Charities have always delivered services, ranging from support for the poor and destitute to education or hospitals. The crucial questions have been: who decides what the services should be, and who finances them? In mediaeval times the decisions were mostly made by religious institutions and the services delivered by monks or church officials. The resources came either from the Church's extensive property income or from donations; when the wealthy made large donations these were often earmarked for a specific purpose.

But these services were patchy, and eventually the need for greater consistency and wider access prompted the state – if only to head off social unrest – to make decisions about what the services should be and to finance them out of taxation. At first, state provision of services was minimal and charities remained the principal providers of social services. But over several centuries the balance changed – slowly at first, but then more rapidly when the Industrial Revolution gave rise to increasing social problems in the expanding cities.

The process culminated in the establishment of the welfare state in the 20th century, which in turn led to the modern phenomenon of charities being contracted by the state to provide some of the services that the state requires by law or deems desirable. Such provision of public services is one of the most controversial aspects of the work of charities in modern times and forms the focus of this chapter. There are two main controversies, both of which are essentially political. The first is about funding: the pressure on public authorities to control public spending pushes charities to put in the lowest possible bids in order to win work, which can lead to a lowering of standards of service or prompt them to subsidise public contracts from voluntary income. The second is about independence – whether charities that accept work under contract from government should refrain from speaking freely about it and challenging politicians and their policies.

The financial crisis caused by the coronavirus pandemic added dramatically to these familiar concerns. Roughly half of charities’ contracts from the public sector come from central government, which even after the relaxing of the first lockdown restrictions was facing the worst recession in modern times, foreshadowed by a 20.4% shrinkage of the economy between April and June 2020.