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Feb 15

A tough year ahead in public service

Enterprise, Public sector cuts, Speaking truth to power, Work programme

Guest blog from Peter Holbrook, CEO of Social Enterprise UK, on what looks like a very difficult year ahead for social enterprises working in public sector markets.

Peter HolbrookIt’s been a sobering start to the year, detoxes aside. As our researchers take to the field to conduct the third state of social enterprise survey (we’ll be publishing the findings early summer) I’m filled, for the first time in years, with a genuine sense of fear about how the sector is fairing in public service markets. Many social enterprises started their journeys in public services and it feels only right to acknowledge and share what some of you are feeling.

As 2012 drew to a close I think we all knew 2013 was going to be tough year: I’ve seen many valuable social enterprises close or contract to mere shadows of their previous selves; I’ve seen frown lines deepen on the foreheads of many managers and leaders; community services shut up shop and collective community action dissipate. There’s only so much people can take before their appetites are disabled, before their energy dwindles or before they’re forced to focus on very personal challenges like simply getting food on the family table.

It’s the small social enterprises that are often the anchors within their communities that are perhaps experiencing the greatest challenges as contracts for services simply disappear – the only ray of hope in finding a grant funder willing to step in and plug the holes left by a shrinking state.

There are wins like the occupation of Friern Barnet Library where the residents have been given a very modest £25,000 grant to run their library and save it from closure, but these few victories run against the current grain. Even larger, more established social enterprises are feeling the pinch, or punch. Even Turning Point has had to put its employees on new contracts in response to cuts in local authority and health budgets – and they’ve been open in saying that the cuts are only really just beginning to bite. Despite most of our members portraying stalwart positivity, the trademark of our sector, some are facing uncertain futures as margins are further squeezed, quality and integrity potentially compromised and cash flow and finance become critically tight.

While the jury’s out on the Work Programme until we see more long-term results, anecdotally I think the majority of social enterprises and charities believe the current arrangements with their primes to be unsustainable. A number have been forced to drop out, others are hanging on, doing their best to make it work with the large private providers at the helm. With such major policy changes come teething problems, but when the urgency is so great, when unemployment figures are so high, when people are losing their benefits with no substitute, when social enterprises and charities – who have been doing this for years and getting results – are being replaced by shareholder driven firms, it can feel painfully slow when those problems aren’t remedied.

The best entrepreneurs are innovative, so it’s important not be down on policy that is trying to do something different. But it’s also important to be honest about when something’s not working, to change tack – and to learn from what’s gone before. That’s why there’s anxiety about the MoJ’s plans: our sector wants political leaders to learn what it can from the Work Programme, and to be given the opportunity to input to improve on what there is, including that contracts need to be differently designed as we move forward. The current consultation (which closes on the 22nd of Feb) is of vital importance. We must propose alternatives, not just identify the weaknesses and threats within the architecture that’s been proposed by the new Secretary of State.

I was invited to give evidence to the Public Administration Select Committee last week – an opportunity to relay the problems being experienced on the ground by our members. The government’s ideology has created a tug of war between localism on one hand, and centralised control and the continued up-scaling of contracts on the other. How many are willing to bet on localism winning that war? With payment by results gaining in popularity and the current cost of social investment being so high, the growth of social enterprise in public service markets is looking very uncertain.

Welfare to work, criminal justice, health and social care – these are new worlds and new markets in which we’re seeing the needless driving down of service quality, wages and morale – and the driving up of profit for shareholders who are getting rich on the NHS, rich on welfare, rich on crime and rich on the taxpayer. We’ve outlined what we think needs to happen to remedy the growing toxicity of public sector markets in our report, The Shadow State, and we’ll be pushing these recommendations at every relevant opportunity.

We’ll also be rolling up our sleeves and doing all we can through our members and networks to practically support social enterprises and mutuals survive this new world of public service delivery.


The recommendations in The Shadow State report include:

– The Public Services (Social Value) Act should be strengthened in the following ways:

1. Public bodies should be obliged to include social value in its commissioning and procurement and account for how this is generated.

2. The Act should be extended to apply to the purchasing of goods and works and the management of assets as well as services.

3. The Act should be supported with Statutory Guidance.

– The Freedom of Information (FOI) Act should be extended to companies delivering public services – but these should be revised to take account of proportional cost burdens on smaller providers.

– Performance under previous contracts should be explicitly weighed up as part of the decision-making process in procurement decisions. At present, when evaluating tenders public authorities rarely have information on whether bidders have previously breached their commitments in other tenders with other public authorities.

– Open book accounting should be rolled out with supportive guidance for all public sector contracts worth more than £250,000. When adopted effectively, open book accounting can mitigate against excessive profiteering, increase transparency, and improve the sharing of risk.

Click here to read them in full in The Shadow State.

Read the blog on the Social Enterprise UK website.

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