Should Social Enterprise Deliver Public Services?

February 1st 2024

Social enterprises are driven by social justice and deliver a range of public services including health, social care, children, services, education, homelessness, housing, domestic abuse, public health, leisure, culture, employment, training, transport, criminal justice across local, central government and the NHS. Some are small and local, others are very large with a multi-million-pound turnover employing thousands. Collectively they contribute £60 billion to the UK economy. They remain active in their communities. Despite their size or location, they all demonstrate a flexible, entrepreneurial, fleet of foot, innovative and collaborative approach. Set that against the patronising stereotype of the social sector doing good things but doing it outside the grown-up economy and you get the frustration of leaders of social enterprises. This view, I think, is often shaped by the traditional corporate social responsibility approach which appears to reject our ability to trade and forces some social enterprises to be coy about using the word “profit”, dressing it up as surplus or even worse “not for profit”.
Profit isn’t a dirty word, its what you do with the profit that matters. Interestingly, 8 out of 10 social enterprises have been successful in delivering services and if you look at the big business disasters, they weren’t social enterprises but companies like Carillion and ABC. If we compare social enterprises with the top 100 PLCs over a 30-year period, 41% of the top social ventures were likely to survive, compared to 33% of the PLC’s.

This week, I spent two days with E3M Social Enterprise Leaders in a social enterprise hotel (The Castlefield in Manchester) discussing the world we are navigating, our partnerships and how we get people (including politicians) to understand better what we do. We talked about the challenges of having Commissioners whose focus is on the entrenched and dysfunctional UK, where they continue to use a competitive contracting approach with an emphasis on value for money, rather than being designed 100% for the public benefit; despite having the Social Value Act. The darlings of the macroeconomics with social purpose Mariana Mazzucato and Kate Raworth’s Doughnut Economics added value to the debate that financial value should not be the sole determinant of public policy.

The resulting ‘value for money’ contracts often provided by extractive corporates are criticised as failing to deliver public benefit because they must prioritise returns to shareholders. They are therefore more liable to keep costs low by reducing quality, suppressing innovation and extracting resources from local areas of public authorities while not actually contributing to public value. For example, in May 2022, an investigation found half of the social care operators are owned by private equity firms based offshore; many of which are registered in countries known for their generous tax regimes!
In the world of childcare, we’re seeing this more and more and it’s likely to be challenged even further if the Government Expansion Plan tips us into position of becoming the third arm of the welfare state, if over 60% of the places in nurseries are purchased by the Government. This is against a backdrop of 77% of the public who think businesses should maximise their profits, but not to the detriment of workers, customers, communities and the environment. They are very alert to companies’ ability to green-wash, impact-wash and all the other hushing and washing going down!

Interestingly, the Welsh Government is looking to eliminate the private profit marketplace for looked-after children services because there should not be a market for care for children. Not surprisingly, YouGov found that nine in ten members of the public were in favour of Social Enterprises running public services. I should imagine that number has consolidated given more recent debacles such as the privatisation of UK Water, described as an ATM for investors despite the wide condemnation of mismanagement, pouring live sewage into the rivers and raising household water bills by 40%. It makes a mockery of the discussion on impact and maximising social value, and the principle that meeting social needs represents the best financial investment.
In a recent book, Vitalising Purpose in which many of us collaborated, we talked about the paradigm shift needed to do things differently. Placing social enterprises into the Business department would be a start, but ultimately social leaders must present an alternative business mindset which strengthens the triple bottom line and ensure economic, social and environmental sustainability is at the heart of the service.

Doing Good by Doing Good Business!

Have a read of Vitalising Purpose and let me know your thoughts.