My Lords, I am most grateful to the noble Lord, Lord Forsyth of Drumlean, for this opportunity. I shall concentrate my remarks on the role of charities. The third sector is very different from either government or local government bodies and commercial companies. Apart from their governance structure, they have the volunteering culture but can also develop unparalleled expertise and combine their services very flexibly. This is done by putting the child, the patient, the poor, the whatever, right at the centre of everything that they do and building the support around it—if only all public services did that. It is also a very large sector; for example, it provides 80 per cent of all the palliative care in the UK.

I consulted a number of charities in preparing for the debate, and this is what they said. Age Concern is concerned about short-term contracts from local authorities, which cause a lack of stability and an inability to plan properly. Terminating contracts at short notice also brings about uncertainty about redundancies. When money is tight, it is the council's own services that are protected, shifting the redundancy costs from the council to the charity. When you pay out for redundancy, that pot of money is lost to the public service pot, so planning to avoid redundancies anywhere is only good housekeeping. Age Concern is also concerned about the reluctance of commissioners to fund core costs. You need to make a bit over the top of cost to fund both overheads and unexpected problems that arise during the course of the contract.

Another NGO said that the recent Compact agreement is great but is not used universally. Some government departments and local authorities are still tending towards one-year contracts. Will the Minister say how the Government are monitoring to see whether all authorities and departments are implementing it fully? The NGO was also concerned about the reluctance of commissioners to put a contingency into the contracts. When a problem arises, such as maternity leave, there is no money in the budget to cover it and the NGO has to go back and ask for more.

A third NGO was concerned about the process of bidding for contracts, which is often long-winded and behind schedule. That means that by the time you get the go-ahead, there are only a couple of weeks before the work is supposed to start. How can you manage your workforce, whether paid or volunteer, on that basis?

The RNID, which sent us a briefing for this debate, was concerned about four major issues, as the others were. There is a need for full-cost recovery, for an appropriate level of overhead, for an upfront discussion of the risks, and to make provision for them. It also wanted longer-term funding for greater stability. It also had another set of issues relating to campaigning, independence and accountability. It talked about its independence and wanted the ability to engage in campaigning, and not only as a peripheral activity. It wanted permission to broadcast social advocacy adverts and to repeal restrictions on demonstrations near Parliament, especially given the plans for the pedestrianisation of Parliament Square. My noble friend Lady Miller of Chilthorne Domer, who brought in a Private Member's Bill on that issue, and I absolutely agree with the RNID. On accountability, the RNID would like to see impact reporting used more widely. This is where a charity sets out its objectives from last year, says how many of them have been achieved, and sets out its future objectives for next year.

Sue Ryder, the provider of specialist palliative and neurological care, also sent us a briefing. It is at the forefront of innovation but has concerns about the financial arrangements that restrict its ability to innovate. It cites one-year contracts and no contracts at all as being of particular concern. It told us about the magnitude of the situation. Hospices, for example, receive only 34 per cent of their funding from statutory sources, so they alone are subsidising the Government, just for palliative care, to the tune of £200 million per year—an enormous amount of money. Underfunding means that services are being eroded. They also point out that a lack of transparency in the funding process means that services are funded differently by different PCTs, which is a major contributor to there being a postcode lottery for health. The NSPCC have the same concerns about short-term funding and shortfalls, but added that different accounting or planning cycles can disrupt plans and lead either to unidentified gaps in service, or unidentified overlaps, which are a waste of money.

It is not easy to combine delivery of services with being an effective campaigning organisation, but it is desirable. The people who can alert us to need and bring about change are those closest to the grass roots. This issue of not covering full costs, and there being nothing for contingency and overheads, is serious. The public give money to charities on the understanding that it will be used to provide extra services, over and above what the Government are supposed to provide. If the cost of services is more than they get, charities will have to subsidise from their fundraising, and will therefore be able to do less of the extra stuff, which the public are paying for. The Government get a great multiplier when they use a charity to deliver services. They get it on the cheap because charities use volunteers. That is fine. I do not want to discourage the volunteering culture in any way, but it has to be taken account of.

NGOs can also provide savings by spreading their expertise over a wide area. By commissioning an NGO to deliver a service, the Government implicitly accept that they have a duty to deliver that service. They may say that if we ask them to pay charities more, they can commission less, so the missing services will have to be paid for by the charity. The charities do not always have the money to do that, so the total quantity of services will diminish, and so will innovation. Charities tell us that their ability to be creative and to innovate is being limited by the failure, financially, to allow for a bit of risk. There is always risk in doing new things. That is a pity, and we all lose by it. I look forward to the Minister's reply to all these concerns.