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New kid on the Provider Block

16th April 2007

Ever been to the Eden Project? Bought a copy of the Big Issue? Visited your local farmers’ market? Dined at one of Jamie Oliver’s Fifteen restaurants? If so, then you are already a customer of a growing breed of businesses with a conscience. But what is social enterprise all about, and could it play a significant role in a diversifying health and social care market place?

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What is social enterprise?

Social enterprise is one element of what is now being called ‘the third sector’ – voluntary, charitable, community and other not-for-profit non-governmental organisations. A social enterprise is a business whose primary goal is to achieve public good, whether that be social, environmental, cultural or for the local community, rather than to generate profit for its owners and shareholders. Social enterprises are run applying the same business skills and solutions as a private sector business would be, but any profits the business makes are reinvested to further its public objectives. Social enterprises can be characterised by some form of democratic staff ownership.

The social enterprise movement can be traced back to the Rochdale pioneers who established what is now the Co-operative Group back in 1844. There are around 55,000 businesses running in the UK today that can be described as social enterprises, with a collective turnover of £27bn, contributing £55bn to GDP. They include Housing Associations, farmers’ co-operatives, and childcare providers, and take various legal forms such as Company Limited by Guarantee or Shares, co-operatives, mutuals, industrial and provident societies, and since 2005 Community Interest Companies – a special form of limited liability company created by the government to promote social enterprise.

What does social enterprise offer that the private and public sector does not?

Social enterprise is seen by the government as a more dynamic means of providing public services than the traditional public sector route of big government directly providing uniform services to passive citizens. Because, unlike government agencies, they are run like businesses, are independent, create a considerable degree of pride amongst their staff, and enjoy better relationships with their customers or clients, social enterprises tend to be more innovative and effective in meeting needs, often re-inventing accepted service models. They offer greater choice than a single set of central government services could, and also offer value for money in the way they manage to develop partnerships with voluntary and charitable organisations. Social enterprise is concerned only with providing a social ‘return’ on its activities, rather than having to invest some of its financial ‘return’ in the shape of profit for its shareholders.

What is the government doing to promote social enterprise?

The Office of the Third Sector was established within the Cabinet Office in May 2006 to promote the role of the third sector, and with it was launched a strategy for social enterprise. The Department of Health followed soon after, setting up its own Social Enterprise Unit and a fund to promote social enterprises in delivering health and social care. Commissioning a Patient Led NHS, and Our Health, Our Care, Our Say provided the policy framework to allow new players from the third sector to trade in the health and social care market place, widening patient choice in the process. The Department’s Third Sector Commissioning Taskforce has been working with commissioners and third sector providers since to provide a sound commercial basis for bringing these new providers on board – simplifying contracting arrangements, streamlining regulation and accreditation systems, advising providers on how to successfully bid for NHS contracts, and developing commissioners understanding of and confidence in these new partners.

In January 2007 the Social Enterprise Unit announced a number of Pathfinder schemes. These are existing or proposed new Community Interest Companies which would receive government support and advice to be the first social enterprises to provide services in health and social care. They will get a share of a £1.4m interim development fund. The first tranche of Pathfinder schemes include the Forest of Dean Health Enterprise Trust which, amongst other things, plans to take over the running of local community hospitals. Another Pathfinder scheme is Maternal Link Birth Centres which proposes to provide ante-natal, post-natal and community midwifery services at home or in birth centres in Trafford. In addition to the interim fund, a social enterprise fund of £73m over four years has been made available for investing in existing and emerging social enterprises.

Of course, there is already a prime example of social enterprise in full swing in the NHS in the shape of NHS Foundation Trusts – legally established as not-for-profit Public Benefit Corporations whose assets are locked into public service. The Expert Patient Programme has also now been cut free from the Department of Health, and has been established as the first ever national Community Interest Company with an aim of delivering 100,000 courses to patients.

And the future?

It is only in the last two years that the government has really thrown its weight behind the third sector, and especially social enterprises, as a means of meeting public need. The Commons Public Administration Committee has announced an inquiry into the government’s growing tendency towards purchasing services from the third sector. Whatever the outcome of the inquiry, what does seem clear is that with growing public mistrust of big business, heavy-handed government, and a strengthening tide of ethical consumerism as a means of leveraging social and global action, social enterprise seems to be here to stay as a way of doing business in the 21st century.

Latest news

  • The Social Enterprise Coalition in association with Hempsons solicitors have produced Healthy Business, a guide to social enterprise in health and social care (www.socialenterprise.org.uk/Page.aspx?SP=2068). The publication was launched by Secretary of State, Patricia Hewitt. The Coalition plans to set up a health and social care forum in May.
  • NHS North West has chosen to use the Community Interest Company model for a new organisation it is setting up to spearhead its efforts on health improvement and addressing health inequalities. The company will run a region-wide public health programme over four years including a social marketing campaign. The CIC was seen as the best way of getting an independent view and developing a broad coalition for change

For more information on social enterprise and the role of the third sector, go to:

www.dh.gov.uk/PolicyAndGuidance/OrganisationPolicy/Commissioning/SocialEnterprise/fs/en

www.networks.nhs.uk/networks/page/155

www.cabinetoffice.gov.uk/third_sector

www.socialenterprise.org.uk

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