Social Enterprises and Local Services Uday Thakkar © Red Ochre

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

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 £ ,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 –  Red Ochre  Transition Institute –  TPP Law –