Delivery costs?

Governments, led by the UK, embraced “social enterprise” as the “third way” – income-generating charities that did not depend wholly on public coffers but dealt with the increasing number of social problems that defied government solutions. My main concern about this viewpoint is that it stripped the notion of innovation and systems change – the essence of social entrepreneurial endeavour – right out of the approach.  In the UK and those countries that have followed, social enterprises have become part of the ‘social enterprise industrial complex’,  sub-contractors to government and feeding into a dysfunctional system.

Pamela Hartigan, Director of the Skoll Centre for Social Entrepreneurship, announces herself as the Dwight Eisenhower of the social enterprise world in a recent blog for Oxfam. The next sentence is: “But that is for another blog” so we don’t yet know what the ‘social enterprise industrial complex’ actually is but, from what precedes it, the suggestion is that Hartigan may have some concerns about the role of social enterprise in UK public service outsourcing.

The service is brilliant because we’re brilliant and we’ve got the contract

She’s not the only one. July saw the publication of (at least) two papers looking at the changing relationship between the social sectors and the state. In ‘Failing the public?‘, a ‘provocation paper’ published by NPC, Fiona Sheil asks whether charities’ increasing focus on delivering contracts within existing public service systems inhibits their ability to innovate and advocate for change.

While acknowledging the value of specialist services funded by the state, Sheil questions the assumption (widely held by many in social enterprise) that the fact that a social organisation ends up delivering a public contract is a good thing in itself: “in more generic, universal provision, how much value does a charity add when under contract? Many charities argue strongly that service delivery by a mission-driven organisation with a beneficiary focus can produce better results, and that taking on contracts is the best way to prove this. However, studies show that in some cases contract terms and pricing is so tight that charities end up delivering services of no better quality than providers from other sectors.

For Sheil, charities need to be able to provide better evidence of the kind of services that are needed. She explains: “Research work is often considered a nicety, not a necessity. Funding tends to be sporadic, and limited, and systems and skills for collecting evidence and demonstrating impact are often not planned or embedded. As a result, the charity sector is operating in a public service system that is itself deficient, because of its lack of commitment to evidenced based decisions, and the charity sector is doing too little to alter that.

Even more important is the role of people who use services. While politicians of all parties have been ramping up the rhetoric about co-production, Sheil believes that it’s up to the charity sector to demonstrate the reality: “The charity sector itself is a demonstration of user and peer-led activity. Charities should be knocking down the doors of Whitehall to promote all methods of service and system structure that give users greater power and control.

Ultimately, Sheil’s point is that charities need to focus on how they can best work with and influence public services to achieve a positive social impact rather than assume there’s a direct correlation between positive social change and growth in their own turnover: “The sector needs to identify where it adds specific value through the delivery of public services, and where delivery by any competent provider would achieve a similar result. If the system is well structured, and its principles and evidential basis sound, it matters less who delivers the actual service to people.

The key difficultly with Sheil’s paper is that, primarily due to the fact that it’s a relatively short opinion piece, it’s easy to endorse many of sentiments without being clear how they’d translate into practice.

Your grants are lovely but your contracts are instruments of neo-liberal co-option

Equally sceptical about the voluntary sector’s role in public service outsourcing, albeit for slightly different reasons, is Glasgow Caledonian University academic and former MP, Les Huckfield. Huckfield’s paper, ‘The Rise and Influence of Social Enterprise, Social Investment and Public Service Mutuals‘ is part of the National Coalition for Independent Action(NCIA)’s ‘Inquiry into Voluntary Services‘.

The NCIA are a campaign group known for their robust, if not especially nuanced, arguments in favour of a voluntary sector that either campaigns for social change or delivers mostly small scale, grant-funded activities that fill the gaps left by the public sector. These organisations may also develop innovative approaches that could be adopted by the public sector in order to be rolled out on a larger scale.

In his paper, Huckfield starts from the assumption that the marketization of public service delivery is a very bad thing and provides a blow-by-blow examination and denunciation of the policies and organisations connected to it (some more directly than others). He claims that: “the landscape in which NCIA organisations operate has been completely transformed by New Labour and Coalition Government promotion of Social Enterprises and Social Investment, and by the Coalition Government’s introduction of Public Service Mutuals. ‘Social Enterprise’ has become a generic term for Third Sector organisations delivering public services.

Those of us who are politically ambivalent about public service marketisation often ignore the work of the NCIA on the basis that they’re more focused on (re)stating an honourable position than suggesting ways that charities and social enterprise might respond to the everyday challenges of keeping going within the modern economy. In some areas of public service delivery (such as residential care) rejecting marketization, rather than campaigning for different types of markets, is practically irrelevant. In others (such as supporting independent living) it’s simply wrong.

It would be a mistake, though, for social sector pragmatists to ignore this paper entirely. Partly because while bemoaning the raft of initiatives aimed at ‘the transformation of voluntary services providers into quasi-businesses‘, Huckfield also does a good job of explained just how unsuccessful many of them have been.

Social investment is a particular area where successive governments have been so keen on the idea in principle that they’ve been broadly indifferent to the practical realities. Huckfield gives a concise of overview of how the UK social investment market arrived at its current predicament before concluding: “All these evaluations above show that ChangeUp, Futurebuilders and the Social Enterprise Investment Fund [SEIF]– all of which sought to fashion more of the Third Sector within the Government’s procurement agenda and to become vehicles for Social Investment – have not been very successful.

If anything, the assessment of SEIF as not being very successful is, as reported previously, unduly generous. Huckfield is right to point out the gap between the huge coverage given to initiatives such as Social Impact Bonds and the reality of the emerging social investment market: “As a proportion of all Social Investment, the [GHK] Report shows that 90% was for secured loans, mostly through social banks, and only 1% for Social Impact Bonds, These Reports shows that despite considerable Cabinet Office funding and continuing publicity hype by Big Society Capital and SIFIs, the concept of Social Investment is making only slow progress.

The problem is that Huckfield is so successful in demonstrating the failings of attempts to entice the voluntary sector in public service markets, he struggles to make a convincing argument for why those attempts must be defeated.

Brolly bad show

The other reason for reading paper, though, is to enjoy Huckfield’s charge sheet directed at umbrella organisations who have, as he sees it, functioned as ‘The Government’s ‘Little Helpers” in supporting an increased role for the voluntary sector in contracted public service delivery. The guilty parties include: Social Enterprise UK, Locality, ACEVO and NCVO.

Some of the charges levied at these umbrellas seem more relevant than others. For example, Social Enterprise UK is criticised for allowing private sector businesses to become supporter members and for being: ‘equivocal on the crucial issue of the role and power of equity and shareholding in social enterprises’.

We’re also told that: “Alongside Social Enterprise UK and ACEVO, NCVO forms a national triumvirate of Third Sector organisations which have underpinned Government policy on contracted and outsourced delivery of public services and has consistently argued for a ‘level playing field’ to allow voluntary agencies to compete with the
private sector for outsourced public services.

It’s not clear whether Huckfield believes these organisations should instead argue for their members to be discriminated against in commissioning processes, whether they should argue for a sloping playing field (perhaps with commissioners changing ends at half time) or whether they should just argue less consistently.

On the other hand, Huckfield is surprisingly matter of fact about ACEVO chief executive, Sir Stephen Bubb, and other voluntary sector leaders placing themselves at the heart of Andrew Lansley’s controversial Health and Social Care Act 2012. In Bubb’s case, by chairing the “Choice and Competition: Delivering Real Choice” Panel for the NHS Future Forum.

Huckfield notes that, while in that role, Bubb reiterated his support for: ‘the principles set out in the White Paper – the principles of diversity, of choice, of transparency, of free competition‘ but there’s no wider consideration of the extent to which the workings of Pamela Hartigan’s ‘social enterprise industrial complex’ may have been partially responsible for the legislative dog’s dinner that emerged at the end of the process.

Huckfield successfully proves leading umbrella bodies entirely guilty of following their publicly stated policies, policies which he and (presumably) NCIA members disagree with. He doesn’t prove that in doing so they’ve misled anyone, let down their members or made the world a worse place as a result. Nor does he suggest how charities and social enterprises, their members or the people who use their services, would be any better off if they followed the NCIA’s rejectionist line.

Ultimately, though, what Huckfield, Fiona Sheil and Pamela Hartigan all remind us of, in very different ways, is that charities and social enterprises don’t exist in a political vacuum. If a social organisation takes on a public contract, it isn’t just taking on a contract, it’s engaging with the system that produced that contract and the political assumptions and decisions that underpin it.






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8 responses to “Delivery costs?

  1. It was the Skoll Social Edge forum that introduced me to many felllow travellers. One conversation in particular stands out, on the subjext of Profit For a Purpose, It was just a month before the release of our paper calling for a re-think of traditional capitalism in large scale social innovation. Pamela Hartigan is a recent convert, it seems.

    A call for action went out in February 2008, when USAID were prompted to help “establish an alternative form of capitalism, where profits and/or aid money are put to use in investment vehicles with the singular purpose of helping the world’s poorest and most vulnerable people”
    The following year in March 2009, the economic crisis was upon us and we delivered the first of our papers to the international conference on Economics for Ecology, which concluded:

    “What is not guesswork is that the broken – again – capitalist system, be it traditional economics theories in the West or hybrid communism/capitalism in China, is sitting in a world where the existence of human beings is at grave risk, and it’s no longer alarmist to say so.

    The question at hand is what to do next, and how to do it. We all get to invent whatever new economics system that comes next, because we must. ”

    Within weeks at Oxford Social Enterprise Forum a conference was held to discuss whether a new form of capitalism was possible. It was sponsored by Skoll and UnLtd., both amply funded under the neoliberal system now in question.

    Hartigan went on to develop the concept of Breakthrough Capitalism with Volans, which on the face of it doesn’t seem to be a lot different to our own advocacy, except that we’d put it into practice..

    An interesting recent spin off from the case for reforming capitalism comes in a book to be released next month by Naomi Klein which pretty much says the same thing.


  2. Karl Wilding

    David – good article. For what it’s worth, Hartigan’s phrase is very similar to the ‘nonprofit industrial complex’ which has been around for at least a decade:

    It would appear that the authors in 2004 were correct: the revolution wouldn’t be funded. It doesn’t particularly appear to have been socially invested in, either.


  3. I’d agree with Karl – interesting & important to debate. I think both authors raise & make valid points, although as you point out, neither really has a constructive alternative – bar, perhaps, a return to a (truly) voluntary sector and some co-operatives.

    I’m still intrigued by Hartigan’s reference to the industrial complex – as you say, the blog isn’t written yet, so a little tricky to tell. Though Karl’s link helps explain a little where she might be heading with it.

    The NCIA piece raises some interesting and apposite questions about the success of government programmes & social investment, though is as selective as usual – ignoring (for example) SEUK’s Shadow State work, Co-ops & SEUK speaking out publicly on what is really a mutual or, more fundamentally, all spin-outs before New Labour (housing associations, transport, leisure trusts et al presumably don’t fit the narrative so well).

    It’s also a little bit intriguing from a Scottish-English perspective – the writer of the NCIA piece (though it doesn’t say in the bio) is on the board of Senscot (NB – as an aside I think the values element of the code should be promoted a lot more south of the border). All of the various Scottish intermediaries have themselves been advocating for government procurement that works better for SMEs, social enterprises and charities in Scotland. I’m not sure why this is significantly different or doesn’t warrant as much attention – perhaps because in this instance it was only 10 days ago (

    We work increasingly closely with our home nations colleagues, mostly because we are facing similar challenges – though (public) spending cuts may not have hit as hard in all to the same extent as yet. It’s also because we have much to learn from each other – the Wales govt’s commission on mutuals & co-operatives ( has some things I would be keen to import; though NCIA be warned, despite not being from London, it does feature investment & procurement & spin-offs.

    Anyway, much to ponder & much to work on, as ever. Thanks for the food for thought.


    • Beanbags admin

      Hi Nick,

      Thanks for your comment. I think specifically on social investment, the divisions between Scotland and England (or, perhaps, the divisions between inner London and everywhere beyond zone 2 of the London transport system) are partly due to whose rhetoric is loudest. Many people working beyond zone 2 get to read stuff about creating new asset classes and £billions of private investment, they have no reason to doubt it’s actually happening and they don’t like the sound of it.

      There has been a problem that, up until relatively recently, many inner London-based sector leaders have just assumed that everyone else knew that this rhetorical stuff was nonsense so have diplomatically avoided admitting it publicly (possibly to avoid offending the government).

      When it comes to things that actually are happening, though (again using social investment as an example), I can’t think of any specific point where SEUK’s practical position is currently different from Senscot’s. For examples, while possibly expressing it in a different tone, you’re both pretty sceptical about the hype around Social Impact Bonds and both concerned about Unltd’s support for social investment in private companies.

      More broadly, I think umbrellas are less divided on principles and more pragmatically adapting to the political climate they operate within. It’s interesting to see how the debates are developing in Scotland and Wales.


  4. Coming from a different direction, one of business, it took a long time to understand the emphasis on foundations/nonprofits in social enterprise as interpreted by the Blair govenment. Wikipedia enlightens:

    “UnLtd was formed in 2000 by seven leading non-profit organisations working with social entrepreneurs both across the UK and internationally: Ashoka: Innovators for the Public, Changemakers, Community Action Network (CAN), Comic Relief, The Scarman Trust, SENSCOT, and The School for Social Entrepreneurs (SSE).

    UnLtd’s Awards are funded by the income generated by a £100 million endowment from the Millennium Commission as a permanent source of grants for individuals throughout the United Kingdom to develop their skills and talents, and to contribute to the community; the income from the endowment is held by the Millennium Awards, of which UnLtd is the sole Trustee.[2] This legacy is invested as a permanent endowment so that it generates sufficient income to fund UnLtd’s Millennium Awards in perpetuity.[5]”

    By all accounts, the Blair family are now comfortably established in the world pf foundations, The constraints of these foundations and their program related investments was part of the case for a business driven apporach to social enterprise, where profit is re-invested in the community rather than returned to private hands.

    Over the years I’ve heard a lot of statements about social enterprise being part trade returning some profit for social goals but I’ve only read one case, for business to operate for the benefit of the entire community. .


  5. I can offer a little insight into the original intent (at least) of the Community Interest Company form for conducting social enterprise, as it was in fact my father, Roger Warren Evans, who is cited in Hansard debates as the inventor of it! He was then, and had been for some 40 years, a close friend and Trustee of Michael Young’s Institute for Community Studies and the Mutual Aid Centre.

    It was absolutely the case that what drove my father in creating that new legal form for commercial enterprise was the belief (probably profoundly influenced by his Quakerism too) that good commercial business was generally, and certainly should be, good for society – and that it should be possible to create a company form that offered some benefits/incentives in terms of tax treatment, to commercial companies that went as far as ‘reinvesting’ their profits in their (or other) community’s interests, rather than sharing them out among private individuals.

    I know, for certain, that he never envisaged the CIC as an competitor to, or alternative vehicle for, anything that should or could be a charitable or voluntary endeavour – indeed, as that link I posted above shows in the issue under debate, he went out of his way in original drafting, to make that distinction as crystal clear as possible, by suggesting that no charity should be able to deploy CIC status at all. It remains that case that he has used voluntary association and charity registration for the vast majority of his socially entrepreneurial inventions (and over 60 years, so many working with Michael, I can’t tell you just how many there have been!). Trading, as a charity, to generate income (and surplus) for charitable purposes, has been a long tradition, and remains inherently different from the intended adoption of social enterprise forms in commercial trade. That was his intention anyway – but as all creative people know, once you’ve made something and let others see it, it often becomes whatever they want it to be!


    • That’s interesting to read Kathy and it answers some of my questions.

      We started in April 2004 as a CLG and soon after gave an interview about our work in Russia to source a microenterprise development initiative. It was published in October 2004, saying:

      “The P-CED model is not a charity sort of operation. It is business. What we choose to do with profits is entirely up to us, and we choose before anything else happens to set most of our profits aside to assist poor people. In fact, our corporate charter requires us by law – UK law, where rule of law is very well established – to use our profits only for social benefit. We cannot do anything else with it. To the extent that it is difficult or impossible to engage honestly and predictably in business activities in any given community and make a profit, we are reduced in what we can do with any profits that might be made.”

      In February 2005, I’d written to Lady Thornton about the dearth of funding for this approach. I’d also tried to make contact with the APPGs on social enterprise and microfinance, Only the latter replied, with disinterest.

      And so it continued until I joined the SEC in 2006, describing our ongoing work in Ukraine to which their response was that our work was beyond their current focus.


  6. Very interesting Kathy – many thanks for this insight + reminder of original intent.

    David – you are right, I think; my experience working with our excellent colleagues at SENI, Wales Co-ops, SES and other regional bodies is that we have much to share, much to learn and much to gain from working together. And, because we have much (more) in common than divides, that seems increasingly logical and sensible. As you say, behind the rhetoric, there is very little difference in the positions amongst most.


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