A Local Healthwatch for each Local Authority – a Major Opportunity for Social Enterprise?


2013 will be a year for defining ‘Social Enterprise’, especially in the National Health Service in England. This Background section explains why.

(From the outset, Huckfield declares an interest in all this as a Member of the Board of the Social Entrepreneurs’ Network Scotland and a firm supporter of Social Enterprise)

Andrew Lansley’s Health and Social Care Act March 2012 gives all Local Councils a stronger role in shaping health and care services through setting up Health and Wellbeing Boards, which bring together local Councillors, Directors of Adult Social Services, Children’s Services and Public Health, Clinical Commissioning Groups and patients’ views to be represented by a new local Healthwatch (formerly called Local Involvement Networks). Local authorities must all employ a Director of Public Health and will become responsible for the health of their local populations.

Huckfield, like many others, is not pretending that these new Healthwatch bodies will be a countervailing power to GPs’ Clinical Commissioning Groups as the big Budget Holders. Through having a seat on Health and Wellbeing Boards, a local Healthwatch will be able to provide advice and information about access to local services and choices available to patients. It will be able to stress concerns, visit health and care centres, and hopefully through sitting on the Health and Wellbeing Board, at least find out something about what’s happening.

But beyond this, a local Healthwatch won’t have much real power.

(For those who have lost track on new NHS Structures under the Health and Social Care Act 2012, there are useful summaries on the UK Parliament site and on the Department of Health site at Health and Social Care Act Explained. There’s also a candid summary of events throughout the 2010 to 2012 passage of the Act – “Never Again” by the Institute of Government and the King’s Fund – which shows foundations laid for the 2012 Act by the previous Labour Government.)

The potential breakthrough for Social Enterprise is that the 2012 Lansley Act replaces a key Section in the Local Government and Public Involvement in Health Act 2007 so that “the body contracted to be the local Healthwatch must be a ‘body corporate’ (ie. a legal entity), which is a Social Enterprise.”.

As the Department of Health’s Summary Report on Issues Relating to Healthwatch Regulations July 20 2012 shows on page 2, Social Enterprise UK was consulted about all this. This Summary Report also makes it clear on its page 4, Section 1.11 that “The proposed criteria align with the principles promoted by organisations such as Social Enterprise UK”.

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Not Much Doubt about the Regulations

There was no ‘Social Enterprise’ definition in the Public Services (Social Value) Act March 2012, which “requires public authorities to have regard to economic, social and environmental well-being in connection with public services contracts”, that is to say, written contracts in which a contracting authority engages a person to provide services.

These Regulations therefore represent the first attempt under Coalition Government legislation to define ‘Social Enterprise’ in detail. What follows shows that from mid 2012 there should not have been much doubt about their content.

In June 2012, the Local Government Association published Get in on the Act: Health and Social Care Act 2012. Page 14 is clear about Section 183: Local Healthwatch bodies.

    “Section 183: makes provision for contractual arrangements between local authorities and LH, which must be a Social Enterprise. It also enables local authorities to authorise LH organisations to contract with other organisations or individuals (LH contractors) to assist them to carry out their activities.”

Accompanying the Regulations, the Explanatory Memorandum to the Parliamentary Joint Select Committee on Statutory Instruments on pages 8 to 10 is comprehensive about the forthcoming definition of ‘Social Enterprise’

    “7.15 Local Healthwatch organisations will be social enterprises which satisfy the community interest test and other criteria. There is no single definition of a Social Enterprise and there are several legal forms. However, a general description would be ‘businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community'”.

Succeeding paragraphs of the Explanatory Memorandum refer to Local Healthwatch bodies’ satisfying a “community interest test”, provisions for distribution of profits and assets on dissolution.

Parliament’s Joint Committee (Lords and Commons) on Statutory Instruments is able to report on discrepancies and lack of clarity in Regulations which it considers. The Joint Committee on Statutory Instruments Publication List makes no reference to consideration of these Regulations, despite their significance in defining ‘Social Enterprise.’

But all these other publications should have left no doubt about the significance of forthcoming Regulations in seeking to define ‘Social Enterprise’. Following precedent, there is now every possibility that this definition will be replicated in Regulations under other legislation.

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2007 Local Government and 2012 Health and Social Care Acts and the 2012 Regulations for Local Healthwatch Bodies from April 2013

Though Huckfield is grateful that dilligent colleagues at “Though Cowards Flinch” have also signposted to the detailed Regulations shown below, what follows below is Huckfield’s interpretation.

1) Section 222 Arrangements under Section 221 (1) of the Local Government and Public Involvement in Health Act 2007 previously set out who may provide a “patients’ view” on a wide range of local health, care and social services. Subsection (2) says:

    “(2) In this section, a reference to a “Local Involvement Network” is to a person who, in pursuance of the arrangements, is to carry on in A’s area activities specified in section 221(2) for that area”.

2) Section 183 of Andrew Lansley’s Health and Social Care March 2012, changes this:

    “183: Local Authority Arrangements

    (2) For Subsection (2) substitute—

    (2) The arrangements must be made with a body corporate which—

    (a) is a Social Enterprise, and

    (b) satisfies such criteria as may be prescribed by Regulations made by the Secretary of State.”

    “(7) For subsection (8) substitute—

    (8) For the purposes of this section, a body is a Social Enterprise if—

    (a) a person might reasonably consider that it acts for the benefit of the community in England, and

    (b) it satisfies such criteria as may be prescribed by regulations made by the Secretary of State.

    (9) Regulations made by the Secretary of State may provide that activities of a prescribed description are to be treated as being, or as not being, activities which a person might reasonably consider to be activities carried on for the benefit of the community in England.

    (10) In subsections (8) and (9), “community” includes a section of the community; and regulations made by the Secretary of State may make provision about what does, does not or may constitute a section of the community.”

3) The NHS Bodies and Local Authorities (Partnership Arrangements, Care Trusts, Public Health and Local Healthwatch) Regulations 2012, is Statutory Instrument 2012 (No 3094) under the 2012 Lansley Act. The Regulations were laid before Parliament on Monday 17 December 2012:

    “Criteria concerning Social Enterprises
    35.—(1) For the purposes of section 222(8)(b) of the 2007 Act (Local Healthwatch: Social Enterprises) the criteria prescribed are that the constitution of the body must—

    (a) state, or contain provisions which ensure, that not less than 50% of its distributable profits in each financial year will be used or applied for the purpose of the activities of that body

    (b) contain a statement or condition that the body is carrying on its activities for the benefit of the community in England, and

    (c) where appropriate, contain provisions relating to the distribution of assets which take effect when that body is dissolved or wound up, as specified in paragraph (2).

    (2) The provisions referred to in paragraph (1)(c) are ones which—

    (a) require that the residual assets of the body be distributed to those members of the body (if any) who are entitled to share in any distribution of assets on the dissolution or winding up of that body according to those members’ rights and interests in that body

    (b) in the case of a company not limited by guarantee and registered as a charity in England and Wales, provide that no member shall receive an amount which exceeds the paid up value of the shares which the member holds in the company, and

    (c) designate another social enterprise (within the meaning of section 222(8) of the 2007 Act) to which any remaining residual assets of the body will be distributed after any distribution to members of the body.

    (3) The criteria prescribed in paragraph (1) do not apply to the following bodies—

    (a) a Company Limited by Guarantee and registered as a Charity in England and Wales

    (b) a Community Interest Company registered as a Company Limited by Guarantee; and

    (c) a Charitable Incorporated Organisation (within the meaning of Part 11 of the Charities Act 2011(1) (Charitable Incorporated Organisations).”

Though many, including Huckfield, would still be concerned about distribution and the ‘asset lock’, it would have been better if the definition for ‘Social Enterprise’ was based on Sections 35 (1), (2) and (3) inclusively together rather than being either 35(1) or 35(3).

But under these Regulations, it now appears that any organisation, which doesn’t distribute more than 50% of profits, includes a statement of community benefit and some benevolent phrases on distribution of assets, can now call itself a ‘Social Enterprise’.

This new definition of Social Enterprise opens the door very wide. Huckfield believes that this is the first time ‘Social Enterprise’ has been defined in this way.

“Teach Yourself Lansley”

Huckfield is reminded of a previous definition of ‘Social Enterprise’ and is grateful to the Guardian’s signposting on Thursday 02 March 2012 to John Lister’s ““Teach Yourself Lansley”“. This defined ‘Social Enterprise’ as follows:

“Social enterprise: (oxymoronic noun) interim nonprofit private provider paving the way for proper private takeover”

After this definition of ‘Social Enterprise’ in these Regulations, Social Enterprise won’t just be oxymoronic.

There is a real risk that for many in the media and wider public ‘Social Enterprise’ becomes a euphemism encompassing structures ranging from private companies and multinationals with a progressive Corporate Social Responsibility policy to local community structures whose main purpose is changing lifestyles and communities.

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The Social Enterprise UK Badge

The difficulty for Social Enterprise UK may be that the Criteria for its Membership Badge don’t appear very different:

  • “Our business has a clear social or environmental mission that is set out in its governing documents
  • We are an independent business and we earn more than half of our income through trading (or we are working towards this)

  • We are controlled or owned in the interests of our social mission

  • We reinvest or give away at least half our profits or surpluses towards our social purpose

  • We are transparent about how we operate and the impact that we have”

For those, including colleagues at “Beanbags and Bullshit”, who apparently may believe that “controlled or owned in the interests of our social mission” above provides an adequate safeguard, the Social Enterprise UK Membership Badge Criteria say:

“For those organisations that are keen to issues shares we believe that control should remain with the social mission. This could be through a Golden Share issue or it could be by ensuring that the majority and controlling stake is held either in trust or by another body with a social purpose”.

This Golden Share is explained as “a nominal share which is able to outvote all other shares in certain specified circumstances”. Well paid lawyers will be fortified by experience which shows that whoever holds a Golden Share must be prepared to use it.

From this it seems that Social Enterprise UK may not be taken too seriously if it complains about Health Secretary Jeremy Hunt’s new definition of ‘Social Enterprise’, when those who wear its own Badge may not to many people look much different.

Any readers in doubt about any of this need only read the Chief Executive of Social Enterprise UK’s “Hello Autumn” Blog of Tuesday 06 September 2011:

“At Social Enterprise UK HQ we’re seeing an upsurge in interest – potential start-ups looking for advice, Social Enterprises realising that they’re part of a movement (it still amazes me how many organisations there are out there that don’t realise they’re actually a Social Enterprise), but perhaps most interestingly, big corporates are knocking on our door wanting to know how they can get into the world of Social Enterprise”.

This story above about the 2012 Local Healthwatch Regulations for April 2013 shows that those “big corporates” won’t need to bother knocking on the Social Enterprise UK door. They only need to read the Regulations.

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