Everyone profits: Local Government Chronicle


Everyone Profits


When Phil Hope – the minister for the third sector – addresses Thursday’s ‘LA Connecting London 2008’ conference on social enterprise and local government, he can expect an optimistic audience. There is a feeling both within local government and inside the social enterprise sector that there is about to be a major expansion in the delivery of council services by social enterprises.


The main reason for this optimism is that a social enterprise unit is being set-up by the Department for Communities and Local Government. Its job – as with a similar unit, already established within the Department of Health – is to promote the use of social enterprises and to provide practical support in the expansion of the sector. The unit will be set-up over the summer and is intended to be operational by the autumn.


DCLG is being advised by the main sector body, the Social Enterprise Coalition. The SEC’s chief executive, Jonathan Bland, says that the move by the health department was instrumental in pushing forward social enterprises in providing health services and expanding the number doing so. If events in the health sector are a good indicator, DCLG’s social enterprise unit could see many more social enterprises providing services on behalf of councils. “It had quite a significant impact,” says Bland. “There is a lot more recognition of the role of social enterprise. We do have members winning more contracts and doing more things as a result.”


What is more, points out Bland, the Department of Health provided a £100m investment budget to stimulate the creation and expansion of health social enterprises, to help primary care trusts, in particular, have a greater diversity of suppliers. As a result there are more social care social enterprises providing services on contract with local authorities, as well as through PCTs.


Bland hopes that DCLG and other government departments will provide their own social enterprise investment budget. “My view if that we need something similar for each department where social enterprise is underdeveloped, in each market area, to help that solution happen,” he explains.


Phil Hope will be using the forthcoming conference – organised by Social Enterprise London, the regional promotional agency, with the support of London Councils – to stress the importance of using local government procurement to support social enterprises. But the communities secretary clearly has a wider horizon than simply expanding the number of social enterprises selling services to councils.


“Hazel Blears says she wants social enterprise to be in the DNA of her department and to go through all its policies and programmes,” reports Bland. “That has a big impact on local authorities and local authority services. It is about moving from ideas to action.” Giving a keynote speech in March, at the SEC annual conference, Blears stressed that she sees social enterprises as being central to the way local authorities operate in the future. “I believe today we need a new approach to how government works with communities,” she said. “A little less paternalism – a lot more partnership. A little less social engineering – a lot more social enterprise.”


We will have to wait until later this summer for the latest local government white paper, which, Blears said, “will mark another big stepforward” in building links between the community development and social enterprise sectors on the one hand and local government on the other. This is likely to take forward the proposal to transfer underused local public assets to community groups, including social enterprises. It is also likely to see, Blears suggested, social enterprises taking a much bigger role in neighbourhood regeneration.


Social enterprise service provision to local government is particularly strong in social care and leisure services – and in housing, with housing associations widely regarded as a form of social enterprise. (Some housing associations are members of the SEC.) The SEC hopes that gradually social enterprises will become equally strong in other service areas, including regeneration. Bland says that he wants local authorities not only to see SEs as a different and often better means of providing public services, but also as a more inclusive and innovative approach to engagement.


“What social enterprises are brilliant at is making links for people on the ground, which government – centrally and locally – is incapable of doing,” says Bland. In particular, argues Bland, demand and supply can be brought together through community engagement. In this way, people without jobs can provide services for local people whose needs are not being met by the public or private sectors.


Social enterprises are also involved as partners with local authorities in many parts of the country in rescuing, or reopening, Post Office branches from closure. While the Department for Business, Enterprise and Regulatory Reform has told the Post Office to work with local authorities where they want to put forward alternatives to planned closures, in practice many of the schemes will only be viable if based around community groups – in other words, trading social enterprises. Virsa – Village Retail Services Association – is supporting 134 social enterprise Post Offices that have stayed open, many of which are also assisted by their local authorities.


But to think of social enterprises as being necessarily small operations would be very misleading. Coin Street Community Business is a social enterprise that has been responsible for much of the redevelopment on London’s South Bank. It rebuilt the landmark Oxo Tower, which has a Harvey Nichols restaurant and 33 retail studies, and constructed four developments for housing co-operatives, in which over a thousand people are living. A planning enquiry is now taking place on a Coin Street proposal for a £200m development for a controversial 43 storey tower block – including leisure and community services – that would change central London’s Thames riverscape. The proposal had been strongly backed by Ken Livingstone, but looks less likely to go-ahead under the anti-high-rise Boris Johnson.


Yet despite historic links between the Labour Party and the social enterprise movement, support for the sector has come in recent years from across the political spectrum. In a speech earlier this month, David Cameron stressed that social enterprises are part of the modern Conservative vision of strengthening civic society. “There is such a thing as society: it is just not the same thing as the state,” he said. “So we want to see a transformation in the role of community groups, social enterprises and the voluntary sector in helping to build a stronger society for all of us.”


Not only, said Cameron, should social enterprises be a means of delivering public services, but they should also be a method of engaging the wider public in civil society – creating what he called “active citizens”. To give social enterprises, and other ‘third sector’ organisations, a bigger role in civil society it was essential, he argued, that their capacity be developed and strengthened over a sustained period. This fits with his promise that third sector bodies should have ‘full cost recovery’ – that all of their costs, and not just the marginal costs related to a particular service stream, be repaid through service contracts. A repeated complaint of voluntary sector and social enterprise organisations is that because they are formed to deliver a particular service, it is easier for public sector clients to demand that they work for less.


There are other worries about the sustainability of social enterprises as a means of providing services. The success of Greenwich Leisure (see box) has encouraged many local authorities to externalise the management of their leisure services to their existing workforces as leisure trusts, or other form of social enterprise. But there is growing concern in some local authorities that when the contracts come up for renewal, large leisure services companies will out-bid local social enterprises.


Mike Short, national officer for the community and voluntary sector at Unison, says: “Our concern is with the general issue of low cost competition. Although there is a lot of talk from the Government that quality is important, the bottom line is usually that the cheapest bid wins the service. If an organisation has to do the lowest bid to win the service, it has to cut costs, which can be pay, pensions and other terms and conditions. Our members wages are lower in the third sector than in local authorities, though they tend to be better than in the private sector.”


Short said that if leisure trusts were to lose bids to the private sector on contract renewal “it would be a great concern to us”. He added that guidance just issued by the Treasury – telling the public sector that issues of equality and community outcome can be taken into account in making procurement decisions – should help local authorities avoid having to contract-out to the private sector leisure service that are currently being run by social enterprises.


Allison Ogden-Newton, chief executive of Social Enterprise London, says that she hopes that councils attending its conference will, above all, understand more about social enterprise. But she also hopes to see progress on ideas that seem bound to cause controvery and muddy the waters of where social enterprises are perceived to sit politically. One project that interests SEL – which Serco will explain to its conference – is to create social enterprises that bring together private, public and voluntary sector partners for public service delivery.


Another current proposal being examined by SEL is that social enterprises lead on the turnaround of failing schools, creating new academies. “We are hoping that local authorities will consider that sort of independent model, a very community-based model, as preferential to a died-in-the-wool state run model,” says Ogden-Newton.


But Ogden-Newton stresses that despite the current political winds strongly favouring social enterprise, it would be mistaken to expect dramatic developments. “It’s long term,” she says. “Social change has to take a long time actually. We need time and we are making progress. But people need time to take these very bold steps.”




What is a social enterprise?


A social enterprise is a not-for-profit business, motivated by social objectives. Trading surpluses are either reinvested, or donated for a social purpose. The Labour Party’s 2005 manifesto stressed its commitment to the development of social enterprises, including as a method of providing greater plurality of services in the NHS. This has led to an expansion of social enterprises providing social care services to local authorities and the NHS. Development trusts, which are sometimes are used for community-based local area regeneration, are a type of social enterprise. Many housing associations see themselves as social enterprises – particularly those that bring wider social objectives together with their role as a social landlord. There are now about 55,000 social enterprises in the UK, employing half a million people, turning over £27bn a year.


Greenwich Leisure


Greenwich Leisure describes itself as “London’s most successful social enterprise” and was established in 1993. It is a leisure trust, managed by its own staff. It runs 65 leisure centres in and around London, holding contracts with 12 London boroughs, the London Development Agency and two other councils. Profits are reinvested in service development and facilities. As a charity, it is exempt from VAT and rates, giving it a significant trading advantage over a local authority’s direct service organisation.


Shepshed Carers


Shepshed Carers are a former Social Enterprise of the Year. It was formed by two carers in 1994 and now has a hundred worker-members. It provides domiciliary care services to the elderly and others with high dependency needs. It mostly operates under contract to Leicestershire County Council, but also has private contracts. Shepshed Carers say their success is to a large part down to treating their workers well, giving them high quality training and providing flexible working contracts that suit the needs of their members and clients.


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