Cameron argues for shift from ‘state welfare’ to ‘social welfare’

Cameron argues for shift from ‘state welfare’ to ‘social welfare’


Speaking at a conference for the National Council for Voluntary Organisations yesterday, the Conservative leader called for a revolution in Britain’s social economy comparable to the revolution of the commercial economy in the 1980s.

Mr Cameron said the respective roles of the state and communities in the delivery of social justice will be one of the great philosophical divides between the Conservatives and Labour in the next decade and claimed he would tackle head on the arguments advanced against an increased role for the Third Sector in four key areas:

a) their capacity to do more
b) their ability to deliver consistency
c) their accountability to the tax payer, and
d) whether public funding for private organisations would undermine the enterprise that makes them successful.

He argued that the third sector ‘disproves the fundamentalists of the state – those who believe that the only possible co-operation is compulsory collectivism’. But he acknowledged it also ‘disproves the fundamentalists of the market – those who believe that the only co-operation is cash transaction.’

‘Put simply, the third sector proves that there is more to the life of a society than power and money.’

Here is the speech in full:

‘On Monday Iain Duncan Smith handed me the interim report of the Social Justice Policy Group, which I set up under his chairmanship a year ago. It is a powerful document – and shows the depth and seriousness of our policy review process. I want to begin by thanking Iain.

I have argued that we have to be the change we want to see in the world. In setting up the Centre for Social Justice and putting so much effort into understanding the nature of poverty in our country, Iain has done just that. And now he, Debbie Scott, and their team on the policy group have shown the value of this approach.

Their work is comprehensive – and sobering. Parts of our country are not merely falling behind as the rest of Britain gets richer. They are actually going backwards. More people in severe poverty than a decade ago. Almost one a half million children being brought up by addicts. Nearly nine million people with debt problems.

And worst of all – cause and effect of these other problems – endemic family breakdown and fatherlessness in many of our inner cities. I am glad that the Prime Minister has said he agrees with Iain’s analysis about family breakdown. I hope we can form a political consensus on the importance of supporting and encouraging stable families.

Iain’s team will be developing proposals which they will present to the party next year. Today I want to describe my ambition for one of the key aspects of their work: the voluntary sector. The scale of our ambition for the voluntary sector – and the contribution it can make to social justice in our country – has led some people to question whether we are realistic in our aims. I want to tackle those criticisms head-on today.

But first I want to explain why I think the voluntary sector has such a vital role to play – and where it fits into the battle of ideas, which is the real substance of politics.

The battle of ideas

I believe that the respective roles of the state and of communities in the delivery of social justice will be one of the great philosophical divides between Conservative and Labour in the next decade.

There are some 700,000 non-statutory, non-profit organisations in the UK. They include everything from a handful of neighbours getting together to organise a play group, to the great national charities like the NSPCC or the National Trust. They include social enterprises, clubs, religious bodies, trade unions, pressure groups, friendly societies, care homes, and many more. The map of social action in Britain is a vibrant kaleidoscope of institutions and organisations, competing and combining, developing effective local responses to local needs.

Gordon Brown once described charity as ‘the sad and seedy competition for public pity.’ I think that attitude is patronising, damaging and profoundly misguided. The voluntary sector should be neither poor relation nor a cut-price alternative to government. lt is absolutely central to the life of the nation, but with a character and contribution all of its own.

This reflects a profound philosophical difference between the parties. Where Labour think that an individual’s identity consists in being recognised, registered and assisted by the state, Conservatives think that identity is derived through membership in society. Labour think that social justice principally means equality, achieved and guaranteed by government. We think it means community, built and maintained by people themselves.

To me those 700,000 organisations prove that there is such a thing as society. It’s just not the same thing as the state. The term ‘the third sector’ was first coined by the liberal economist Friedrich von Hayek, the intellectual guru of Thatcherism. In Law, Legislation and Liberty Hayek wrote that ‘it is most important for a healthy society that we preserve between the commercial and the governmental sector a third, independent sector.’

I mention this not because I want to claim the sector for the Conservative political tradition. That would be quite wrong. But because I want to show that the principles of the free market are not incompatible with the principles of voluntarism and social action which we associate with the third sector.

Of course there is a difference between the third sector and the market. The market is moved by the invisible hand of private self-interest. Nothing wrong with that – it’s the engine of prosperity. But social action has a different motivation, and a different method. Its motive is not personal profit, but general well-being – not private wealth, but social health. And its method is not competition so much as co-operation.

And so the third sector disproves the fundamentalists of the state – those who believe that the only possible co-operation is compulsory collectivism. But it also disproves the fundamentalists of the market – those who believe that the only co-operation is cash transaction. Put simply, the third sector proves that there is more to the life of a society than power and money.

And yet one can make a useful comparison with the market reforms of the 1980s in one respect. The method and the motive of the voluntary sector may be different from the market – we are explicitly not proposing the privatisation of public services. But I believe that this generation could see a revolution in our social economy comparable to the revolution in the commercial economy in the 1980s. That is the revolution that I want to lead.

Think of what great commercial entrepreneurs have done to revolutionise the way we live, the way we work, the way we take our leisure. In these areas we take the incredible transformative power of enterprise for granted. But why stop there? Don’t we need the same transformation in the social sphere that we have seen in the economic sphere? Why should social enterprise not also transform the most important thing of all, the communities we live in?

It’s already happening. The voluntary sector means more than charity in its old-fashioned sense. It includes venture philanthropists, like New Philanthropy Capital or the Impetus Trust, set up by commercial entrepreneurs who want to bring their flair for spotting success to the field of social action. It includes social enterprises – businesses, running on business principles, but with a social purpose. I think of The Big Issue, a fantastic nationwide business which rescues so many people from homelessness.

And it includes a new generation of social enterprises – social enterprise 2.0, as I’ve heard it called. Where Web 2.0 means a more interactive, multimedia internet, social enterprise 2.0 means social action that is more innovative, dynamic, flexible and responsive. The social enterprises of the future need ‘systems entrepreneurs’ as well as ‘community entrepreneurs’ – people with experience of running effective modern organisations, able to work creatively with donors and government as well as with clients. Our aim should be to make social enterprise as attractive and exciting a career prospect for young graduates as business or the professions is now.

The 20th century was dominated by a great, sweeping change: the introduction of state welfare. There were successes, great steps forward for our country which must never be reversed: universal education, universal healthcare. But there have also been failures, as laid out in Iain’s report.

Merely relying on state welfare, with its centralised control – that’s the old way of doing things, and it’s not working well enough. Progress is too slow. Deprivation too entrenched. Opportunity and aspiration too limited. The 21st century calls for a new approach. Less state control, more social responsibility. Not just state welfare, but social welfare too. That is our ambition for the social sector in this country – a social revolution as dramatic as the economic transformation of the 1980s.

Cut-price welfare?

Now some have criticised this ambition. They say it’s just a Tory ruse to cut spending and cut taxes. They say the voluntary sector can’t bear the extra weight we want to place on it. They say it’ll lead to a postcode lottery. That voluntary bodies can’t be properly accountable. And they say that by increasing the use of the voluntary sector in delivering public services, we’ll end up destroying its independence and creativity.

Well, I think all those arguments are wrong. They are defeatist. They are one of the main reasons why we still suffer so much social breakdown in this country. So let me take these arguments on, one by one.

The first – to me least valid – objection is political rather than practical. Our opponents claim that our belief in the social sector covers a secret agenda to introduce a sort of cut-price welfare so we can reduce taxes.

All I can do is reject this directly. It is not true. With a Conservative government, spending on public services will rise. We will share the proceeds of growth between lower taxes and more public spending.

Of course I want to open up public services to the best providers available, whether in the state sector, the voluntary sector or the commercial sector. But our motivation is not simply an arid desire to roll back the frontiers of the state. It is a mission richer and more rewarding than that: to roll forward the frontiers of society. To empower – and, yes, to fund – more social organisations in the work they do. Not to force new work on voluntary bodies – but to give them a ‘right to supply’ where they can do a better job than government.


And this brings me to a second, more substantive objection to our programme. Some have asked whether there is enough capacity in the social sector – whether independent organisations are able or willing to bear the weight of responsibility and work that we have in mind.

The honest answer to the question ‘Is there enough capacity?’ is: No. Not yet. State control has crowded out social responsibility. We will not be able to deliver an overnight transformation. Of course not every charity, community group or social enterprise has the capacity or the wish to expand. But there are plenty who do. There are specific things which government can do to help this happen.

The idea that only a public body can operate on a large scale is plainly wrong. The recycling giant ECT is a great example of a social enterprise delivering high-quality services nationwide.
And yet organisations like ECT are the exception not the rule. In general, social enterprises who wish to go to scale, find it very difficult to do so. One of the principal problems is the fact that social sector bodies cannot claim their full costs in a public contract, whereas public sector or commercial bodies can.

In his Pre Budget Report in 2002, Gordon Brown promised there would be full cost recovery for all government contracts by 2006. The National Audit Office has reported that this hasn’t happened. Indeed in a survey last year 80 per cent of charity chief executives say the situation on cost recovery has not improved at all. Last week, in this year’s Pre Budget Report, the Chancellor made the same pledge to implement full cost recovery. But this time no target date has been given.

Our Policy Review is working to identify all the obstacles to expansion in the social sector, and finding ways to remove them.

But not every charity, social enterprise or voluntary association is able or willing to go to scale. Not all social sector bodies are like little acorns, ready to grow into giant oaks. Many – perhaps most – are effective precisely because they are small and local, and understand intimately the community they work in.

And even where we cannot help such organisations grow in size, we can surely help them grow in number. I believe there is an enormous amount of latent social capacity in Britain. Economists talk of ‘dead capital’ – for instance, unregistered property, which therefore cannot be bought or sold or used as the security for a loan. The same goes for the non-commercial world. There is a great deal of dead social capital in our country: energy and talent and commitment which is just waiting to be put to work.

In Wythenshawe, Greater Manchester, Greg Davies was looking for people to help improve their run-down neighbourhood. Rather than going to the council, he simply walked down each street and knocked on the door of the houses which weren’t vandalised. He figured that if someone had enough authority, enough respect in the neighbourhood to be safe from petty crime, then that someone was a natural leader. It wasn’t a particularly scientific test – but it worked. Greg brought the social capital of Wythenshawe to life and has established a thriving social enterprise, giving hope and opportunity to a community failed by state welfare.

How can we help people like Greg Davies? We need to make it easier for small community organisations to access public money and to use it to make a difference. One policy I am desperate to see enacted is a simple one: longer funding cycles. The current system of one-year funding is a significant barrier to small organisations. They cannot plan ahead with any certainty. They find themselves constantly worrying about next year’s income, and at a real disadvantage to larger organisations which can afford full time fundraisers and grant-seekers.

Four years ago Gordon Brown announced three-year funding cycles. But a recent report from the National Audit Office said that there has been ‘little progress’ on ensuring longer funding. This has to change. The Chancellor mentioned this again in the Pre Budget Report last week. We will be watching, to make sure it really happens this time.

Postcode lottery?

The value of small, local organisations is that they understand and can respond flexibly to the social problems in their area. But this very strength prompts critics of our approach to argue that it will lead to a postcode lottery, with different providers and different standards of provision across the country.

There are four good reasons to discount this objection.

First, Britain suffers a serious postcode lottery at the moment. The NHS is the most centralised healthcare system in the western world – yet it has wide variations in actual medical outcomes, and health inequalities are actually growing. Monopolistic public provision does not ensure national uniformity.

Second, paradoxically, it is freedom and diversity which will deliver more consistent standards across the country. In the commercial economy, the market is a method for transmitting information about what works and what people want. The result is steadily rising standards across the board. The same goes for the social economy: diversity prompts innovation, and freedom prompts the spread of good practice.

Third, the role of commissioners is important for ensuring consistent standards. I want the public sector to be as expert in procuring and commissioning services as it is at providing them directly. This will itself ensure consistency as well as improvement.

And fourth, government will always have a role as a guarantor of standards. The state makes the law, sets the regulations, and in many cases allocates the money. There are a variety of mechanisms already in place – Service Level Agreements, Public Service Agreements and so on – which can be used to ensure that basic conditions, governing access and outcomes, can be applied.


The next objection to our plans for the social sector follows from this. How will taxpayers be sure that their money is being put to a good purpose? How will independent providers be held to account?

Here we need to dismiss the notion that government is the only legitimate supervisor of social action. Yes, the Treasury has a responsibility to make sure that taxpayers’ money is not wasted. But that does not mean the government should be directly in charge of every agency or organisation that spends public money.

The fact is there are more ways to ensure financial probity than direct and detailed accountability to the Treasury. When an agency or organisation is transparent in its operations, when it has other sources of funding besides the state, when it has proper governance arrangements, and when it works directly for local people as small voluntary groups usually do – then all this is a far more effective method of accountability than a tick-box exercise conducted for the benefit of remote officials.

We need to relax the stringent reporting restrictions that small organisations, especially, have to comply with. I would like to see a major deregulation of small and medium sized social organisations in our most deprived areas. Just as the last Conservative government helped foster businesses in deregulated Enterprise Zones in our inner cities, the same needs to happen today: Social Enterprise Zones created to foster a culture of social action where it is needed most.


And this brings me to the final objection that has been raised to our plans. To me this is the most respectable argument. It is that by transferring more responsibility to social organisations we will actually damage the very thing we celebrate: their independence and innovation.

Already, it is worrying how much the social sector is in thrall to the state. Charities as a whole receive more money from the taxpayer than they do from private sources. Organisations which once zealously protected their independence now take up to 90 per cent of their income from the state. They are in danger of becoming independent only in name.

Of course, I do not object in principle to social sector organisations taking income from the state. I have no truck with the view that any contact with government is contamination. I am conscious of the damage that the withdrawal of SRB and EU funding is likely to do, and I share the sector’s anxiety that the Big Lottery Fund will be used to bail out the London Olympics. But as that danger itself suggests, I do believe that what ministers call the ‘partnership’ between the state and the voluntary sector is frequently a very unequal relationship.

Worst of all are the contracts that occupy as much time and effort to win and report on, as they take to actually deliver. Fairbridge, a national charity working with inner-city children in 16 different areas around Britain, has to bid for its work to five different agencies in each area. Each one demands direct performance management and accountability on everything – and that can include knowing what proportion of the petrol in the charity’s bus they each paid for.

To take a more general example. Of the money that government spends on the voluntary bodies which care for disabled children, 25 per cent goes on assessment. This represents a shameful waste of time and money.

Most of all, this approach neglects the great benefit of social organisations: that what they do is not measurable. You cannot quantify loving care and present it in a statistical report.

Part of the problem is our risk-averse culture. The consequence can be a box-ticking culture which is designed to cover officials’ backs rather than to enhance quality or safety.

And so I concede that there is a real danger here. But that is not a reason to do nothing. It is a reason to build a new system. To devolve power to the local level, and develop alternative mechanisms for allocating state funding than the current cumbersome and bureaucratic bidding process.

One such method is match funding, which is already used but could be liberalised further. Rather than bidding for the right to receive a certain sum from the government if funds are also raised from other sources, registered charities could simply receive government money in direct proportion as they raise private funds. This mechanism would cut down on the bidding process and show that a charity can be held to account as effectively by the community as by the government.

Most of all, we need to change our national culture. Of course in the case of essential services there must be safeguards and guidelines. All organisations, including commercial and social organisations, must be regulated. But we need to show far more trust, far more ‘bureaucratic bravery’, than we do now. I would like to have a situation where, rather than just taking the blame if a funding allocation goes wrong, public sector workers and civil servants are congratulated for those that go right.

Let us be clear: this is a question of social responsibility. We all have a responsibility to contribute to this culture change – each of us as individuals; those who work in the public sector; the media. Our responsibility can never be enforced by government. It is a question of attitude and behaviour, areas where we should aim, in Edmund Burke’s phrase, ‘to give a leaning, not a law.’

And so the priorities for policy in this area are clear. In the coming months, alongside the Social Justice Policy Group, we will be identifying ways to remove the barriers to growth and the barriers to entry which restrict the social sector. We will be finding methods of funding social organisations, holding them to account and ensuring national standards, without diminishing their creativity and innovation. And we will also be developing a series of detailed proposals to stimulate private giving – a subject I will be addressing in more detail in the New Year.

I have great ambitions for the social sector in this country, and I make no apology for that. I simply do not believe that we will make serious progress in tackling relative poverty and deprivation, in creating communities fit for the 21st century, unless we inspire a revolution in social provision. From state welfare to social welfare, the big idea that is at the heart of our plans for social justice.

I am very grateful to the NCVO for all the advice and information they have given the party and Iain’s group. Thank you for giving me the opportunity to set out in more detail my thinking on this vitally important agenda today. And I hope we will continue to work together closely as we develop our proposals for government.’