Really spoiling us?

Tuesday saw the departure into the sunset of the Social Enterprise Ambassadors marked with a celebratory evening at Coin Street (more on this later).

Opinion on the closing speech from Civil Society minister, Nick Hurd, ranged from Allison Ogden-Newton‘s view that Hurd was ‘passionate’ in outlining his commitment to social enterprise to Liam Black‘s view that the ministerial contribution was ‘shallow and cliche ridden.’

My view lies somewhere in between. As junior ministers go, Hurd is a strong performer. He seems like a genuinely decent bloke and his short speech was well judged for the occasion – in the sense that it was positive, good-humoured and didn’t involve too much ‘big P’ politics. Where I’m with Liam Black is that bit of it that was political revealed the ongoing gap between the coalition government’s pro-social enterprise and the practical reality of what they’re doing.

What they’re doing, according to Hurd, is:

  1. cutting bureaucracy to make it easier to start a business,
  2. launching the Big Society Bank,
  3. encouraging public sector workers to spin-out their services into social enterprises and
  4. encouraging public sector commissioners to commission social enterprises to deliver public services.

As far as existing social enterprises are concerned, only the the fourth of these measures is practically useful and – conveniently or otherwise – it’s the one that central government has the least ability to actually deliver.

Cutting bureaucracy is fairly neutral. The actual process of starting a business in the UK is not very complicated and I’m dubious about whether people who are unable to do it are likely to be very good at running a business, even if the process of starting-up was made easier. Of course, running a small social enterprise would be easier if it was cheaper – as I’ve suggested before, maybe social enterprises could pay less employers’ National Insurance.

The Big Society Bank, as far as we know, is like to make a relatively small contribution to a niche area of financial demand.

The spinning out of public sector services into social enterprises is a definitely a good thing for the social enterprise lobby but (at best) it’s a distinctly mixed blessing for the movement as a whole. Most current social enterprises are small providers who often provide locally-focused and or specialist services fitting into gaps in public sector service provision. Social enterprises who find their local PCT delivery arm or large department of their local council has become a (possibly nominal) social enterprise are not going to find it easier to compete for public sector contracts.

These new spun-out behemoths will have most of the advantages of being a large public sector organisation – resources, contacts and understanding of commissioning processes – with the added bonus of theoretically being social enterprises. Supporters of high-level spin-outs would argue that social enterprise is about finding ways to deliver positive social outcomes and this may involve changes that cause existing social enterprises to struggle or go out of business. This a perfectly honorable position but not one that helps small social enterprises very much.

It seems that there’s at least three partially competing narratives in the coalition’s approach to social enterprise:

  • The spin-out services narrative – that’s mostly about finding ways to deliver cheaper and better public services through new social enterprise vehicles, and offers little to existing social enterprises.
  • The Big Society narrative – that mainly involves volunteers doing stuff for free to replace axed services with limited state support – and involves small social enterprises if they can develop effective business models that don’t require ongoing state support.
  • The Centre for Social Justice narrative – that involves recognising the role of local charities and social enterprises in local service delivery and seems most conscious of the fact that while volunteering is important, existing local community activity is both vitally important and does cost money.

In terms of what’s happening so far, the first two narratives are currently the dominant ones. The social enterprise lobby has to balance the competing challenges of supporting new spun-out social enterprise to make sure they really do embrace the values of the movement as well as the social enterprise label while also defending the interests of the majority of organisations in the current movement who – from what we’ve heard so far – don’t stand to benefit from looming political developments.

Others’ thoughts on this much appreciated. Would be keen to hear from Big Society people on how existing social enterprises can get involved.

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11 Comments

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11 responses to “Really spoiling us?

  1. As far as I can tell the “social enterprise movement” is a gift for the government. A willing victim!

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  2. I’d agree that much of the new generation of professionally managed, financially sustainable social enterprises will emerge from the public sector. People there often have the skills and now the incentive to opt out and take control of their destinies.

    Whilst of course many of our existing social enterprises are excellent, innovative and successful, many are not. I think it is both inevitable and actually healthy that many lacklustre, inefficient, unfocused social enterprises will fail to be replaced by bigger, stronger new organisations.

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  3. beanbagsandbullsh1t

    Robert,

    I share you hope that some (hopefully many) spun-out social enterprises will do a good job.

    I less hopeful that many of them will replace the work of smaller social enterprises in any way other than being able to squeeze them out through sheer bulk.

    I think there’s two separate questions:
    – one of is around whether (necessarily) large organisations like PCT delivery arms become spun-out social enterprises and, in doing so, become better at doing what they do
    – another is round whether the resources and opportunities will be there for smaller, locally-focused and specialist social enterprises to continue doing what they do

    Where these questions overlap for me is the worry that the smaller organisations – even the good ones – will struggle to survive in the new market (where they’ll face competition from both big spun-out social enterprises and the private sector).

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  4. I think the good, flexible, customer focused social enterprise will always do well, be it large or small. A PCT cannot be a social enterprise but can encourage those within it to take that step.

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  5. A good analysis of what might well happen rather than what is intended to happen, but maybe there is more to add as this blug leaves out the business end – two parts to that. First, the private sector will have a strong and better capitalised go at public sector spinout market, so the toughest competition could well come from there. Second, the analysis leaves out the potential for social enterprise as a business sector – retail, B2B and other models which make less reliance on public funding. It is pretty unique to the UK to have such a focus on public sector as key market/income stream – there are other routes to creating social value.

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  6. beanbagsandbullsh1t

    Cliff,

    Agree re: the private sector.

    I’d also agree that it isn’t an intentional government policy (or the policy of people developing large new spun-out social enterprises) for loads of grassroots social enterprises to go bust but – as a by-product of their wider approach – it the likely consequence of their actions.

    This is not something that it’s either impossible or too late to address. Smaller organisations need support to engage with new commissioning processes, the processes themselves need to be open to smaller organisations and larger organisations need to be encouraged (possibly obliged) to sub-contract to smaller organisations in a fair and sustainable way.

    I agree that social enterprise in the UK is heavily focused on the public sector. This is not an accident, it was New Labour’s policy throughout the last decade – enthusiastically endorsed by the Social Enterprise Coalition – to support the development of social enterprises delivering public services and more or less ignore the potential for social enterprises to do anything else.

    I back the current suggestions – including those from Unltd and Respublica – to support the development of new social enterprises that will be sustainable trading businesses (that don’t trade primarily with state agencies).

    I’m keen to see what the government will do to enable more of those social enterprises to start up and then grow.

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  7. . . and of course there you have it. Any organisation that derives the bulk of its income directly from the public sector is not in my book a social enterprise!

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  8. beanbagsandbullsh1t

    Robert,

    There will be a range of views on whether that’s a positive aspiration but it doesn’t reflect the social enterprise sector we’ve got – where, according to last year’s State of Social Enterprise survey, 49% of social enterprises get 50% or more of their income from the public sector (and lots more would fold with without some state grants or contracts).

    I’d agree, though, that as well as worrying abot the government’s doing we do also have to consider how more of the companies might get more of their income from non-state sources.

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  9. Robert makes a good point about SEs which are effectively dependent upon public sector spending.

    What “encouraging public sector workers to spin-out their services into social enterprises” means then is that groups of public service workers will be allowed to form joint ventures with existing profit-maximising firms which specialise in public service delivery. This effectively moves the impact of service cuts and job cuts from a decision being made by politicians…

    This will probably impact negatively on the public image of social enterprise – what’s more, the impact of the austerity measures and the resulting return to recession will excacerbate the problems that the social enterprise movement is confronted with and the problems it seeks to solve through trading.

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  10. beanbagsandbullsh1t

    Yes. Can’t really disagree with that analysis.

    In terms of the general point about SE dependence on public spending:

    The UK’s a mixed-economy where – this year – government spending will account for around 45% of GDP. The government is a bigger player – all governments are – in the social sectors of the economy than in the economy as a whole. As Cliff points out, the UK social enterprise sector is unusually heavily aligned towards providing public services – or services that are delivered as if they’re public services (free or heavily subsidised to the end user).

    On a purely economic basis it wouldn’t be very sensible for anyone to start a social enterprise that offers stuff the government pays for on the basis they’d refuse to take money from the government.

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  11. Pingback: Growing incredulity | Beanbags and Bullsh!t

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