Podcast transcript: Lord O'Donnell on the future of civil society – Third Sector

27 January 2023
Lucinda and Alina are joined by Lord Gus O’Donnell to discuss ways of strengthening civil society in the UK
This is an automatically generated transcript of the Third Sector podcast episode: Lord O’Donnell on the future of civil society. We apologise for any errors in spelling and grammar. 

Lucinda: Hello, and welcome to the Third Sector podcast. I’m Lucinda Rouse 

Alina: And I’m Alina Martin. We’re reporters at Third Sector, the UK’s leading publication for the voluntary and not-for-profit sector. 

Lucinda: In this episode, we’ll be talking to Lord Gus O’Donnell about the latest Law Family Commission on Civil Society Report 

Alina: And in the Good News Bulletin later we’ll be talking about the Cartier watch donated to a charity shop. 

Lucinda: But let’s jump straight in with our main feature for this week. The Law Family Commission is a two-year research programme, which was created by Pro Bono Economics. The final report has just been released. It stresses the ever increasing importance of civil society to help drive economic and social progress.
It calls for greater national recognition, an ambitious vision and strategic investment into social sector productivity. It stresses the need for a greater use of technology, better data infrastructure, more diversity, and a shift away from short-term funding. It believes an additional 5 billion pounds per year could be raised from public donations.
So without further ado, let’s welcome our guest to talk about it.
Lord Gus O’Donnell is the chair of the Law Family Commission on Civil Society. He’s also the chair of Pro Bono Economics. Gus served as Cabinet secretary and head of the Civil Service between 2005 and 2011. Before that, he held positions at the British Embassy in Washington, the Treasury, the World Bank, and the International Monetary Fund, among others.
Hello, Gus, and thank you very much for joining us today. 

Gus: Thank you for inviting me. It’s a great privilege. 

Lucinda: Well, it must be quite an exciting time at Pro Bono Economics, the culmination of this two-year commission. Could you just, in a nutshell, tell me what the high level findings and recommendations are from this final report?

Gus: Certainly. As you say, this is a big moment for us. It’s been two years in the making. We’ve had 17 amazing commissioners. We’ve produced all sorts of publications. We’ve worked with organisations to make sure that the things we’re recommending, some of them have already been implemented, which is fantastic, and some I know will receive a very warm response from my former colleagues in the Civil Service, or else they’re going to get it from me. So I’m sure it’ll be fine. 
Basically, we set out with the aim of unleashing the potential of civil society and to get across to people that civil society really matters. The conversations I had with Andy Haldane about this were very much of the view as well, that you can’t look at civil society on its own. You need to think about its relationship with the public sector and the private sector. And when people used to say to me, what’s the right way of solving a problem when I was in government, they would either think of it as a private sector solution, you know, the market should do it, or government should do it. And civil society just got left out of the conversation. 
So the most important thing I think that will come out of this report is actually people realise that civil society exists and is important and needs to be involved in all of those conversations. So when you think about how do we solve the cost of living crisis, how do we react to very high energy prices?
You think of, yes, there are things government can do. Yes, there are things the private sector can do, but civil society will be at the front end dealing with people who are suffering the most from the cost of living crisis. People whose real living standards are declining and there’ll be people who need the help of food banks.
You know, all the things that civil society can do really well. It does better than the public or private sector because it’s closer to communities. It’s closer to understanding individual problems. So we will have recommendations about valuing civil society better. So we worked with the ONS, the Office for National Statistics, to talk about valuing it.
Andy Haldane’s worked out that it’s about 10% of our economy, but it’s hardly there. We have 20 million volunteers. They don’t show up at all in GDP figures. I keep using this now hackneyed example where if all of us volunteers, you know, my time volunteering for all the different organisations I volunteer for, if I give that up and go into selling crack cocaine, then GDP goes up.
I mean, that’s crazy, right? That is not a measure of success. So the ONS is now well on their way to getting satellite accounts, which will measure the value. Twenty million volunteers in this country, it’s huge. There’s the question then about how civil society itself operates, how charities operate, and we’ve been talking to the regulator, we’ve been talking to charities about what are the issues for them about things like funding, you know, getting more funding for not the obvious frontline, but for help with digital, for help with the infrastructure of charities that people kind of neglect.
And getting grant fund-making bodies to be much more resilient to understanding that charities are spending an enormous effort in applying for funds. You know, some of them up to 40%. There must be better ways of doing this. And then working with government, you know, I remember working with prime ministers.
Every prime minister will bring together the business sector to think about, you know, with big companies, you know, what are the things we should do? Too often civil society’s just left out of that conversation. Nobody thinks about the role they’ll play and so they need to be there at that table. So we need a philanthropy champion who understands what philanthropy’s all about.
We need to have people who say, when we are thinking about how to handle the cost of living crisis, we need to hear from civil society because they’re at the frontline. And then finally the private sector. The language is becoming much, much better. We’re talking about businesses, thinking about purpose rather than profit.
They’re thinking about ESG and the E part has been quite well developed. We’re talking about how to measure their impact on the environment, but the S part has been somewhat neglected, so we need to think about what’s the social impact of my business. We have James Timson, who’s one of our commissioners who’s been brilliant at saying, actually, it’s not just about me making money, but I want to be a successful businessman.
It’s about how I do it and the impact I have on society as a whole. So there’s all of those different sectors coming together, I think can unleash the potential of this sector, and we need it more than ever. The crisis in cost of living means that more and more of us are going to have to interact with people who are suffering from real living standards costs, and for a lot of people listening, that’ll mean volunteering.
We’ve got a lot of 50 to 64 year olds who have decided not to go back to work. A lot of them are up for volunteering. We need to use that kind of spare surplus army to say, actually get into volunteering, make a difference, and that might well lead them to think that. They want to spend the rest of their years, not just volunteering, but actually getting back part-time into work as well.

Alina: And you have already mentioned, so the title of the report is “Unleashing the Power of Civil Society”. What would you say currently is preventing civil society from fulfilling its role?

Gus: I would say, first of all, its voice isn’t heard where it needs to be heard in the corridors of power, in the boardrooms. And charities by their nature are people who get on with their work at the local community level, and it’s hard for them to think about what are the things at a sectoral level, you know, that they’re very hard pushed. We know that donations are down. We know that demand is higher than ever.
So to ask people to kind of stand back and say strategically, what would help you as a charity? How could we make sure that all of those people who decide not to tick the box on Gift Aid actually decided they would tick the box and we get about £380 million more for charities? Simple things like that.
So I think it’s getting their voice heard. It’s getting both the public and private sectors to say, actually we realise this is important. We realise we don’t understand close to enough. And getting philanthropists. I went up to Newcastle to talk to the community foundation there, and it’s amazing to think of people who grew up in that area who are now living in Silicon Valley. Billionaires, multimillionaires who want to contribute back to where they grew up and yet not quite sure how to do it. 
Community foundations can help there. And I think this whole place-based idea of funding, I think is crucial. Everybody’s talking about levelling up, but actually one of the problems we have is that, in those areas where they’re relatively rich, you’ll find that the charitable sector and volunteers are relatively strong. And there are lots of areas that are both deprived and most in need. And we really need to find a way of exploiting matching and place-based funding and using community foundations much more.

Alina: Yeah. And in the report you have outlined, rather, the Commission has outlined, a sort of roadmap for increasing charities’ productivity, which is a sort of long-term project, but are there any quick wins to help improve charities’ productivity at the moment? 

Gus: Yes. I mean, as anyone who’s worked on productivity and Andy Haldane, God bless him, has worked on it a lot of times until they abolished his strategy council. Big mistake. Yes, it’s a long term thing, but yes, there are things we could do straight away. For example, I’ve worked with Charlie Mayhew, the be the business people, and there are lots of government programmes which help small and medium-sized enterprises to improve their productivity. They help them on the digital side.
They help them with all sorts of areas about things that could be as simple as records management or understanding how to collect and analyse data to make yourselves more efficient. All of those things, those government programmes are not open to charities. Now it would be relatively simple for government to say, actually, you know what, yes, we’re going to open them to charities.
We may need to tweak them somewhat. We may need to give a slightly different slant to them. But things like, how do you best use online ways of contacting your customers or contacting those people who really need you? How do you best reach out to try and generate revenue or donations? These things are quite common and so I think, and everybody who’s an employer, be you a charity or a small or medium-sized enterprise, you are having to deal with the same issues.
You’re having to deal with government regulations, making sure you do all the right things. How do you train your staff? There’s some shocking numbers in the report about the level of training that goes on in charities. A number of charities that don’t actually have any money spare to train their staff.
So there’s lots of things that we could do reasonably quickly. And again, it comes back to the understanding in government that actually this is a sector that really matters. And it’s just been neglected. 

Lucinda: There’s a heavy emphasis in this vision for the way forward for civil society in strengthening partnerships between government, between the business sector and between civil society. But my question would be how realistic is that in this current climate? You know, we’re in a situation where, for whatever reason, we’re struggling to get trains to run and get people to work on time. Do you think, is this all sort of wishful thinking or is it change that can happen in the short term under the current government?

Gus: Sure. I think what you are seeing, you’re absolutely right. When you have a cost of living crisis and you have inflation going up to 10% and you have pay deals which would, mostly we’re talking about public sector, which would freeze in big real terms, pay cuts. It’s very hard to talk about partnership with that as a backdrop.
And the net result is everybody loses, you know, customers, employers, employees. So you do need to build those partnerships over a long, long time. Like I said, I’ll come back to this, I remember in my days as Cabinet secretary, bringing together all the permanent secretaries with various business leaders. But we very rarely got together with heads of civil society. And there’s a lot we could learn.
I think about, take one charity like Citizens Advice Bureau, very close to people on the ground, very close to understanding which particular benefits are working. Citizens Advice Bureau does brilliant work in helping people fill in forms. Well, what are the forms that are impossible to fill in and can we improve that?
What can we learn from these charities about the way in which benefits and the social policy we’re hoping to deliver actually get to the people on the ground? So I think that to me would be developing the partnerships. 
And with the private sector, I think the private sector’s beginning to realise that if you want to be an employer who attracts good staff, you need to be thinking about your social impact.
I’m sitting here in Frontier Economics. We are almost like a mutual, everybody owns us. And people join us because they know we care about our social impact. They know that we are a net zero, we try as far as possible to offset all of our carbon footprint. We care. We have kids coming in here after school to learn maths taught by our lovely economists. 
There’s all sorts of things where we think actually about our impact on the communities that we live in and the world that we live in. And that could be either at the global level, writing about climate change, or just taking in local kids who are somewhat disadvantaged and helping them get through their exams.

Lucinda: So quite simple ideas, really, just to improve collaboration and make the most of resources that are available. 

Gus: Well, I would say, yes you are right, they are simple ideas. But on top of that, we need government to be saying, this is important. And I would say that the two things I mentioned, the philanthropy champion. The other thing we have for lots of other things that government has thought worthwhile got a What Works centre, you know, What Works in Education, What Works in Health, What Works in Wellbeing. And where’s the What Works for the Third Sector, What Works for Charities, where are the examples of really running a food bank incredibly well?
Or really getting community engagement or managing a campaign? I think we could have something like that, a kind of civil society office for evidence, which we might house within one of the other What Works centres, minimise the bureaucracy and all the rest of it. But I think that we definitely need that evidence base to help charities know what works and what doesn’t.
What’s been tried in different parts of the country, different countries, so that we take that jump forward and we can innovate successfully. 

Alina: And you’ve already twice touched on this idea of a philanthropy champion. What in your view would this person look like? What would they be doing and what sort of experience would they have to have to successfully fulfill this position?

Gus: Well, they wouldn’t be like me in the sense that I think philanthropists need to, you know, after a career in the Civil Service, curiously enough, I haven’t accumulated millions that I can give to charities and I can only give my time, which is I hope of some value. But you want someone that understands philanthropists and there are various levels to it.
At one level, Bill Gates has done amazing things globally. There are some amazing philanthropists in the UK that actually put in a lot of money helping startups say in the medical field where they need some research. It’s very innovative. A lot of it’s going to fail, and it may not lead to something which is actually going to make a lot of money for a pharmaceutical company, but it may be, as it were, a public good. 
So there’s those kinds of things. So there’s a global element to this. There’s lots of UK citizens, people abroad who have started here who are now in the States or Canada or or around the world, have made lots of money and would like to invest some back to help in the UK.
So I think that kind of global philanthropy champion, but also someone that can say domestically, how do we increase philanthropy here? How do we make sure that the Gift Aid system works to maximum effect? How do we encourage people to give more? How do we encourage wealthy people here to give more and to give more effectively? 
I think that also is important, to care about the impact of what they’re doing, and to get it measured. So I think all of those things, and if you have that sort of philanthropy champion who understands high net worth individuals and that process of giving, then I think that would make a big difference because they would have a voice in government. People would recognise them for what they were, which was themselves a great philanthropist. 
So I think that to me would be someone who could understand why philanthropists give and what will make them give more, to help us and, and what are the barriers, what are the obstacles, and how do we get rid of them?
So that to me would be really powerful and a really powerful voice within government. 

Alina: And speaking of government, the report includes a call on the Treasury to invest the £380 million coming from unclaimed Gift Aid back into the sector. I was wondering, in your view, what would be the best and most effective way to use this money?

Gus: Well, first of all, the reason the £380 million isn’t collected is because people aren’t ticking the box. So there needs to be a big push to say, look, you are paying a lot in tax. Why don’t you put a bit more of your tax going to your favourite charity, to your cause?
To me it’s a really compelling push. So when we’ve got it, I will probably be one for looking at the whole, the less sexy part, if you like. The less glamorous part, which is the infrastructure of the charitable sector. Helping charities, you know, I talked about all of this stuff with, digital age.
We really need to be thinking about reaching out to people digitally. We need to be establishing proper websites. We need to be getting that interaction back and forward. And then we need to be going out to people who are, as it were, isolated from those digital services because they just don’t know how to do it.
I think we saw during Covid that people were learning really quickly because they couldn’t see each other face to face, how to do this kind of thing, you know, something on Teams or Zoom or whatever and interact with their family and do those precious things which you just couldn’t do. And I think we need to move on from that to say, well actually this can make your life a lot better. 
If you’ve got mobility issues, you can get your shopping done and they’ll deliver it to your door. And for all of those things where people may have been scared of technology, trying to help them and get some digital angels out there, helping people to use technology to maximum effect and bring communities and families together.

Lucinda: And the report suggests that charities have been subject to neglect, they’re suffering from restrictive funding structures, short-term funding, and a whole heap of other challenges. And I kind of got the impression that, in some places of the report, charities were kind of being referred to as helpless parties in this climate.
You know, there’s so much that needs to happen by the government and whosoever else, but our listeners are charity management professionals. Most of them overworked, under-resourced, trying to do the best they can to keep their head above water to be delivering the services that their beneficiaries need.
What action would you say that charity leaders should be taking to help improve the climate, improve the relationship with the government and with businesses to generally make the sector healthier? 

Gus: Well, I’d say number one, please back this report and all of our recommendations and help us get them through. Because the kinds of things, all you said, charities are struggling because their funding is very short term. Their funding is fixed. You know, it’s, it’s not unrestricted, there’s so much restricted funding out there. That’s what people crave is some more freedom, some more ability to plan for the long term. 
Take those strategic decisions that you’re going to invest in your infrastructure and to do that, you know, there may be a short term dip in how much you can do for your customers, for your clients, but long term it’s going to mean that you are much more impactful.
So I think those sorts of things, and that will require us to say, who can change that? Well, first of all, grants and foundations can change that, the way they give money, they can make more long term, more unrestricted. Government can, you know, the charity regulator can push that and pursue those gains, those efforts to get this better.
So I think, yeah, the struggling people, I get your pain. Pro Bono Economics is in exactly the same world as everybody else, and I’m chair of trustees there. We’re thinking about where’s the next funding coming from? You know, we want to increase the voice of the sector, we want to be more effective, we want to do more, do more research and help the sector be recognised as much as it should.
But you can’t do that on no funding. So again, we’re in exactly the same position. So I do understand their pain. It is important that we get government and the private sector to understand it and foundations, and I think those groups together and philanthropists, could all make a huge difference.

Lucinda: Mmm. And do you have any suggestions on how charities can get the message across and campaign more effectively for these changes? 

Gus: Be realistic. You know that we’re in a stage now where there are big deficits and although tax rates are high and spending is high, and borrowing is very, very high.
So think about things which improve the efficiency of your operation and think about things which you can sell to the public sector as the way forward, I think the way forward in public spending. Having spent most of my life in Treasury, it’s very simple. It’s spending much, much more money on prevention in order to ensure that you have to spend less later.
So when you think about some of the charities that Pro Bono Economics has worked with like Magic Breakfast, Place2Be, St Giles Trust, you are looking at organisations which are spending money now, which will improve the prospects, and so turn someone who might have ended up being a cost to society being, say, in prison or on benefits, instead being a taxpayer and being a net contribution, you know, very much to the Exchequer and the finances. 
So it is worth it in a long term sense. And helping getting that message across to the Treasury and charities, being able to quantify that in terms of their impact, you know, in terms of numbers, but also in terms of its subjective impact on wellbeing and things like that, which I think is a massively important area.

Lucinda: Thank you. And one final question for you. I understand that you’re a firm believer in the power of economics in trying to make the world a better place. 

Gus: You bet. 

Lucinda: How do you see this research contributing to making the world a better place? What do you hope the impact will be? 

Gus: So, I think the economics profession itself has something to answer for, because when I was teaching economics, you would have the public sector and the private sector.
And so often, as I said earlier, that the solution people think of as being, well, should this be run by the state or should it be run by the private sector? You can think of various things in health, for example. And to my mind, the answer to those questions is always the people that should run it, or the sector which should run it should be the ones that do it most effectively, both for the customers and for the taxpayer.
In that, quite often the answer is civil society. So therefore you need to think about all of these sectors together and you need to kind of get the voice through and understand that actually if you’re trying to work out how to help people on the line who’ve got a cost of living crisis, yes, there’s an element which is about an overall energy bailout or whatever, you know, price caps and things like that.
But also there’s a massive part for communities, for those brilliant volunteers in the Citizens Advice Bureau actually having a conversation with someone, in the end saying, look, I’m going to give you some vouchers for the food bank because I know that you are really struggling and you need that. 
And it’s difficult for governments, in a way they have to kind of do things which cover the whole spectrum and which are going to be good overall, but actually will miss pockets and it won’t be quite right. And the private sector needs to understand that this is something they need to be in. You know, this is a conversation they need to be part of. And if they stay out of it, they’ll actually lose customers and long term they’ll be less successful. 

Lucinda: Gus O’Donnell, chair of Pro Bono Economics, thank you very much for joining us today. 

Gus: Thank you. Great questions.

Alina: Now it’s time for the Good News Bulletin featuring everything from the positive to the downright strange stories we’ve spotted in the sector. What do you have for us this week, Lucinda?

Lucinda: I’ve got one of those feel-good charity shop treasure stories. You’ll remember that a couple of months ago we took the podcast to London’s trendy Portobello Road to have a dig around in some of the high-end boutique charity shops.

Alina: Yes, that was so much fun. 

Lucinda: Well, perhaps we should have stayed a bit closer to Third Sector headquarters because the British Heart Foundation shop in Hounslow, which isn’t far at all from us, found a mint condition Cartier watch in a bag of donations. Unfortunately for the thrifters of Hounslow, the 18 carat gold Tank Francaise watch wasn’t put on sale in store, but was instead sent to the British Heart Foundation’s online hub for verification. It was then sold on eBay for 9,766 pounds, which broke the British Heart Foundation’s record for the highest value internet sale. 

Alina: Yeah, I mean, that’s impressive and I understand that they would have taken it off the high street store. I don’t remember the last time I walked into a charity shop with a thousand pounds to spend. 

Lucinda: Let alone 10. 

Alina: Yeah. 

Lucinda: Since the average value of a charity shop donation is less than five pounds, it is understandable that the British Heart Foundation would’ve taken it out of its high street retail line. Although, Hounslow was found to be home to the most generous charitable donors relative to the average local salary in England and Wales last year. So maybe it’s not altogether surprising that we should be finding Cartier watches amongst donations. 

Alina: Maybe we’re due a new expedition. 

Lucinda: Yeah, I’d be up for that.

Alina: That’s it for this week. We’ll be joined next week by Stephanie Draper, chief executive of Bond. So if you’ve enjoyed this episode, make sure you subscribe to the Third Sector podcast to be the first to know about it. But for now, I’m Alina Martin 

Lucinda: And I’m Lucinda Rouse. Thank you to our guest, Gus O’Donnell and our producer Nav Pal. Join us again next week.
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