Unpacking the State: The Implications for the Third Sector of Changing Relationships Between...

Voluntas: International Journal of Voluntary and Nonprofit Organizations, Vol. 9, No. 2, 1998

Unpacking the State: The Implicationsfor the Third Sector of ChangingRelationships Between Nationaland Local Government

Marilyn Taylor1,3 and Andrea Bassi2

The drive to welfare reform has revolutionalized the relationship between thestate and the third sector in many countries. But this article argues that, if weare to understand the impact of the changing role of the state on the thirdsector, then we must first understand the dynamics of the relationship betweennational and local government. It compares two countries—the U.K. andItaly—where national-local government relations have developed in differentdirections, and suggests a number of avenues for further analysis of thisthree-way relationship.

INTRODUCTION

The changing role of the state in welfare across the globe is now widelydocumented, along with the "decentralization" of welfare delivery to third sector(and for-profit) organizations. But in many countries, welfare reform has alsobeen associated with the "decentralization" of government itself. In Europe,for example, Batley distinguishes between two approaches, comparing thosecountries who "favor the marketization of public services and the weakeningof local government's role" with those who favor "the reform of public servicesand the decentralization of government so as to create the conditions for morediverse, flexible and responsive decision-making" (1991, p. 225).

1Health and Social Policy Research Centre, University of Brighton, Brighton, U.K.2Istituto di Ricerche Educative e Formative (IREF), Rome, Italy.3Correspondence should be directed to Marilyn Taylor, Health and Social Policy ResearchCentre, University of Brighton, Palmer, Brighton BN1 9PH, U.K., e-mail: [email protected].

KEY WORDS: government; third sector relations; local government; comparative; social care.

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0957-8765/98/0600-0113$15.00/1 © 1998 International Society for Third Sector Research and The Johns Hopkins University

It is national government that has been the primary target of criti-cism and reform. Thus, the "third parties" referred to in discussions of"third party government" in the U.S. and Italy include cities, counties,and states (Donati, 1993; Salamon, 1995, p. 6; CENSIS, 1996), while thelanguage of local "self-government in Germany and some Central andEastern European countries suggests that, in some parts of Europe atleast, resistance to the state is targeted at the national rather than locallevel.

Gidron et al. (1992), in their comparison of relationships be-tween government and the third sector across nine countries (eightof them European), note that: "The nature of government's relation-ship with the third sector may differ widely depending on whetherthe national, regional, provincial or local government is the subjectof attention" (1992, p. 9). It is local authorities who are the primarypoint of contact with the state for a significant number of third sectororganizations (DeVita et al., 1994; Rei, 1994; Commission on the Fu-ture of the Voluntary Sector, 1996; Kendall and Knapp, 1996) and itis through local authorities that the relationship between the stateand third sector is often mediated. The status and powers of localgovernment are thus likely to be a crucial factor in the implementa-tion of welfare reform.

With the exception of Wolch (1990), however, relatively little atten-tion has been given to the implications of different central-local governmentrelations for the third sector. This article aims to fill that gap by exploringthe three-way relationship between central government, local government,and the third sector in the field of social care in two countries: the U.K.and Italy.

BACKGROUND

Some of the classifications of the relationship between governmentand the third sector are reproduced in Table I. Using these classifications,most countries are moving from government dominated models to someform of partnership model. But, although they are moving in a similar di-rection, different countries are coming from very different starting points.The model that exists in each country is the product of many differentlocal factors: religion, demographics, history, ethnic mix, and ideology.These factors also influence the relationship between local and central gov-ernment.

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Unpacking the State: Third-Sector Implications 115

In Western Europe, the pattern of welfare in the 20th century hasbeen a product of a variety of relationships between state, church, and capi-tal, which have been resolved in different ways.4 In some cases the reso-lution has been enshrined in a system of subsidiarity (as, for example, inGermany and the Netherlands), which obliges the state to defer to thirdsector organizations wherever possible—a corporate resolution in which or-ganizations with their origins in the main religious congregations or work-ing-class mutual aid are the key players in the delivery of welfare, but wherethe state provides the finance (Gidron et al.'s "collaborative" system). Inothers, church or other third sector welfare organizations have been ab-sorbed into the state, sometimes against a background of animosity towardthe church, sometimes in recognition of the "voluntary failure" (Salamon,1987) of both church-based philanthropy and working-class mutual aid. Inrecent years, a combination of technological advance, demographic change,increased consumer expectations, and economic recession has caused manyof the second group of countries to move away from government-domi-nated systems to privatized, dual, or collaborative systems, but has encour-aged a move toward the market even in the collaborative systems of thefirst group, in order to bring nonstatutory resources into welfare and ensurethe efficient use of state resources.

In most European countries, this has been accompanied by the de-centralization of government. In some (for example, Germany), there haslong been a presumption against centralized government, while in othersthere has been a more recent drive toward decentralization (for example,France, Italy, and the Netherlands) or experimentation with new formsof relationship between central and more independent forms of local gov-ernment (for example, Sweden). In France and Italy, decentralization isassociated with a growth in third sector organizations, as local govern-ments that do not have the institutional capacity to deliver the servicesfor which they have responsibility look to the third sector for support(Mizrahi-Tchernonog, 1992). Only in the U.K. has an increasing role forthe third sector been associated with the centralization of government(Batley, 1991; Norton, 1991).

In comparing the U.K. and Italy, therefore, this article is comparingtwo countries where the relationship between central and local governmentappears to be developing in opposite directions. In both countries the roleof the third sector in welfare is growing—in Kramer et al.'s (1993) recentstudy of four European countries, it was in the U.K. and Italy that theincrease in the number of third sector organizations was highest. The fol-

4See Kramer et al. (1993. pp. 116-120) for a discussion of the importance of religion in thedevelopment of government-third sector relations.


lowing pages describe the changing situation in each country: the changingrelationship between national and local government; the way the relation-ship between the state and third sector has developed over time; and thevariations between different local authorities within each country. A con-cluding section then identifies the key questions for further research thatarise out of this comparison.

THE UNITED KINGDOM CASE STUDY

The Changing State

There is no written constitutional guarantee protecting local self-gov-ernment in the U.K. U.K. local government does not have a power of gen-eral competence: Its powers have been defined by central government.Although local authorities have extensive powers and duties, they are ef-fectively the creature of Parliament. Only 15-20% of local government fi-nance is now raised locally.

In fact, the U.K. government tradition has been one of a "dual polity,"marked by separation between national and local administrations. Coupledwith a "first past the post" electoral system dominated until recently bytwo main parties, this gives government in the U.K. an adversarial charac-ter, which contrasts with closer integration between national and local gov-ernment on the continent and the coalition systems of government thatarise out of proportional representation.

Antagonism between central and local government in the U.K. has along history. It arose first between the monarchy and the barons in medie-val times, then between the Anglican Church and the nonconformist dis-senters whose power bases were outside London, and between theprovinces and London. However, with the gradual entry of the state intowelfare over the first part of the 20th century, it was the municipality thatwas seen as the vehicle for tackling social problems. The introduction ofa universalist welfare state in the 1940s reinforced the role of local gov-ernment as the major provider of education and gave it an increasing rolein housing, planning, and social care. Health, in contrast, was centralizedinto a National Health Service, administered through separate nonelectedlocal bodies.

Social care was not a priority in the early years of the postwar welfarestate and still relied to some extent on traditional third sector organizations(Means and Smith, 1985). But by the early 1970s, legislative reforms sawlarge consolidated social services departments take their place alongsidehousing and education in a system of local government that had itself been


consolidated into fewer and larger authorities. Despite its considerablepowers at this time, however, local government in the U.K. developedmainly as an instrument for service delivery and administration rather thanas the instrument for the democratic representation of the local communitythat it is in the rest of Europe (Batley, 1991).

The oil crisis of the 1970s put a brake on the expansion of state wel-fare and with it local government's service empires. With the election ofan aggressively right-wing government in 1979, committed to rolling backthe frontiers of the welfare state, local government found itself under at-tack. Left-wing local authorities in particular, committed to preserving statewelfare, presented an open challenge to the new government's agenda toreduce both public expenditure and the range of government functions(Wolch, 1990). Over the 1980s and early 1990s, central government tookmeasures to:

• Bypass local authorities, through introducing local unelectedquangos (quasi-nongovernmental organizations), especially ineconomic development, and by removing local authorityrepresentatives from the (nonelected) health authorities; and viaenlargement of direct consumer control, with opportunities given totenants of public housing estates and parents and governors ofschools to "opt out" of local authority control

• Restrict the tax-raising powers of local government in some areas5

• Introduce markets into welfare, with f inancial and legalarrangements that favored third party provision

• Reform the structure of local government, replacing a two-tier localgovernment system with unitary local authorities, particularly inScotland, Wales, and metropolitan areas

As a result of these changes, local government found itself operatingas one of a number of public bodies in a competitive market, with lessfinancial autonomy. Its power base was stripped back and its role trans-formed from providing to "enabling" other providers, under strict centralgovernment guidance.

Batley argues that, through these reforms, the historical insulation oflocal from national government in the U.K. was replaced by increasing fi-nancial control, regulation, and supervision of the local by the national state(Batley, 1991, p. 226). As part of this process local government was also,according to some commentators (Clarke et al., 1994), subject to ideologicalcolonization. In particular, exposure to a new managerial ethos raised a

5The local business tax is now set by central government and a ceiling has been set on theamount local authorities can raise through taxes on local residents.


series of managerial competencies and accountabilities above its politicalrole, and was associated with the introduction of cost centers, internal mar-kets, compulsory competitive tendering (CCT) in some services, and per-formance-related pay. This new public management (Hood, 1991; Pollitt,1993) was in part a tool for depoliticizing local government; it also chal-lenged the "producer" power of the human service professionals and pub-lic-sector trade unions. It was also extremely influential in the NationalHealth Service with the introduction of internal markets.

Legislative reform in the social care field appeared to go against this cen-tralizing trend. The spiraling costs of residential care, financed centrally throughthe social security budget on a reimbursement basis, forced a thorough reviewof adult care in the 1980s. As a result (and with some reluctance), local authori-ties were designated lead agencies in developing adult care at the local level,with responsibility for planning, setting common standards, setting priorities andobjectives, regulation, inspection, and evaluation of the services.

They were also given control of the monies transferred by central gov-ernment from the social security budget, but with the proviso that 85% of thismoney be spent on independent-sector (third sector and for-profit-sector) pro-vision. The compulsory competitive tendering required of many local authorityservices did not apply to social care, but the "new managerial" ethos that CCThad introduced—the "contract culture"—had an impact on all areas of localgovernment operations. Centrally imposed controls on overall finance addedto the sense of being under siege that pervaded many authorities as a resultof the reforms; as resources continually failed to meet need, the extension oflocal government powers in this field seemed to be a poisoned chalice.

The Changing Role of the Third Sector

Until the 20th century, British welfare operated a "dual system," accord-ing to Gidron et al.'s classification—with the state and third sector takingclearly demarcated roles6 and social care dominated by the third sector. Duringthe first half of the 20th century, this gradually changed to a more collaborativesystem, with the state financing third sector activity in a number of fields. How-ever, after the welfare state was introduced in the 1940s, the British systemwas dearly government-dominated. Though parts of the system, especially socialcare, were still mixed, the third sector was very much the junior partner (Owen,

6Legislation in 1601, codifying both the Poor Law and the Statute of Charitable Uses,introduced what some commentators saw as a "parallel bars" system (Webb and Webb, 1912),with charity having responsibility for the deserving poor and the state dealing through asystem of deterrence with the undeserving poor. This continued, with occasional fluctuations,until the late 19th century.


1964). As dissatisfaction with the state grew, however, the third sector, alongwith the commercial sector, was held up as an alternative by commentators inthe sector, as well as by those on the political right who wanted to roll backthe welfare state (Kramer et al., 1993).

In the battle for control between the market-oriented central govern-ment and left-wing local authorities in the 1980s, both local and central gov-ernment funding to the sector soared, doubling in real terms between 1979and 1987. Two factors were at play. Wolch argues that Conservative-con-trolled central government increasingly saw the potential for the third sectorto act as an agent: an apolitical "shadow state" that could deliver servicesmore cheaply (Wolch, 1990; see also Deakin, 1995). Labour-controlled localauthorities meanwhile looked to the third sector as an ally, funding "small,innovative, participatory grass-roots groups to deliver services, become faith-ful constituents and oppose Thatcherism" (Wolch, 1990, p. 111). Black andminority ethnic groups, their needs often overlooked in the earlier collabo-rations between statutory and third sectors, were among the beneficiariesof these policies (Deakin, 1995); tenants' associations, women's groups, self-help groups, and campaigning bodies all flourished.

This retrenchment between a Labour Party that had traditionally beenhostile to philanthropy and the third sector was not just about politics, how-ever. While Labour authorities funded advocacy, campaigning, and com-munity development, they were also looking for genuinely new approachesto service delivery (Wolch, 1990; Batley and Stoker, 1991) and to decisionmaking. Recognizing the justice of some of the criticisms of state welfare,some local authorities (not only those on the left) took their own initiativesto decentralize services, locating services closer to the ground and settingup neighborhood-based decision-making or advisory forums, which offerednew opportunities for local third sector organizations to influence local pol-icy and practice.

Central government was caught in a dilemma. As Wolch points out,at the same time that central government sought to employ the third sectoras an agent for service delivery, it saw the sector deployed to some effectby politically antagonistic authorities. Its response was to abolish second-tiermetropolitan authorities—seen as the chief offenders—in the mid-1980s, totighten controls over the use of local government funds for political pur-poses, and to move ahead on its privatization agenda with a raft of legisla-tion in the late 1980s. These moves against local authorities were to catchthe third sector—and especially the newer wave of activity—in their wake.Capping and other reforms to local authority finance restricted the flow offunds from the local authority, with dips in funding in the late 1980s, bothin real terms and in the proportion of total government expenditure.


The upward trend of government funding was restored with the com-munity care reforms in the early 1990s, although the increase has beengreatest in respect of fee payments (through contracts) and in areas wherecentral government has been most concerned to protect the private market,especially care for elderly people (Russell et al., 1995). But the financialregime imposed by central government, coupled with the move from grantsto contracts and tighter service agreements at the local level, led to fearsamong third sector organizations that they might lose their autonomy. The-ory suggests that when government authorities lose direct responsibility forservices, they increase their regulation and monitoring capacity (Scott andMeyer, 1993), perhaps in damaging ways.

The evidence for or against greater government control is mixed asyet. In the social care field, research suggests that many organizations areinvolved in contract specification and report satisfaction with the outcome(Richardson, 1995; Kumar, 1997), but concern about inappropriate proce-dural and regulatory requirements remains. This concern is not confinedto contracts. The "new managerialism" reported above means that tightermonitoring and regulation has spread into all corners of the public sector(Deakin, 1996; Taylor and Lewis, 1997). Regulatory requirements may alsocome from different sources, including national training requirements,European Health and Safety regulations, and so on (Taylor et al., 1995).This can cause particular problems for the smaller organizations who makeup the bulk of the third sector in this country and who may not be in themarket for contracts. Some recent research has suggested an increasing po-larization in the sector between larger, more professional organizations andsmaller, more locally based organizations, and between paid staff and man-agers and volunteers (Russell and Scott, 1997).

A recent restructuring of local government, with the introduction ofunitary authorities in a significant number of localities, meanwhile, is an-other source of concern for some third sector organizations. With most ofthe changes taking place in 1996-97 and 1997-98, it is too early to establishtheir overall impact. There are likely to be gainers and losers. For somethird sector organizations, it is an opportunity for a fresh start, with a newauthority. However, even in "friendly" authorities, the changes are likelyto incur high transaction costs and initial evidence is that in some parts ofthe country the combination of local government restructuring and publicexpenditure constraint has put further pressure on third sector funding.One of the main effects of the changes in England has been the separationof urban centers of population from surrounding more rural areas. This isof particular concern to third sector organizations in more rural areas,where the term "voluntary sector" (by which name the sector tends to beknown in the U.K.) has traditionally been seen as volunteering (Craig,


1994) and hence a way of saving money. Evidence from previous local gov-ernment restructuring is not encouraging. The loss of the two-tier systemin metropolitan authorities in the 1980s led to a decline in local authorityfunding to third sector organizations from these areas, even in Londonwhere there was a successor funding body.

In summary, research suggests the various welfare reforms have had posi-tive and negative effects. There is general agreement that local governmentservice empires needed to be broken up and that the reforms have offerednew opportunities at the local government as well as voluntary sector level. Itremains to be seen what impact the election of a new Labour government atthe national level will have. Its commitment to moving from a "contract cultureto a partnership culture" and to developing a "compact" between governmentand the third sector at the national level (Labour Party, 1997) may offer hopefor a more collaborative future. But controls on local government finance re-main tight and much will depend on the extent to which the new national gov-ernment is also able to build a more trusting relationship with local authorities.

Local Variations

Although the initial resistance to reform has diminished (Taylor andLewis, 1997), there is still considerable variation between authorities, be-tween those who see the third sector organizations they work with as agentsand those who see them as partners. Drawing on Bemrose and MacKeith(1996) and Taylor and Lansley (1992; see also Wistow et al., 1994, 1996),we can identify four main responses:

• Defensive "objector" authorities unwilling to concede too muchground to nonstatutory alternatives ("welfare state" authorities)—often"old" Labour authorities, who had been in power without change forlong periods of time and were still ideologically committed to statewelfare delivery. Use of the voluntary sector was grudging, but voluntaryorganizations were preferred to for-profit organizations.

• At the other end of the scale, "enthusiasts" ("market pluralists")engaged in aggressive marketization—throwing local democracy outof the window along with out-of-date systems of service delivery.These were usually new Conservative authorities, ideologicallycommitted to market pluralism. The enthusiastic adoption of marketprinciples created space for those third sector organizations bestequipped to compete in the market, but was less likely to supportthe range of organizations that flourished in the 1980s, sincevoluntary organizations were mainly seen as service providers.


• Traditional Conservatives ("benevolent paternalists")—a dyingbreed, with their strongholds in rural areas now often taken overby center-left opposition parties.7 Under their new management,these authorities tended to belong to Bemrose and MacKeith'smiddle groups, including the "pragmatic business management"authorities (who might also be expected to favor thoseorganizations best equipped to compete in the market; see Unwinand Westland, 1996).

• "Responsive" authorities, including authorities who had taken theopportunity to develop a partnership paradigm, involvingnonstatutory organizations in the policy and planning as well asthe delivery of welfare (the so-called "welfare pluralists"; seeBrenton, 1985). They were likely to have a long history ofinvestment in the voluntary sector and its infrastructure, and tohave invested in both its service and political dimensions. Theseauthorities also had a history of consultation with the third sectorthat developed the trust and infrastructure on which third partygovernment can thrive. Bemrose and MacKeith noted that their"responsive" authorities consulted third sector organizationsextensively in deciding how to take the reforms forward.

THE ITALIAN CASE STUDY

The Changing State

There are four levels of government in Italy: national, regional, pro-vincial, and municipal. The Italian state introduced the principle of decen-tralized administration in the Constitution of 1948, but the law was notimplemented until 1970. Nonetheless, Tarrow calls this reform "one of thefew recent attempts to create new representative institutions in the nation-states in the West" (Tarrow in Putnam, 1993, p. 17). Italy is now dividedinto 20 regions, 5 of which have a separate autonomous statute, whichmeans they have a Parliament and legislative powers.

7The rise of a third party—the Liberal Democrats—with particular success in localgovernment, coupled with the tendency of the British electorate to register their disapprovalwith the party in power at the national level in local elections, created a number of "hung"councils (that is, with no party in overall control). The number of local councils underConservative control (the same as central government) was very low until the local electionsin 1997, when the party, having lost heavily in the national elections, regained some groundat the local level.


The elected members at each level are elected through a complex sys-tem that until 1993 was proportional and is now a mix of proportional andmajoritarian. However, Batley (1991) argues that, "A broadly centralizingparty system operates at all levels to bind together a myriad of public or-ganizations as well as levels of government." This he argues "makes centralgovernment open to a two way traffic of local influence through the careersand pressures of local politicians." The situation has changed slightly in thelast few years but still suggests more movement between central and localparty mechanisms than Batley sees in the U.K.

Local government in Italy has limited financial autonomy. Almost allthe taxpayers' money goes first to central government and then back tothe regions, according to a formula that takes account of such factors aspopulation and economic and social conditions.8 There is, however, a greatdeal of managerial autonomy in the delivery of welfare services, especiallysocial care. There is no national law covering social care in Italy apart froman 1890 statute concerning the nationalization of the charitable institutionof the Catholic Church and a decree of the president of the Republic in1977, concerning the powers and responsibility of municipalities. Indeed,it was not until the second half of the 1970s that legislation establishedany formal social services system in Italy, with government finance and de-livery. Regions were given responsibility for the delivery and regulation ofsocial services; the municipalities were charged with the delivery of theseservices. However, in many regions, social services were delivered throughlocal health units (LHUs—also public bodies), with money and staff trans-ferred from the municipalities. While this allowed for the coordination ofservices across municipalities that were often too small to provide servicesthemselves, it meant that social care was dominated culturally, profession-ally, and technically by the health sector.

At the beginning of the 1990s, four further sets of legislation wereenacted that changed this situation: the 1990 laws on the Reform of LocalGovernment; the 1991 laws on nonprofit organizations; the so-calledCounter-Reform of the National Health Service; and the reform of the elec-toral system in 1993. The Counter-Reform of the National Health Servicechanged the structure of the LHUs, dismantling the integration betweenhealth and social services. It eliminated the LHU councils (which were seento allow too much political influence from the parties and thus to be vul-nerable to corruption) and substituted these with a "general manager" underthe control of the regional administration. It reduced the number of LHUsand renamed them as Public Enterprises for Health, signaling the introduc-tion of market principles into local health and social care policies.

8The picture has changed recently in the field of health.


In the wake of these changes, many municipalities withdrew their staff fromLHUs and began to deliver social services directly. But this created big problemsfor them in terms of both internal organizational structure and finance. Sincemost municipalities had delegated the management of social services to the LHUsover the 1980s, they now had to rebuild their own structural capacity, bringingtheir staff back under their own umbrella and organizing their own local infra-structure. This posed particular problems for small municipalities that had "fed-erated" to buy services from an LHU in the past. Moreover, since the money forsocial services had come predominantly from the regional administration and wastightly interwoven with health budget transfers, it proved very difficult to definehow much money the municipality would have for social services.

This set of legislation coincided with the "quiet civil war" (tangentopoli)—the fight against political corruption and the resulting turnover of almost two-thirds of the political leadership in the country. This political upheavalpromises to be a major factor in the future development of welfare. Until theearly 1990s, despite countless changes of administration, central governmentwas dominated by one faction or another of the Christian Democrats. Italynow has a center-left "Ulivo" coalition government (in which, for the first timein its history as a republic—1948 onward—the former Communist Party sharespower in central government). After a very short period during which the rightwas in power (from March to December 1994) and another year and a halfwhen there was a so-called technical government (apolitical) (from January1995 to April 1996), this new coalition seems to have developed the potentialand the will to put huge reforms in education, welfare, employment, etc. intoplace. There have been several recent statements attaching priority to a na-tional law for social service.

These reforms have put three main items onto the political agenda in Italytoday. One is administrative federalism, which calls for more power to the regionsand municipalities, and less to the central state. The second is fiscal reform, whichwould decentralize financial powers, giving regions, provinces, and municipalitiesthe power to raise taxes and determine their expenditure. The third is the pri-vatization of public services, including social care, health care, and education.

The Changing Role of the Third Sector

Batley describes the Italian picture as one with "a variety of institutionalrelationships... involving partnerships between levels of government, semiautono-mous organisations, private concessionaries, voluntary organisations financed bygovernment, fees and private sponsors" (Batley, 1991, p. 215). The history ofthe Italian third sector is thus intimately bound up with, on the one hand, thechurch, and on the other, the political parties (see Zaninelli, 1997).


Until the end of the 19th century, the Italian welfare system was third sectordominant in Gidron et al.'s terms, moving more toward a dual (parallel but in-dependent) model during the first half of this century. Until the 1960s, the Italianthird sector consisted mainly of two forms of organization: the big traditional resi-dential care institutions run by the property-rich Catholic Church, and the asso-ciations that had grown up alongside the development of different political andreligious parties, and which had been organized at the national level under twomain umbrella organizations, ACLI (Catholic) and ARCI (associated with theformer Communist and Socialist parties). The associations remain the biggest sub-sector of third sector organizations in Italy in terms of numbers and are mainlyconcerned with culture, the environment, human rights, and leisure.

After the second Vatican Council (1964-68) and the student revolutionof 1968, both the church and the laity were encouraged to get involved in socialactivities, and a third category of organization exploded onto the scene. Volon-tariati—organizations that are exclusively or almost exclusively formed by vol-unteers—now cover the whole country, carrying out an enormous number ofactivities in the field of health and social services at the local level. With theestablishment of the Italian welfare state between 1975 and 1980, these becameimportant partners for local authorities, entering into contracts in order to coverbasic volunteer expenses (such as travel) and the cost of premises.

The other third sector organizations that grew from the 1970s on-ward—the social cooperatives—are unique to Italy. Social cooperatives workin the field of social services, health, and education. They grew quicklyduring the 1980s and in many regions of the country they are the othermajor partner of local authorities in the field of welfare, with thousandsof employees and several billion lire of monetary transfers. They are themajor employers in the third sector.

There are two different kinds of social cooperative. The first, composedalmost entirely of professional workers, are the main participants in the "con-tracting-out" phenomenon in Italy (Bassi, 1997). They were encouraged by localauthorities during the 1980s in order to overcome budgetary problems in thedelivery of social care, health services for elderly and disabled people, and serv-ices for children and young people. They are strongly aligned with politicalparties (the white coops, associated with the Catholic Church and Christiandemocrat axis, and the red coops, associated with the political left).

The second kind of social cooperative consists typically of a group of vol-unteers (who govern the cooperative) and a group of users/clients (former drugusers, former prisoners, immigrants, disabled people, etc.). These cooperativesaim to reintegrate their clients into society through employment and trainingactivities. They have contracts with local authorities (municipalities and LHUs),but they also sell their products and services on the market.


The establishment of the "Italian welfare state" between 1975 and 1980significantly expanded the delivery of services through public agencies. But thesereforms were put in place by a system which, despite the centralization of fi-nance, had a very low level of central coordination; Kramer et al. (1993) referto Italy as an "unplanned contract state." The involvement of government dur-ing the 1980s was one where central government provided the finance, butwhere this was mediated first through regions, which exercised a considerableamount of autonomy in the development of welfare policy and planning, andthen to a much smaller extent through provinces. Delivery was delegated tothe LHUs, who might then contract with third sector organizations. The systemof social care that grew up under this system was therefore a collaborativemodel rather than a government-dominated one, but using third sector organi-zations as agents rather than partners.

The experience of the city of Ravenna illustrates how the relationshipbetween local government and the third sector worked in Italy between the1970s and the most recent reforms (Bassi, 1997). It is one of the largest of 18municipalities in a province in northeastern Italy (also called Ravenna). It sharesan LHU with two other municipalities. In 1985, the three municipalities decidedto delegate the management of social services to the LHU, which set up aspecial department called the Servizio Sociale. The region, the province, andthe three municipalities each transferred both money and staff to the ServizioSociale, with the region providing 80% of the money. The Servizio Sociale hadsome 50 public employees but called on the services of more than 500 employ-ees working in coops, with whom it had contracts.

In this example, therefore, the state organized, financed, and controlled(through a commissioning body made up of providers, professional assessors,LHUs, and the municipality); the coop workers delivered the professional serv-ices, coordinated by a social worker who was a public employee; and volontariatiand associations participated through referring potential clients to the ServizioSociale and carrying out complementary tasks that did not need special pro-fessional skills, such as shopping, paying bills, and offering company; they alsoacted as advocates and campaigned for service improvements.

This situation was not without its tensions. The Servizio Sociale triedto save money by stimulating competition among social cooperatives; thesocial cooperatives tried to increase the numbers of contracts and to extendtheir length to three years; volontariati and associations of elderly peopletried to achieve services of better quality without additional fees. Insidethe coops, the workers were becoming unionized and asking for better jobconditions, wage, social insurance, etc., which was increasing the cost ofservices. Meanwhile, new laws covering voluntary associations and socialcoops were introducing new regulations that created difficulties for smallerorganizations without the resources to implement them.


The legislation of the early 1990s—and especially the "counterreform" ofthe NHS—is changing this picture yet again. This legislation, as in the U.K.,has been accompanied by cuts in public expenditure, which have an impact onboth contracts and subsidies, especially as the managers of the new Health En-terprises get a personal premium for the public money they save. However,there are now moves to restore the social services that were run by LHUs tothe municipalities. Restructuring these services in this way will require extensivecollaboration with third sector organizations if it is to work, given that few mu-nicipalities have the organizational capacity or skills to provide directly. As Kra-mer et al. (1993) point out, in these circumstances the potential for "purchasercapture" can be strong (see also Ranci, 1994). The tangentopoli, however, offersthe potential to reduce clientelism, because municipalities will have to put con-tracts out to tender rather than make private deals.

The Italian system of welfare thus seems to be moving toward a sys-tem in which the overall policy framework is the responsibility of centralgovernment; the regional level is responsible for planning, setting commonstandards, setting priorities and objectives, financing, regulation and evalu-ation of the services; and the municipalities have the responsibility of ad-ministering finance and organizing the delivery of services, both directly orthrough third sector organizations.

As a result, the third sector in Italy now finds itself in a very excitingbut challenging situation. With the assumption of responsibility by the mu-nicipality, there is at least the potential to move from agency to partnershipand for joint ventures where local authorities and third sector organizationspool resources. At the same time, the tangentopoli and the recent electionsoffer the prospect of new legislation in the social care field, which couldsignificantly enhance the status of this sector at the national level.

Local Variations

One of the major benefits of this new system is its potential to beginto address the huge differences that exist between the regions and the con-sequent patchiness of service provision. In very few regions is the systemas well organized and structured as that described above; many areas ofthe country do not even have a department of Servizio Sociale. Putnam(1993) suggests that what sets the former regions apart is their "social capi-tal"—a strong "civil society" tradition based in associations—which has pro-vided the basis for effective local government. He compares this with theSouth, where it is the strength of family that determines the culture ofgovernment and that has produced a system prone to corruption and de-pendent on the informal economy for welfare.


Since Putnam's study, the political situation has also changed in someSouthern regions, for two reasons. First, electoral reform has introduceddirectly elected mayors and given them the powers to choose their own cabi-net of local ministers. Second, tangentopoli has removed most of the formerpolitical leaders from the scene and allowed a new political leadership toemerge. The great majority of the new mayors are from the center-left coa-lition and many have backgrounds in the third sector. A gradually renewedtrust in local government has broken political apathy and led to a revivalin civil society with a growth of community-based activities.

QUESTIONS AND THEMES

In both the U.K. and Italy, there was a considerable increase in thenumber of third sector organizations over the 1980s (Kramer et al., 1993).In Italy, however, this was in the context of a relatively weak central gov-ernment and the decentralization of government responsibilities; in the U.K.,it was in the context of what many commentators have seen as the centrali-zation of authority at the central government level and the erosion of localauthority powers (Batley and Stoker, 1991). Table II summarizes some ofthe key differences and similarities between Italy and the U.K.

The comparison in this paper is broad and needs to be extended toother countries. It may also need to take other factors into account, suchas the degree of centralization in the third sector itself and the extent towhich the relationship with the state is mediated at national "peak asso-ciation" level (as in Germany and the Netherlands) or at a more local level.Nonetheless, our observations so far suggest that categorizing any countrysolely in terms of any one model of voluntary-statutory relationships over-simplifies the complexity of the relationship.

Both histories show that the relationship between the state and thethird sector changes over time and varies from locality to locality, accordingto different traditions, cultures, and administrations. They also suggest thatchanges in this relationship in the two countries can be related to changesin the relationship between central and local government and the differentcharacteristics of local government in different countries. The comparisonsuggests a number of key questions to be addressed in future research.

1. Does a collaborative partnership between the state and the third sector re-quire a central steer or local autonomy?

In the U.K. many argue that there has been too much of a centralpolicy steer, with the result that local authorities have financial responsi-bility without power, having to steer between tramlines set firmly by central


government. However, it can be argued that in Italy there has been toolittle rather than too much of a central steer: Both government and thethird sector have been incorporated into particularist agendas. Tangentopoliand a new direction in central government offer the opportunity to breakthis tradition, although it is too soon to say whether it will be successful.However, while local autonomy (in Italy) has been associated with patchydelivery and clientelism, it has also offered opportunities for experimenta-tion, innovation, and pockets of excellence in parts of the country.

In the U.K. the loss of financial power at the local level has beenassociated with a perceived loss of autonomy. However, the Italian expe-rience suggests that the centralization of finance does not always have thiseffect. The degree of local autonomy is also shaped by political traditionand the power of parties. Thus, while Italian local government does nothave any fund-raising powers, it still has considerable autonomy in the im-plementation of social care policies.

2. Does the relationship between local government and the third sector mirrorthat between central and local government?

In the U.K. a dual polity (separate and distinct) between central andlocal government in the 19th century was mirrored by a dual relationshipbetween the statutory and voluntary sectors. More recently the conflict thatcharacterized central-local government relations in the 1980s and early 1990swas accompanied by a "conflict" paradigm in the relationship between thestatutory and voluntary sectors. Most commentators would agree that localgovernment certainly needed reform and that its vast service empires neededto be broken down. But the way the reforms were introduced—swift, top-down, and characterized by "the sort of bureaucratic, prefectoral supervisionwhich other (European) governments have found to be costly and stultifying"(Batley, 1991)—not only engendered a lack of trust between central and localgovernment but threatened what had been seen as relatively trusting rela-tionships between local government and the third sector.

However, after the resistance of the 1980s, it could be argued thatlocal authorities have largely settled into a role as purchasing and managingagents for central government. In this role they are seeing third sector or-ganizations as agents rather than as competitors. This is true even in thecase of third sector housing associations, whose growth has been at the directexpense of local authority housing provision (Kendall and Knapp, 1996).Some have argued that this acceptance of a new role is due to an ideologicalcolonization by central or local government through the institutionalizationof an individualist and extremely depoliticized "new managerialist" purchas-ing culture in town halls across the U.K. (Clarke et al., 1994).


On the other hand, there is evidence both from the U.K. and Italy thatconflict between central and local government can create beneficial alliancesbetween local government and the third sector. In both Italy and the U.K.,third sector organizations have benefitted from policies put into place at thelocal level by parties opposed to the national government and seeking to es-tablish their credentials as a credible alternative. In Italy, associations wereamong the allies that regional governments brought to their aid to force a re-luctant central government to decentralize real powers in the 1970s (Putnam,1993). In the U.K., the attack on local government forced many local authoritiesto review their relationship with local third sector organizations and to investin the development of civil society, both as allies against central governmentand as a means of demonstrating a more responsive administration. While thisis most graphically illustrated by the conflict between central government andthe new urban left in the 1980s, it is worth noting that the encouragement of"community politics" was also a platform for the emergence of a third forcein British local politics: the emerging Liberal Democrats.

3. Is the relationship with the third sector influenced by the extent to whichlocal government is seen as local service administration or local democracy?

The first may favor an agency role; the second is more likely to favora collaborative partnership role. Despite the events of the 1980s, local gov-ernment in the U.K. has been identified with a service rather than a politicalrole. Its standing and status as a service provider both made it the focus ofthe attack on state welfare and encouraged the "conflict paradigm" alongwith fierce resistance. In Italy, by contrast, the tradition of local governmentis much more of a local representative one. The third sector has benefittedfrom the late development of decentralized government as well as the latedevelopment of policies for social care. In some cases, local government didnot have the capacity to deliver services itself; in others, there has been aconscious choice to deliver services through the third sector. However, therewere two contrasting stages of growth that illustrate this point further. In thefirst stage, the third sector was funded largely as an agent through LHUs,which were nonelected public bodies with a service administration role. It isonly with the reversion of responsibility to the democratically elected munici-palities that the scope exists for a more collaborative partnership.

The extent to which this richer partnership will become possible in theU.K. will depend on the extent to which authorities define their "enabling"role as one that goes beyond agency and encompasses development and po-litical dimensions. Many commentators argue that "marketization" is mostlikely to favor the larger service-providing organizations that can bear thetransaction costs. There is also concern that a focus on "agency" will margi-nalize the complementary and advocacy functions of the third sector. But while


the "politicization" of local government faded after the 1980s, the investment inthe third sector that accompanied the conflicts of the 1980s—and the pressureon local authorities to relinquish service empires and to consult with users andcommunities—did lay the basis for a wider "enabling" role. This was most evidentin Bemrose and MacKeith's "responsive" authorities, who had supported theemergence of a new wave of third sector activity and who had encouraged in-vestment in all aspects of the sector's work, even within tight financial limits.

4. Is a strong third sector compatible with strong local government?

Putnam (1993) has argued that the performance of local government inItaly is heavily influenced by the vitality of local civil society. Certainly the tra-dition of small firms, cooperatives, and associations in parts of Italy is one onwhich both government and the third sector have been able to build. Putnam'sperspective is over centuries, and the origins of the strong associational traditionhe documents lie shrouded in the mysteries of time. From our more limitedperspective, however, it is possible to argue that the relationship has been asymbiotic one. The new wave of independent organizations that developed inthe 1980s in the U.K., while often critical of local government, owed much tolocal government funding. Local governments in some parts of the U.K. havebeen major investors not just in services but in the political development ofthe third sector and in community-based social enterprise. Their more devel-oped and diverse third sector is arguably better equipped, in terms of localorganizational and political capacity, to realize the potential of real collabora-tion than that of authorities who did not invest and to create both the consumerchoice and citizen's voice that makes for effective government.

Meanwhile, in southern Italy, there are signs of a revival in localdemocratic government and thus in the third sector. This is the result oftwo changes: first, a change in electoral law that allows the mayor to beelected directly and allows him to choose his administration; second,tangentopoli leading to a major turnover in political leadership. Now, manyof the key actors in local government come from the third sector. Increasingtrust in local government and local democracy has led to a reawakeningof interest in associations and other third sector organizations.

The need for trust in local government and in the capacity of the elec-torate to affect that government is most powerfully illustrated in the Italianexample. However, U.K. experience, with its first-past-the-post system in localas well as central government, suggests that, where local authorities have beenunder the control of one party without real opposition for a long time, which-ever the party, the capacity to create social capital can be reduced. It will beinteresting to see whether the breakdown of the two-party system in localgovernment, assuming it continues, will eventually create an environment thatencourages a more diverse and influential third sector.


5. How does the size of local authorities affect the extent to which a collabo-rative relationship can be developed with a diverse third sector?

Some research suggests that the greater the decentralization, themore likely it is that authorities will be able to develop and support localproviders (Hoyes et al., 1993). The extreme decentralization in Italy—evi-denced in the large number of municipalities (2000 plus)—has both advan-tages and disadvantages. Local authorities in this position can be closer totheir communities and more responsive to local need. Blair (1991) arguesthat the large size of local government units in the U.K. prior to the recentlocal government reforms makes it difficult for the public to identify withthem. Certainly, during the 1980s, few of the public were prepared to goout on a limb in defense of local government service empires. But, whilehe sees Southern European governments as being closer to the consumer,Blair argues that they lack the expertise and organizational strength to takeeffective action. Small size can also make local government prey to "pur-chaser capture" by large providers.

The introduction of smaller unitary authorities in some areas of theU.K. is giving rise to similar concerns. But the fact that local governmentreform in the U.K. is also reducing the number of tiers of government maybe of equal concern. It could be argued that pluralism in government (thatis, a variety of autonomous levels of government) is likely to encouragepluralism in the third sector. A variety of different levels of government(organized as they have been in the U.K. along functional rather than hi-erarchical lines or as in Italy with delegated powers) offers alternativesources of funding, which can increase the range of supported activitiesand reduce dependency on any one source. Gronbjerg (1993) has shownhow U.S. organizations have resisted resource dependency by combiningfunds from a multiplicity of government funders.

CONCLUSIONS

As different countries seek to address common problems and tensionswithin welfare—between equity and diversity, control and responsiveness,quality and flexibility, cost and rising demand—it seems that models of wel-fare are converging. But it is at the local government level that these ten-sions are played out, and the experience of the U.K. and Italy suggeststhat, beneath this convergence, there still exists considerable scope for vari-ation. If we are to understand the impact that changes in the state haveon the third sector, we must understand the dynamics of the relationshipbetween national and local government as well as those between the state


as a whole and the third sector. Such an analysis allows a more compre-hensive understanding of variations in the impact of marketization on thethird sector. It also allows for a more flexible conceptualization of the roleof the state and its capacity for collaboration through decentralized gov-ernment within a clear but "light touch" national framework.

ACKNOWLEDGMENT

This article is a revised version of a paper presented to the secondISTR conference, Mexico City, July 1996.

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