Corporate success in Surrey

To be successful as a business, the possibility has to exist that you might one day lose. It keeps all businesses – including social ones – honest and focused.

Part of Craig Dearden-Phillips’ matter-of-fact reaction to the news that Central Surrey Health(CSH), the government’s favourite healthcare spin-out, have failed in a bid for a large new contract. As The Guardian‘s Patrick Butler explains, CSH have lost out in the race to land a £500million five-year contract to deliver community services in south west and north west Surrey with preferred bidder status going to Assura Medical, a company majority-owned by Virgin Healthcare.

Dearden-Phillips aside, other social enterprise leaders have been less circumspect in their reactions. Social Enterprise London‘s Allison Ogden-Newton blogs that: “we are all gobsmacked that it (CSH) has lost out to a big, new, private sector provider.” Adding: “So what was the question posed by Surrey Health Authority that Virgin could answer better than CSH? Without having all the facts, I am inclined to speculate that if Virgin had the right answer, it was the wrong question.

Health Investor is unable to shed much light on the matter noting: “The size of the contract is unprecedented for the Virgin-owned company, which generated revenue of around £27 million from its GPCos in 2010 ” but the speculation in Patrick Butler’s report is that that question was ‘can you raise a £10million bond as surety?’.

Butler notes: “It is not clear whether this financial fragility counted against CSH in the contract process,” before adding: “A common critique of spin outs is they are being set up to fail, by a government which has a secret agenda to break up the NHS and allow private corporations in through the back door.” 

Butler is correct that this is common critique but it is also, frankly, a pretty stupid one. Not because the government does not have an agenda to allow private companies to deliver NHS services but because this agenda is a clear, open policy position. In the case of the north west and south west Surrey contract, the tendering out process is part of the implementation out of the previous government’s decision to force PCTs to divest themselves of their delivery arms but the new government’s Any Qualified Provider policy demonstrates a clear direction of travel.

While the last year’s upheavals have left us with a healthcare landscape that, if personified, would resemble a contortionist in a washing machine, the one thing that is abundantly clear is the private sector involvement is going to increase a lot. The current government has made clear that it likes social enterprises and that they should bid for contracts, it hasn’t said it’s going to actively intervene to enable them to win them.

Butler goes on to quote Social Enterprise UK‘s Peter Holbrook suggested that the government back up its warm words for social enterprise with some sort of intervention in the commissioning process: “It is not enough for government to open up markets; it needs to create fair markets that benefit society. Some of the financial criteria used in contracts create an unequal playing field in which social enterprises are unable to compete because they may not have the same financial backing as private sector providers. Unless swift action is taken to address this we will see social enterprises and mutuals lose out to the private sector.”

Holbrook is clearly right that some financial criteria make it hard for social enterprises to large corporations – and also with NHS Foundation Trusts (whose debts are under-written by the state). Unfortunately, that may be partly because the grim reality is that, compared to the other two types of organisation, the social enterprises – not CSH specifically but any relatively small social enterprise – will be the ones most likely to go bust.

The spectre of Secure Healthcare looms large over this debate. Not because any of the specifics of what happened in that instance are necessarily relevant to other social enterprises bidding for contracts now but because general fear about awarding large contracts to relatively small businesses may override all other considerations.

My sense is that, true believers such as Craig Dearden-Phillips aside, there isn’t much appetite within the social enterprise movement for a wide open market in NHS provision. If anything, there’s a split between those who would prefer that markets were primarily restricted to public, charity and social enterprise providers forever – and those who think that should be the situation for now, with the private sector getting a chance in a few years time when social enterprise providers have had the chance to develop a track record. There’s also apparently the idea that the government should do something which means anyone can bid for contracts but the social enterprises will usually win. Whether or not any of these should be the government’s position, none of them currently are.

Dearden Phillips concludes: “Today’s set back is not, as some might say, the beginning of the end for spin-outs – but the end of the beginning. Being a social enterprise means being like any business – but just one better.

It’s hard to disagree with the general principle. It’s a bit less clear how a social enterprise might go about becoming a corporation with virtually limitless financial muscle to then complete the process of going one better.


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5 responses to “Corporate success in Surrey

  1. When I’d read of the reaction to the non-selection of CSH, the last line of Martin Niemoller’s poem came to mind:

    “Then they came for me — and there was no one left to speak for me.”

    This is a sector who can’t agree on a social enterprise definition and it can be argued that all business has a social benefit.

    Social enterprise “leaders” were indignant at having the rug pulled from beneath their feet. But where had they been when I’d called for their support?

    Leadership suggests these responsibilities and yet what I’ve seen repeatedly over the last 7 years is our copyright violated, our work re-branded and us pushed out of the way. Welcome to the self-serving reality of social enterprise.

    I’d taken the Unison stance on the matter of local healthcare services and joined them in their local protest last week. We later went into the public meeting to talk to the new social enterprise provider.

    This is a newly created CIC limited by shares and a guaranteed annual income of £100 million. There were suggestions they they themselves would look favourably on social enterprise suppliers, but experience teaches that this just doesn’t happen.

    The clear divide in government thinking is that “social enterprise” is appropriate in what is publicly funded, whereas when it comes to business with potential for profit and community re-investment, social enterprise is kept at arms length. Such is the experience of many with community broadband aspirations, for example.

    Few follow these things I know, but Sir Richard Branson was speaking at the Davos ‘Ukrainian Lunch’ a couple of years ago, calling on business to focus more on social problems. What he had to say bore a remarkable resemblance to our copyright paper on social enterprise, as you may see for yourself.

    Take a look at the guest list and you’ll see him alongside Clinton, Blair, Gates and Yunus. Reason enough to contact Virgin Unite offering to lead the way, with their support.

    That didn’t happen of course, and it seems that fine rhetoric has translated into wanting a piece of the NHS action.


  2. On your last point David, about a social enterprise becoming a corporation, which goes to the heart of the matter.
    Corporations have acquired their influence by means of an economic paradigm in which money is imagined into existence as debt. This is where one may find the core argument for an alternate paradigm.

    The seminars on Economic in Transition offered the opportunity to relate how this combination of an unsustainable economic paradigm in conjunction with the rise of corporations and unregulated money markets led to the train wreck of 2008.

    Social enterprise in itself clearly isn’t up to competing in this kind of environment. It will be drip fed as some kind of palliative unless it finds its own means of leveraging finance. One way of doing this is shared asset investment, community shares for example, another is for a solidarity approach in which social enterprise re-invests continually to help others propagate the social economy. by means of seed funding. A point which seems to have been missed with the introduction of the CIC.

    The case for social purpose in business and the need to think beyond free market capitalism – the economics of production and profit maximisation is now better understood, with the same conclusions.


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