Dame Anne Owers is chair of the Independence Panel. Photograph: Linda Nylind for the Guardian

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This article titled “Charities scared to speak out amid cuts, says report” was written by Patrick Butler, social policy editor, for guardian.co.uk on Monday 9th January 2012 00.05 Europe/London

Charities that provide public services are increasingly reluctant to speak out against social injustice because they fear they will lose their funding, according to a report.

The Independence Panel, a commission set up to monitor the voluntary sector as it grapples with huge cuts in public funding, said service provider charities that traditionally have also had an advocacy role were censoring their public utterances for fear of reprisals from local authority and central government funders.

It said there was a perception that charity independence had come under more pressure as a result of cuts, particularly among smaller charities working with socially excluded groups such as homeless people and individuals with addiction and mental health problems.

“Some organisations that rely on state funding are fearful of challenging government or local authorities, in case this could lead to reprisals,” the report said.

In a pointed reference to the government’s “big society” rhetoric, the panel warned that charities’ contributions to society could be eroded if safeguards were not introduced to preserve their independent voice.

“A great deal is lost if the sector ceases to be able to give a voice to the voiceless or deliver uncomfortable truths to those with power … Voluntary sector organisations need to know that if they produce evidence-based critiques or challenges, this will not be held against them,” the panel said.

“They should not need to make the choice between being able to provide vital services to a client group and being able to speak out on their behalf.”

State funders such as local authorities are expected to adhere to the rules of the compact, an agreement supposed to enshrine the right of charities who provide public services to campaign and advocate on behalf of clients, regardless of their funding arrangements. A National Audit Office report due this week is expected to find evidence that some councils are failing to comply with the compact.

The panel, which includes several of the voluntary sector’s most respected names, said some Conservative politicians were starting to challenge the right of state-funded charities to speak out against government policies.

In October the welfare secretary, Iain Duncan Smith, attacked the Child Poverty Action Group over its legal challenge to the government’s housing benefit reforms, calling it “a waste of taxpayers’ money”. It turned out that the charity’s lawyers had acted for free.

The proportion of voluntary sector organisations delivering public services rose from 20% to 31% between 2008 and 2010. But the overall funding pot is shrinking, with some estimating as much as £3bn could be lost from the charity sector by 2015 as a result of Whitehall and local government funding cuts.

A separate report said funding cuts had led to 70,000 charity jobs being lost over the past year, equivalent to nearly 9% of the workforce. The Third Sector Research Centre said public sector jobs fell by 4.3% over the same period.

Gareth Thomas, the shadow charities minister, said: “David Cameron’s big society agenda was always a mirage but these powerful reports underline the gap between his rhetoric and the reality for community groups and charities of big funding cuts, significant job losses and lost independence.”

The chair of the Independence Panel, Dame Anne Owers, said: “Governments of all political parties have stressed the importance of the voluntary sector. But there needs to be more than a soft, unfocused admiration for a big society or third sector. Central and local government and private sector partners have to recognise the sector’s hard edge: its independence, distinctiveness and ability to speak out from experience.

“If the voluntary sector is perceived to be simply the delivery arm of the statutory or private sector, or appears indistinguishable from either, it will lose the public trust on which it depends for volunteers, donations and tax benefits. Everyone will be poorer.”

The panel warned that over-reliance on income through government contracts could change the nature of the voluntary sector. “There is a danger that parts of the voluntary sector which deliver public services could in effect become not for profit businesses, virtually interchangeable with the private sector.”

Members of the panel include Julia Unwin, chief executive of the Joseph Rowntree Foundation; the former disability rights commissioner Sir Bert Massie; and Professor Nicholas Deakin, who oversaw the creation of the compact in 1996. The Tory peer Lord Hodgson left the panel in November after the government asked him to review the 2006 Charities Act.

The panel met with over 50 individuals and organisations and recieved 35 written responses from voluntary organisations.

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