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On the contrary. Many charities benefit from volunteer work hours that simply would not be possible on a normal government contract. The efficiency of some charities simply cannot be matched by State institutions, as people don't want to volunteer working for the state.
Some volunteer positions could possibly be replaced with well-paying jobs to lower unemployment rates at the benefit of the economy, but people also get a sense of purpose from volunteering. The charitable economy ran by volunteering and donations is an incredible asset for any society, no matter how great the social security net is. And in my experience, a better security net is often correlated with more charity.
That's not to say shitty charities don't exist. But good luck financing all the activities of the Red Cross through a state budget, paying everyone for their work.
So first off, you can totally volunteer for government things. I mean, I can volunteer at my local government library for instance, there's nothing about a government contract that removes the ability to volunteer.
But I wouldn't need to have volunteers if the red cross and all competing charities were swallowed up into one thing.
There are a bunch of organizations that do the same or part of what the red cross does. That's a lot of wasted time of resources, that would be better spent lumped together as a collective unit.
Charity is simply one of the places you absolutely don't want competition/capitalism. You want oversight and efficiency, that's the government.