Citizens Advice is in a rather “unique” position, says chief executive David Harker. This is an independent charity that can appear to operate much like an arm of government; its staff provide advice on a wide range of public services, overlapping with the work of housing offices and Jobcentre Plus, for example. Set up during the Second World War to advise the public on everything from replacing lost ration books to finding missing relatives, the charity continues to issue guidance on any and every aspect of people’s lives – from housing, work, tax and benefits to education and discrimination.

For archaic reasons relating to consumer rights and dating back to the Heath government, the Department for Business, Enterprise and Regulatory Reform (BERR) funds Citizens Advice to the tune of around £20m a year (see box for more details). In recent years, as the government has increasingly outsourced work to the private and third sectors, local Citizens Advice bureaux have been able to supplement that funding with contracts. Those contracts have included legal aid advice and the government’s financial inclusion fund, although the charity has shunned welfare-to-work contracts because it did not want to make decisions about who should or shouldn’t get benefits.

The government’s embracing of the third sector has, Harker says, made it “probably the most exciting time to be involved in third sector organisations” – but it has also meant that voluntary groups are seen as suppliers rather than the partners that many would prefer to be.

For exactly this reason, Harker describes the legal aid contracts administered by the Legal Services Commission as “one of the worst contracts around between government and voluntary sector”. Paying a fixed fee in arrears, the contracts can lead to cashflow problems among suppliers, and Harker is also frustrated by the system of offering regional contracts. Because Citizens Advice didn’t win contracts across the country, its provision of legal aid advice is patchy – and Harker fears that if this piecemeal approach is adopted more widely by government, it would make it increasingly difficult for the charity to provide effective nationwide coverage on many fields of advice. “You might end up with much more fragmented provision, losing something that is quite valuable,” he says.

The problem with lumping private sector suppliers and third sector bodies together to fight it out in competitive tendering, says Harker, is that the onus is on the non-profit bodies – which often cannot compete on purely financial grounds – to demonstrate why they offer better value for money. In recent years, Citizens Advice has introduced a case management system that records every interaction, and this has proved invaluable in proving its case. Analysis of financial inclusion fund clients, for example, shows that bureau advice and negotiations with creditors resulted in each fund client gaining an average of £13,000, through written-off debts or previously unclaimed benefits.

This case management system – which all bureaux are now using – and the information that it holds has already proved of great interest to departments. Even the ministerial National Economic Council has asked the charity to come in and present its data on the impact of the recession. “It has been very pleasing the way that departments and ministers – and I include the prime minister in that – have sought out our information,” says Harker.

Departments might not always be so pleased to see the contents of the database – the story it tells on the impact of tax credits errors might make uncomfortable reading for HM Revenue and Customs, for instance. “I see ourselves very much as a critical friend, and the best government departments are really open to that feedback,” says Harker. “A lot of it depends on the culture created by the permanent secretary, and some of it on how thin-skinned ministers are”.

Departments’ reactions can also depend on “whether there is a lot of political capital invested in a certain initiative”, continues Harker. “The early days of tax credits were like that; there was a bit of a culture of denial” of any problems, he adds. Harker refuses to name and shame the departments currently resistant to friendly criticism, but he will say that the Department for Work and Pensions’ permanent secretary Leigh Lewis is “very, very engaged, committed; he wants to work with us and other organisations and send the message down through the department”.

The case management database is just one element of the IT strategy that Harker implemented when he joined the charity ten years ago. “I was very clear that it would make a lot of difference to us,” he recalls. Since then, and with a £20m grant from government, the charity has built itself an intranet that has allowed bureaux to throw away the 72,000 pages of guidance that they referred to when giving advice.

Managing to create an IT infrastructure for 3,200 outlets on a slender budget has been, says Harker, “a struggle”, with the system occasionally falling over – much to the irritation of staff. Having little money “does focus the mind, because you can’t do the really grandiose things. It needs to work and it needs to deliver benefits,” Harker says. He scoffs at the idea that he might have sympathy with government departments struggling with their own transformational government agenda: “They seem to be spending very large sums of money on it, and not getting it right,” he says.

When he describes the next step of his IT vision – to make the network’s website more interactive so that people can download advice and template letters, book appointments at bureaux, and seek advice by email – the gaping chasm between government departments, with their whizzy websites full of Flash media gizmos, and Citizens Advice is made clear.

But Harker hopes that “as the recession bites” government will want to invest more in Citizens Advice’s infrastructure. The bad times, he argues, may see the better-off descending on bureaux with queries about redundancies and debts, potentially displacing the “people with more intractable problems, who are perhaps less articulate and demanding”. Already, bureaux only answer 11 per cent of phone calls: “If we were a government service, that would be regarded as quite shameful”, admits Harker. If some of the new customers created by the recession can help themselves online, volunteer advisers will have more time for the less computer-literate, he suggests.

The recession will not only make demands on the charity’s time; it also threatens the public sector funding that makes up the vast majority of the national and local organisations’ income. The bail-outs of the banks, the consequent massively increased public deficit, and the need to claw some of that money back from public services in the next comprehensive spending review (CSR) all mean that Harker is “fearful about the long-term future”.

The charity has already received an extra £10m to extend bureau opening hours for a period, but Harker points out that the sum represents a seven per cent boost in its income – compared to a 153 per cent increase in enquiries about redundancies, and a 138 per cent rise in queries about jobseekers allowance between April 2008 and January 2009.

Local authorities, which provide around 46 per cent of local bureaux’ funding, are a particular area of concern. “If they get squeezed, they are going to look at areas of discrete funding,” says Harker. Even the long-standing relationship with BERR is not certain. “One of the disadvantages of being attached to BERR is that its overall budget has been squeezed in past comprehensive spending reviews. Health and education have been the priority,” he notes.

As a result, Harker is hoping to use the charity’s 70th birthday to emphasise that funding Citizens Advice “delivers potential cost savings elsewhere in government”, such as reducing the number of avoidable contacts between the public and local authorities – one of the government’s national targets.

Harker hopes not to have to repeat the 30 redundancies made in 2007, after a ten per cent cut in the charity’s grant forced it to reduce costs by a fifth – a period he describes as “quite traumatic”. As well as some restructuring, with a new focus on winning contracts and an end to the final salary pension scheme (even for existing members), the changes involved making all seven of the directors redundant; just two were re-hired, alongside two fresh faces.

Harker, who seems kind and good-natured but clearly has a steely side, recalls: “It was pretty tough, but if we were going to make savings lower down the organisation, it was right to show that it went right to the top”. It is hard to imagine government departments – if or when they face similar budget cuts – taking quite such a radical approach. But perhaps they should consider it.