to take care of your own before you do anything else".
(Senior Manager, National Learning Provider, year three)

Disconnected policy

3.83 In year three, one point commonly made by interviewees concerned what they perceived as 'disconnected' policy. This occurred in a number of ways, including a disconnect: (1) between policy and practice; (2) between separate policies, and (3) between Scotland and UK, and (4) amongst local authorities.

1. There was a disconnect between policy and practice when it was not clear how a policy would work in practice. This was illustrated in relation to the policy on personalisation (above), but was also noted in relation to several other policies, such as the Work Programme and the Change Funds.
2. Different policies did not always relate to each other (disconnect between policies, or lack of 'joined up' policy). For instance, in Scotland, one interviewee felt that the recent mental health strategy consultation^[26] had not adequately incorporated issues relating to self-directed support (personalisation) and the integration of health and social care.
3. Interviewees also noted some contradictions between policies at different levels, in particular, between Scotland and the UK. For instance, it was felt that welfare reform (from UK) did not sit well with the change agenda in Scotland. Some also felt there was a lack of understanding among UK policy makers about the policy context in Scotland.
4. Policy within different local authorities also differed. For instance, in relation to personalisation.

3.84 The disconnect between policies seems to be more pronounced by year three. This is probably due to (1) conflicting political ideologies at multiple levels, and (2) the number of new policies coming through at the same time. At this stage, it was unclear how many policies would work alongside each other, and what that impact would be.

Conclusions

3.85 Over the three years of the research there had been significant political and policy changes that had important consequences for TSOs in Scotland. Alongside the general financial climate of low or negative economic growth and public sector spending cuts, these represented huge challenges, as well as potential opportunities, for many organisations.

3.86 From 2007, the SNP has led the government in Scotland - firstly, as a minority government and then, following the May 2011 elections, as a majority government. Localism and personalisation are key policy priorities for the SNP government. The 2007 Concordat between Scottish Government and local government included the principle of more local control over planning and services (called 'localism'). While this principle was often supported by TSOs, the impact on TSOs in practice had been more problematic in terms of negotiating with numerous local authorities, a lack of clarity and cohesion and decreased ability to see the 'bigger picture' across Scotland.

3.87 Personalisation (or self-directed support) in Scotland was becoming increasingly important on the agenda of TSOs providing services in health and social care. Most were supportive of the principle of devolving power to service users and a number of TSOs were developing personalisation for their own services. The move towards personalisation was perceived to be both an opportunity and a challenge. It potentially means a very different way of contracting services and being more client-focused. However, there were some concerns about moving to a way of working flexibly enough to meet potential demand.

3.88 With the formation of the UK Coalition government from May 2010, significant policy changes were put in train that could have impacts on TSOs, particularly those involved in the provision of employability. The Work Programme was introduced in 2011 across the UK and replaced existing employability streams. No TSOs had been selected as a 'prime contractor' for the programme. Of those sub-contracted to the programme the numbers of referrals received by year three had been limited. However, over the longer term the Work Programme may have a major impact on TSOs who provide employability services in Scotland. The Welfare Reform Bill in the UK had started to have adverse effects on some TSOs and their clients, particularly those working with single parents, carers and people with disability.

3.89 In year three, one point commonly made by interviewees concerned what they perceived as 'disconnected policy'. For instance, that there was a lack of clarity in how policy would work in practice, a lack of 'joined up' policy, contradictions between policies at different levels, such as at UK and Scotland, and differences between local authority policies.

3.90 The shifting nature of policy priorities presented on-going challenges and opportunities for TSOs. The perceived low priority of volunteering in policy was an issue for some TSOs who relied on a volunteer base, while it was not entirely clear how the 'Big Society' agenda would impact in Scotland. The context of ever-tightening resources meant regulation had become increasingly burdensome for some.

3.91 Increasingly, tendering was the main method by which funding was contracted. However, there were variations in approaches between local authorities and no standardised approach on which services should formally go out to tender.

3.92 The picture was mixed in terms of the level and extent of funding cuts and new funding opportunities. Many organisations had received continued funding but with no inflation up-lift or with a reduction in the budget (cuts were up to 30% in some cases, although around a 5% cut was more common). At the same time, some organisations had secured new additional funding for specific work.

3.93 The pattern of changes in demand for services was mixed with continued high demand reported in some areas but a decrease in demand in others. This may reflect differences in services and areas as well as referral patterns.

3.94 While some TSOs had made reductions in some services because of cuts, most had avoided this by absorbing the effects through making costs savings elsewhere or using accumulated underspends from previous years. However, the latter in particular was not a viable long-term solution. Some organisations were able to provide new services through winning new funding.

3.95 TSOs were keen to minimise the impact of cuts or standstill funding on clients, although choice and flexibility for clients was threatened, in particular the provision of more expensive outreach services.

3.96 The impact of the policy and funding changes was felt most acutely by staff within TSOs. There had been redundancies, reduced hours, changes to terms and conditions of staff contracts as well as increased workloads. This had created a general atmosphere of uncertainty and anxiety among many staff in TSOs, in some cases having a negative impact on staff morale. However, good communication during a time of organisational change could help maintain positive staff relations and morale.