The National Coalition for Independent Action has issued a policy paper claiming that the use of contracts rather than grants is leading to “the destruction of the voluntary sector”.

The 26-page paper entitled Voluntary action under threat: what privatisation means for charities and community groups argues that a market-based approach to public services damages organisations and the people working in them, and does not select the best service.

It says that under the commissioning model, services are funded if they fit the priorities of commissioners, stifling new or innovative work, while the focus on price leads to a diminished level of service to both users and staff.

It also criticises the localism agenda, saying that it leads to “a big market of fragmented and unaccountable services”.