Social Enterprises and Local Services

Uday Thakkar

uday@redochre.org.uk

www.redochre.org.uk © R

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Building the Big Society

The statutory sector is under considerable pressure to reduce spending

Alternatives are to cut services and/ or to increase efficiency of retained services

Many statutory bodies believe that they have probably reached the limits of internal efficiencies

Traditionally there has been a tendency to outsource services to big commercial contractors

Whereas this has been unpopular with employees and unions and increasingly the public (the voters) there is now a major political imperative to look at alternatives

..Public sector workers (will be given) a new right to form employee-owned co-operatives and bid to take over the services they deliver. This will empower millions of public sector workers to become their own bosses and help them to deliver better services”

What is Social Enterprise?

“A business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners” BiS

Charity

Commercial

What does this mean to statutory sector?

Services will be allowed to “Spin Out” i.e. existing services will be hived off into separate legal entities and the services purchased by the statutory sector from the “Spin Outs”

The new companies will employ former employees from the statutory sector

The companies will be mutually owned

They may or may not be social enterprises

Advantages:

Not seen to be privatisation or giving more to big business

Salvage jobs

Greater commitment from employees – in their interest to make a success

Ethos

Not strictly privatisation

Public service ethos maintained

Profit mainly reinvested

Potential of better rewards for employees

Top end salaries capped

History of successful spins outs

Advantages

Focus – on service delivery/ reduce bureaucracy

Control – employee ownership/ participation

Efficiencies – increased productivity/ increased commitment

Responsiveness – closer to user groups and nimbler response

Innovation – ability to experiment and generate new services faster

Reinvestment – continual improve and grow services

Expansion – no geographic restrictions

Sandwell Community Caring Trust – Then and Now

Staff sickness

Average 22 days p.a.

Now less than 1 day p.a. Saving £300-500,000 (no agency staff)

Staff turnover

Was between 20-30% p.a. - Now less than 4%

Management & Admin time

Constituted 22% of all resources - Now it is between 6-7%

Resources spent on front line delivery

Was 62% - Now is 85%

Cost savings

These are long term - not immediate

Privatisation can offer immediate and often greater direct savings

Many statutory bodies cannot or will not wait for the savings to materialise

How true are the savings?

FT reports that privatised services are not always more efficient or achieving the cost savings promised

Often cost savings are apparent initially but not in the longer term

Employment practices are suspect – hence union objections

No measure of the added benefits that social enterprises bring

Employment maintenance

Reinvestment

Localism

Challenges

New companies will not meet PQQ requirements

EU competition laws

Legal challenges

Lack of commitment/ understanding within management

Lack of entrepreneurial skills

Fear of the unknown

Job security

TUPE

Pensions

Government actions do not match the rhetoric

Future

Patchwork of delivery

Increasing number of hybrid structures:

Circle Health

Hammersmith’s education services

Tension between the promise of localism and cost saving

Increasing resentment to big business – A4E

More collaboration between Big Business and SE and increase in SE’s in the supply chain

Success predicated on political will at local authority level as well as central government

References

Social Enterprise UK – www.socialenterprise.org.uk

Red Ochre - www.redochre.org.uk

Transition Institute – www.transitioninstitute.org.uk

TPP Law – www.tpplaw.co.uk