12 January 2007
Supporters say social enterprises marry private efficiency with public values, offering innovative low-cost, high-quality services. But a wider definition of value for money is needed to get the best out of them, says Jonathan Bland
Is 'social enterprise' anything more than a political buzz phrase? Does it have the power to revolutionise business and advance social justice? And is it really a vehicle for improving public services?
The social enterprise movement has been riding a political wave over the past 12 months. Many in the sector believe that it is finally being recognised by the government and its agencies. This is partly a belated acknowledgement of the work it has been doing under the radar for years, but it also shows an upward shift in the sector's ambitions and importance.
The creation of a new Office of the Third Sector, led by an energetic minister, Ed Miliband, was an important landmark, bringing social enterprise into the heart of government. Chancellor Gordon Brown's words at the launch of the Social Enterprise Action Plan in November, in which he called social enterprise 'the new British business success story', indicate the movement's growing status within Westminster.
The UK's estimated 55,000 social enterprises operate in a wide range of sectors, from renewable energy and recycling to health and property development. A key factor in the government's growing interest in them, one given prominence in the action plan, is their potential to drive public service reform. Social enterprises have been delivering public services for many years (on a large scale in areas such as housing and leisure), so it's surprising that they were rarely considered in reform terms until the past 12 months or so.
And it is not just Labour politicians who have awoken to their potential. This time last year, the Conservatives began to champion the sector's role in public service delivery. A dozen shadow Cabinet members toured a range of social enterprises providing public services around London, from environmental and transport services to leisure and childcare.
After the tour, Tory leader David Cameron set out an ambitious vision for the sector's future role in public services. 'It's not just about helping to tackle social problems at the community level,' he said. 'It's about mainstream businesses delivering public services with a distinctive focus on quality, serving the community and employee pride.'
Before the end of 2006 the government set out its stall, with the Cabinet Office's Public Services Action Plan announced alongside December's Pre-Budget Report. The plan describes how the government intends to remove barriers to third sector involvement in delivering and designing public services, and identifies a number of opportunities for growth, including the National Offender Management Service and Jobcentre Plus.
This level of interest across the political spectrum is welcome. Social enterprises have the potential to change the way services are delivered, marrying public sector values with the best of business. They are innovators, showing how services can be improved and often stimulating change in other areas. They will never provide the answer to funding deficits, but they offer a way for public authorities to provide quality, value for money services.
Take the Sandwell Community Caring Trust, which provides care and supported living to children, adults and older people with disabilities. Created in 1997, when £1.2m of care services were transferred from the local council, the trust has achieved impressive savings. For example, an elderly care home that cost the council £452 per person per week in 1997 now costs just £328. This has happened without sacrificing quality or staff pay and conditions. SCCT's 294 staff still enjoy local authority employment terms, and the trust came second in The Sunday Times 100 Best Companies to Work for 2006 list.
In another sector, Bulky Bob's, a division of Merseyside-based FRC Group, has pioneered an approach to waste collection that helps meet local authority recycling targets while tackling long-term local unemployment. Unwanted household furniture is collected, valued and, wherever possible, upgraded. Trainees are taught to drive or to restore furniture: many go on to jobs within the FRC Group. In fact, half of all the group's employees are on, or have graduated from, training programmes. Up to 40% of all items are recycled and the service now employs 49 people, calling at more than 100,000 homes a year: all this and it costs Liverpool City Council less than it paid the previous waste operator.
While these examples are certainly inspiring, there is no cause for complacency. If social enterprises and other third sector providers are to respond to the opportunities opening up, urgent steps must be taken to help them develop capacity. Looming large in the list of 'must dos' is the issue of commissioning.
Real and sustained improvements in public services will be achieved only by engaging in intelligent commissioning from a sufficiently active and diverse supplier base. There are still barriers that make it difficult for many third sector providers to enter the market. Even when social enterprises make it to the bidding stage, too often they are forced to compete on an uneven playing field by the market's failure to take account of the benefits they provide.
To address this, a cultural change programme in public sector commissioning is needed to ensure that all those involved in procurement understand the links between their work and their public body's wider policies. Commissioners should be given incentives to meet multiple objectives with the same expenditure, joining up different types of services to find efficiency gains. The result will be quality services that represent best value for the taxpayer when looked at as a whole.
The government's Social Enterprise Action Plan recognises this. It commits the Office of the Third Sector to work with the North East Regional Centre of Excellence to tackle barriers to the use of social clauses in contracts. This is welcome, but needs to be part of a broader cultural shift that encourages authorities to buy joined-up services delivering multiple outcomes across a wide range of objectives, rather than their traditional narrow approach.
Another important consideration in any move towards intelligent commissioning is the impact of Sir Peter Gershon's Efficiency Review. While savings no doubt have been made as a result, intelligent commissioning has not been improved. Social enterprises will find it hard to deliver the sustainable procurement agenda, as highlighted by the Sustainable Procurement Taskforce, if the perception that better outcomes cost the taxpayer more continues to hold sway. This has to be tackled at the highest level of government, with the concept of efficiency itself redefined.
In particular, the trend towards ever-larger public service contracts needs to be addressed. Relegating social enterprises to the role of subcontractor for contracts negotiated at a regional scale is not a sustainable long-term solution. As any small business knows, being a subordinate partner to a lead contractor often means being bled dry, providing a specialist or peripheral service without getting a fair share of the profits. With margins squeezed to the bare minimum, few social enterprises would have the freedom to innovate.
The Social Enterprise Coalition and its members firmly believe that if the definition of value for money is properly applied to public services, social enterprises will have plenty to offer. But in reality, its application all too often favours price above quality and user need. The government's recent focus on the third sector's role in public services is welcome. But the real test will be whether a new breed of commissioners emerges who truly understand the wider social, environmental and economic impacts of their decisions, who can take advantage of innovative ideas and recognise the contribution social enterprises can make.
Jonathan Bland is chief executive of the Social Enterprise Coalition
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