Social enterpriseand public service delivery

John Maddocks

cipfa.org.uk

Changing service delivery landscape

Health Localism Personalisation of social care Big Society Public Service Reform

“… support the creation and expansion of mutuals, co-operatives, charities and social enterprises, and enable these groups to have much greater involvement in the running of public services”

(The Coalition: Our Programme for Government)

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Social enterprise - definitions

‘… a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community ...’

DTI 2002

‘… social enterprise if: the person or body is carrying on a business; the business’s activities are being carried on primarily for

a purpose that promotes or improves the social or environmental well-being …;

the greater part of any profits for distribution is applied for such a purpose.’

Public Services (Social Enterprise and Social Value) Bill

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A social enterprise …

Undertakes trading activities (50% > of income) Has a social purpose Profits are reinvested (50% > reinvested)

= social enterprise

Independent Asset lock Accountable for social goals

= social enterprise mark

Participatory structure?

= participatory social enterprise

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Main types of ‘social enterprise’ Charities that trade

Annual earned income approx £17.5bn Shift from grants to contracts

Community interest companies Over 4,600 community interest companies Number is growing rapidly

Mutuals Turnover approx £100bn 1million employees

Co-operatives (part of mutuals) Turnover approx £33bn Over 4,900 co-ops in UK

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Variety of legal structures

Including:

Company limited by guarantee Company limited by shares Company limited by guarantee & registered charity Company limited by guarantee & registered CIC Company limited by shares & registered CIC Industrial & Provident Society- for benefit of

community Industrial & Provident Society- bona fide co-op Limited liability partnership Charitable incorporated organisation Charitable Trust

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Different structures different characteristics The results of choices made over legal structure and

rules will be seen longer term. It impacts on:

Regulation Governance Property rights Financing Trading Tax Accounting Participation Long term purpose

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Types of governance

Self selecting - Just the governing body and no wider membership

Democratic – Open membership (involving one or more stakeholder groups) elect governing body

Hybrid – governing body appointed by another body and/or % of places allocated to particular stakeholders, or some other mix of selection and appointment

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Differing characteristics - examples

Characteristic Charity Co-op CIC

Open membership Optional Yes Optional

All surpluses retained Yes Optional Optional

Asset lock Yes Yes, but1 Yes

Charitable status Yes No No

Issue member shares No Yes, if2 Yes, if2

Tax advantages Yes Limited No

Footnotes:1. Co-ops and companies able to revise asset lock terms in their governing documents2. Can issue member shares if not a company limited by guarantee

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Sandwell Community Caring Trust

Charity - company limited by guarantee Initial funding £1.2m (previous year £1.6m) Initial 5 year contract Reduced number of managers Reduced spending on admin Increased spending on service delivery Culture of valuing staff Low absenteeism Low staff turnover

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Sunderland Home Care Associates

Initially CLG – 20 members £1 share each Changed to CLS to allow for share allocations Shares distributed to employees in two ways: Annual free allocation linked to salary Annual sale Board includes 5 employees (3 year term) and

tax/legal expert 360 employees £3.5m turnover £168,000 pre tax profit (2009)

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North West Housing Services

Industrial & Provident Society bona fide co-operative

Formed by a consortium of 38 independent organisations

Now has 46 member organisations Provides professional services to housing

co-operatives, small housing associations, leaseholders and social enterprises

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Greenwich Leisure Limited (GLL)

Industrial & Provident Society for the benefit of the community

Oversees the management of over 100 public leisure centres, including swimming pools and gyms within London and South East England

The board has representation from a number of stakeholders including: customers council staff

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Carn Brea Leisure Centre Trust

Initially LA run Transfer to an external contractor Closed Reopened as charity – company limited by

guarantee Income £1.3m (2010) 90+ employees Trustees elected by membership

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Central Surrey Health

Social enterprise formed in 2006 Company limited by shares Co-owned by 700+ employees Delivering community nursing and therapy

services Previously within PCT In NHS pension scheme

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Bromley Healthcare

Company limited by shares & CIC 800+ delivering community health services Staff and local GPs all have shares Cannot trade shares Cannot own more than one share each Board of directors Council of governors Community Forum

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Bucks Urgent Care

Limited Liability Partnership Consortium of two GP provider companies and a

national provider of out-of-hours medical services Won contract in 2009 to provide specified health

services for the population of Buckinghamshire including: an out-of-hours service   a GP-led Health Centre a dedicated Admissions Avoidance Team to

respond to requests from care homes for urgent medical advice

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Iceni Partnership

Charity - company limited by guarantee Received £3.85 million EU funding to develop

two community asset buildings, redesign the town centre and to provide community cohesion projects and events

Manages: community centre assembly rooms business units

Strong volunteer involvement Small paid staff team

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Eaga: from social enterprise … to Plc … to …. Carillion

Started by 5 staff to address fuel poverty Initially a CLG, then CLS then Plc Established employee benefit trust (EBT) and

transferred share ownership Established charitable trust to fund research

into fuel poverty and wider energy issues Floated 49% of business on Stock Exchange 4,000 partners (2007)

Partners council Revenue £762m, 51m pre tax profit (2010)

Now Carillion Energy Services

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Lessons?

The choice of legal structure matters Understand the ‘differences’ It takes time to develop services, governance,

management, participation and the ‘culture’ of organisation

Service transfers can lead to different ways of ‘thinking’ about service delivery

Choose structure for right reasons

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New opportunities

Changing relationships New service delivery models New financing and funding models New training and support services Organisational difference and what it offers to

users and providers

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New publication What is a social

enterprise? Types of social enterprise Legal structures part 1 Legal structures part 2 Financing Charity trading Tax and social enterprise Governance Tupe Considering options

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Questions - discussion

John.maddocks@cipfa.org.uk http://www.cipfa.org.uk/bigsociety http://www.cipfa.org.uk/panels/charity