Important questions need to be addressed about the extent and form of government intervention and whether such intervention is producing appropriate results.
THE INDUSTRY Commission inquiry into charitable organisations, which has produced record submissions, has set alarm bells ringing among some who fear the sword of economic rationalism is about to cut the private-sector welfare industry down.
The Anglican Archbishop of Sydney thought it "iniquitous" for the IC to investigate the tax deductibility of charitable donations, and proposed that the inquiry be postponed. According to a Uniting Church spokesman, "We will get an economic analysis of the community services sector, an analysis from a group that is not itself knowledgeable about what we are doing".
Such reactions are unfortunately typical of the failure of church (and other) social justice advocates to understand that economists are concerned about issues of equity and are not preoccupied with economic efficiency. They accept that assisting disadvantaged people should not be left entirely to private charitable decisions as this would result in less welfare being supplied than the community desires. Hence economists readily agree that governments should intervene in the "charitable market" to supplement private charitable giving.
This is not the end of the matter, however. Important queestions need to be addressed about the extent and form of government intervention, and whether such intervention is producing appropriate results. A major justification for the inquiry is that, either through the tax deductibility of donations to charitable groups or through the financing by governments of their services, the taxpayer is the main source of funding. It is entirely appropriate, therefore, to investigate whether taxpayer resources are being used efficiently and whether there should be any change in the relationships between governments and charities, including the extent to which welfare services should be provided through charities.
For their part, charitable organisations need to demonstrate that they are accountable not only to governments but to their donors and their customers for achieving the most efficient and effective delivery of services possible. Indeed, even though some who should do so may not recognise it, charities have a moral obligation to work to this end.
The three large organisations I helped prepare a joint submission to the IC inquiry -- the Association for the Blind, the Spastic Society of Victoria and the Yooralla Society of Victoria -- emphasise that their aim is best practice in services delivery to their disabled customers and that this is most likely to occur in a competitive environment.
The title of their submission, "Compassion with Efficiency", highlights their belief that a business-like approach to the supply of welfare "should not imply any down-playing of the charitable side: it should simply mean the delivery of 'compassion' within an efficient framework".
Their three high-powered chief executive officers have, in effect, concluded that pursuit of economic rationalist principles is in the best interests of their organisations and their customers.
These three organisations acknowledge, none the less, that there is both scope and a need to improve the efficiency of the private community services industry. As with much of the government sector, the funding of charitable services has hitherto been based too much on a cost of inputs approach and too little on identifying the most efficient way of achieving a desired standard of service. While welcoming as an appropriate discipline the Victorian Government's decision to move entirely to a contractual basis in its purchasing of services from charitable bodies, the organisations have therefore suggested that a small taskforce be established to develop agreed standards and a more business-like relationship with government.
Their argument that charities should be treated as independent groups and not simply as agencies of government is a powerful one. The community has expressed a long-standing wish to be directly involved in helping people who are disadvantaged and governments should respect that wish.
This desire for direct involvement is expressed both through donations of money to charitable bodies and the free provision by volunteers of their time (as valuable as the monetary donations).
Tax deductibility on donations and tax exemptions to charities probably result in a net saving to the taxpayer. But the community involvement produces a social benefit which may also be considerable.
This leads to an important conclusion. If charitable organisations are fulfilling evident community desires and needs, there is a strong case for making greater use of them. To do that would be consistent with the growing trend to separate the funding and delivery of government services.
This trend recognises that independent agencies are usually more efficient, more innovative and more responsive to individual needs than direct service provision by government departments or agencies.
While some charitable organisations may not like to think of themselves as businesses involved in an industry, they do have that function as well as their invaluable caring role. Their operations can combine the best elements of a society that is both caring and concerned to use its resources efficiently. The potential for expanding their role is considerable in a world that is moving increasingly away from direct government intervention in society.
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