Payment-by-results has the potential to be hugely positive for the voluntary sector, but there are caveats, writes Rhodri Davies, Policy Manager at the Charities Aid Foundation.
Today has seen another upsurge of interest in payment-by-results (PbR) as the announcement of a Ministry of Justice consultation on “transforming rehabilitation” made headlines across the media. This just confirmed what many people already suspected: the Coalition government is very keen on opening up public services to providers from the private and voluntary sectors on a PbR basis, and wants to drive this agenda through as quickly as possible.
The Charities Aid Foundation (CAF) believes that PbR has the potential to be hugely positive for the voluntary sector. However, we are concerned that despite the rhetoric about a desire to involve voluntary sector providers, the way PbR is being implemented makes it too difficult for charities and social enterprises to bid for contracts. The danger is that the benefit of their expertise and innovation will be lost because contracts end up going only to the private sector service delivery giants like Serco, Capita and A4e.
CAF published a report at the end of last year (Funding Good Outcomes) highlighting our concerns about the challenges the implementation of PbR is throwing up for charities and the investors who want to back them to deliver services.
One of our key points is that those commissioning PbR services should think in terms of risk sharing rather than risk transfer. Of course commissioners want to minimise their own risks, and if there are socially-motivated investors happy to help them do this, so much the better. But only up to a point. We do not believe that it is right for PbR to be used as a way of effectively outsourcing the entire risk of funding public services. We recommend that PbR contracts should be structured so that a proportion of payments are made up front to cover core costs and a proportion are made only when (or if) agreed outcomes are delivered. This would represent a much fairer balance of risk between the commissioner and the service provider, and also reduce the level of risk that social investors are being asked to take.
We also believe it is vital that voluntary organisations get the support they need to be able to bid for and deliver contracts. If the Government really wants to see charities and social enterprises playing a key role in the PbR revolution in areas such as rehabilitation, it cannot simply trust to the market to make this happen. Many voluntary organisations have the potential to bring value to service delivery, but do not have the skills and resources to go from providing innovative, small scale interventions to being credible providers of services at a larger scale. They will require help to bridge this gap.
It is encouraging that the government obviously recognises this challenge, and has announced additional funding to help voluntary organisations prepare for PbR in rehabilitation services. However the £500,000 set aside for this purpose seems inadequate. Given the scale of the transformation, it is likely that there will be a large number of charities interested in getting involved in delivering rehabilitation services, so the demand on this fund will very quickly outstrip the money available. There are other pots of money available, such as the Cabinet Office’s Investment and Contract Readiness fund, but more needs to be done to match up this supply with the demand created by the growth of the PbR agenda.