Why Craig Dearden Phillips is wrong on Trade Unions and Social Enterprise

Defending Public Services

Craig’s site claims that he’s “one of the UK’s best known social entrepreneurs”.

But his posting True Enemies – or Necessary Allies? Unions and Social Enterprise on Saturday 20 April 2013 shows that he doesn’t know much about trade unions.

Much of his piece seems based on Care Plus in North East Lincolnshire. From this one example – about which Huckfield doesn’t know enough to comment – his posting becomes a wide ranging and general rant against trade unions. He writes:

    “We have to get prepared, together, for the possibility that very few services will be delivered directly by the State within a decade, particularly if growth does not materialise.”

Huckfield doesn’t disagree and regularly makes postings on this site about cuts in public expenditure, including Private Philanthropy is not the Answer to Public Spending Cuts.

The latest projection by the New Local Government Network’s April 2013 Gaming the Cuts: AnyBorough 2016 on page 9 is that “Local Government, along with some other un-ringfenced services, will face real terms reductions of at least 50% of expenditure over the period 2011/12 to 2017/18”.

But how can Craig blame trade unions for resisting cuts and reductions in services when London Third Sector Organisations encourage more competition through external tendering for delivery of these services, especially in the NHS? That’s why trade unions have fiercely opposed ACEVO in its campaign to open up the NHS to more private competition through its support for the National Health Service (Procurement, Patient Choice and Competition) Regulations) 2013.

Whatever Craig may think, trade unions and the rest of us know that these Regulations will open the NHS door ever wider to the private sector.

Trade union members have not forgotten that on Friday 19 October 2012, the Chief Executives and Secretaries of several London Third Sector Organisations sent a Letter to Sajid Javid MP, Economic Secretary to the Treasury, which led many to believe that they had not only signed up to the Coalition Government’s spending cuts, but to its welfare reforms too!

In that letter, these organisations wrote:

  • “Firstly, our sector stands ready to make a greater contribution to the Government’s Open Public Services agenda. Crucially, we need the opportunities to do this. National and local commissioners need more encouragement and support to engage with the sector”.
  • “…..Naturally, the Government wants to support people off benefits and back into jobs wherever possible. But we know that it can end up costing Government more if vulnerable people are not supported through these processes appropriately: the costs associated with contested work capability assessments are an example of this. We therefore ask Ministers to give special consideration to the important work that our sector, and particularly advice services, can play in relation to welfare reforms and preparing for their impact”.

Trade unions know that among the organisations which signed this letter were:

It is any wonder that in October 2012 Unite Voluntary Sector members called for Charities to leave ACEVO?

Unite Community, Youth and Not for Profit members working for Crisis, Greenpeace and Amnesty International and from Unite’s London and Eastern Regions, sought action at national level.

On Wednesday 21 November 2012 NCIA (the National Coalition for Independent Action) reckoned that these Third Sector organisations had signed up to privatisation and welfare reform and responded:

  • “NCIA says the open public services agenda is code for privatisation and termination of public services. ..We question whether we should connive in delivery of policies about which there is growing evidence of damage to our common wealth and to vulnerable people. Our starting point should always be the expressed needs of our beneficiaries and those with whom we stand in common cause.”

And in January 2013, Independence under Threat – the Report of the Panel on the Independence of the Voluntary Sector on page 43 said:

    “The letter was seen by some as placing the Voluntary Sector at the disposal of the Government machine”.

So instead of ranting against trade unions trying to defend public services, perhaps Craig should address his remarks to those London Social Enterprise and Third Sector Organisations which through their actions support UK Coalition Government policy of opening up public services to private profit-making, payment by results and funding through Social Investment?

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‘Defined out of the Equation’

Craig writes about trade union fears of being “defined out of the equation”. But the real trade union fear is of services themselves being “defined out of the equation”.

Unite has a Community Membership for those not in paid employment, students, carers, and those who are retired or unemployed – for 50p a week. What will Craig do when these Community members team up with those union branches of which he complains to defend services – when those delivering services could be in the same union as those receiving them?

Huckfield belongs to a Unite Not for Profit branch in Edinburgh which is setting the pace in recruiting Personal Assistants employed through Personal Health and Care Budgets. Through trying to safeguard these assistants’ employment rights and conditions, the branch also works to uphold and extend the levels of service delivery made possible through these payments.

Huckfield hopes that Craig supports trade unions working with local communities and service recipients to maintain delivery of their services.

“Let me talk to the Workers”

Referring to Care Plus, Craig writes:

    “my understanding is they (the employers) have tried to change terms and conditions for staff and, in doing so, have sought to deal directly with their own workforce (who are also owners of the company) – rather than deal mainly with the unions.”

But he also writes:

    “It is easy to see where the unions are coming from. The public sector is, in many ways, the only place left in the UK where terms and conditions of staff are relatively good. History has taught the unions that once things are moved out of the public sector, things get worst a lot more quickly for the staff”.

Craig should know that “Let me talk to the workers directly” is the oldest trick in any employer’s book. In reality, many of these are not – as Craig describes – “conversations between bosses and workers”, since neither employer nor employee may know enough about employment law.

Anyone attending the Edinburgh Unite Not for Profit Branch, of which Huckfield is a member, will hear an unending littany about employers’ ignorance of employment law.

Members of this branch work for Third Sector organisations in and around Scotland’s Capital – Voluntary Organisations, Charities and Social Enterprises. Each month it’s the same. Members’ and stewards’ workplace reports tell of Third Sector employers knowing little about sickness pay, redundancy and the rest. And some of these employers are large Scottish and UK organisations, including Housing Associations.

So the Branch is now producing some basic guidance on these issues. Though this is for members, their employers will probably read it keenly.

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Resisting the Next Public Spending Cuts

Craig writes:

    “… trade unions, I believe, need to re-evaluate the Social Enterprise route in terms of its alternatives as the UK enters its next round of public austerity.”

Huckfield hopes that Craig will support trade union opposition where Local Councils may decide to contract out their entire homelessness provision on a payment by results basis. Political decisions for payment by results mean that only the biggest providers – especially those members of the Employment Related Services Association – stand a chance of getting the contract.

Trade unions already resist contracts where their members providing care only get paid “face time” and nothing for time spent between home visits. And some Third Sector employers have agreed contracts which only allow payment for “face time”.

Trade unions will also oppose any attempts to provide housing and care services using a “volunteer plus” formula, under which mentors or befrienders instead of paid employees deliver the service.

Surely Craig supports unions’ arguing against these minimal levels of service delivery?

The Coalition’s Third Sector Procurement

Craig writes:

    “Furthermore, there need to be assurances to trade unions that all will be done to ensure that they are included fully in the operation of these businesses. It happens on the Continent and there is no reason it should not happen here.”

But there is a major political difference for Social Enterprises and Third Sector organisations in many Continental countries. The UK has never experienced a sustained political period when Social Enterprises or Third Sector organisations are regarded as part of a mixed economy in public service delivery.

Jim Callaghan’s 1976 to 1979 Labour Government gave more encouragement to the Third Sector than during the whole recent New Labour era, when a string of Government Third Sector policy statements and documents read like a Procurement Manual.

The latest testimony to this came in the January 2013 Independence under Threat – the Report of the Panel on the Independence of the Voluntary Sector.

On Infrastructure Bodies, on page 43, the Report said:

    “We also believe that infrastructure bodies could do even more than just question practices that threaten the independence of the sector – for example by launching judicial reviews of contractual terms which reduce independence.”

Hopefully, Craig will recognise that these timid “infrastructure bodies” are those same London Third Sector organisations which through their actions are signed up to the UK Coalition Government’s political agenda.

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‘Privatisation – you’re just as a bad as all the rest’

Craig writes:

    “Compared to the prospect of mass-privatisation to firms with dubious motives and a bad track-record, Social Enterprise may well look more attractive, particularly if this can also maintain a wider range of services”

But what does Craig expect unions to say when Big Society Capital, Social Investment Business and London Third Sector Organisations keep extending the range of “social sector organisations” which now style themselves “Social Enterprises”?

Big Society Capital in its For Profit Social Sector Organisations Governance Agreement September 2012 shows that shareholders’ interests are as important as those for whom services are being delivered:

    “The Company exists:
    (a) Primarily to provide affordable credit and other financial services to individuals
    and organisations which are excluded from or are underserved by mainstream credit and financial services markets; and

    (b) As an equal or subsidiary object, to generate value for shareholders.”

Rodney Schwartz, Chief Executive of ClearlySo, when he wrote Social Investment is a Large Tent that is Broadly Defined in Third Sector News on Tuesday 09 April 2013, was equally relaxed about extending to more organisations with a self-styled social mission:

    “From our perspective at ClearlySo, the biggest problem for Social Investment is not the precision of the definition of the term, or its deviation from some ideal, but rather the small size of the market. Put simply, we need more investment in social everything.

    “Thus, we endeavour to bring in more investment from individuals or organisations with capital, however they choose to define ‘social’ (within the bounds of decency and legality, of course) and match them with appropriate investments. By defining the sector broadly, we help to create the largest possible market”.

Again, the conclusion of Independence under Threat – the Report of the Panel on the Independence of the Voluntary Sector is relevant. On the independence of the sector on page 25, the Report says:

    “One danger is that commentators will call for new categories of Not for Profit Organisations to be created, where public money is received, reducing rather than reinforcing distinctiveness. The defining characteristic of the Voluntary Sector should be the primacy of its mission and purpose and independence, rather than the source of funding or activities. A clearer definition of Social Enterprise is needed to prevent abuse”.

On Social Enterprise on page 25, the Report says:

    “.. 26% of small and medium size enterprises badge themselves as Social Enterprises. (Annual Small Business Survey 2010, BIS, April 2011) The Voluntary Sector brand is being abused. ‘Social Enterprise’ is a totally unregulated or defined concept and, for some, just a convenient brand”.

Hopefully Craig will agree that the Baring Foundation’s Panel membership isn’t from trade unions but from those with a distinguished track record of service in the Third Sector.

And, Finally

None of the above represents what Craig calls an argument between “Two Tribes”. “Face time contracts” and mainstream public services delivered by “volunteer plus” befrienders are on the agenda right now. Craig should surely be arguing against Social Enterprises and Third Sector Organisations being driven into contracts which only permit payment for “face time” or public services delivered by volunteers?

Instead of ranting against trade unions, he should surely recognise that these public spending reductions are so big that Social Enterprises and unions should join together to resist them?

Just as importantly, Craig should be asking those London Third Sector Organisations why they have allowed the whole concept of Social Enterprise to become so diluted that Big Society Capital, ClearlySo and others in the London Bubble no longer distinguish between Social Enterprises and profit making Companies Limited by Shares with a self-styled social mission.

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Social Investment – Scotland does it without the Hype

Social Investment in Govanhill, Glasgow without the Hype

During April 2013, there have been two significant and high powered Social Enterprise events:

Sandwiched between these illustrious events, last week in Scotland it was such a relief to hear about the typical problems faced by Social Enterprise and Third Sector Organisations discussed in a thoughtful, down to earth and constructive way at:

By no means was this a dull or boring conference. It was well attended by most of Scotland’s big funders, intermediaries and project managers.

Huckfield in this posting summarises the presentations made, all of which add up to Scotland’s very different approach to Social Enterprise and Third Sector funding. No one mentioned “structured investment products” all day!

Pat Armstrong, Chief Executive, Association of Chief Officers or Scottish Voluntary Organisations

Pat gave a rounded welcome to all those attending. For each of her interventions she had a memorable quotation. Huckfield and others noted that in tone and style, her presentation and approach were very different from her counterpart in England!

Jackie Killeen, Scottish Director, Big Lottery Fund

Jackie explained that among 3000 Big Lottery grants last year, there were £63mn Strategic Grants, £13.8mn in small grants and £7.4mn in mid grants.

There is a Social Investment strand in the 2013-2015 budget, the main focus of which is stimulating a pipeline. Projects needed support on impact measurement. The Budget included £6mn for Social Investment from 2013 till 2015. So this did not represent a wholesale shift. The focus would be:

  • Stimulating the Pipeline
  • Supporting Investment Readiness
  • New models of Community Investment
  • Investing in Research

Compared with the usual Social Investment announcements from the London Bubble, where nothing from Big Society Capital happens without an expensive media launch and cast of thousands, many of us thought that this was Social Investment put rightly in context.

Ken Ferguson, Director of Robertson Trust

Ken explained that the Scottish Government’s Christie Commission Report in June 2011 had emphasised early intervention with longer term horizons and relationships before seeing results. With a tightening of funds, funders were looking at core not just supplementary funding. Grant making Trustees had difficulties in making forecasts for longer periods involved. There was also more demand for revenue rather than capital funding and increasing pressure on smaller charities.

In an impressive funding matrix he analysed some funding models on offer and the issues these raised:

  • Social Impact Bonds. These were a rare species in Scotland and would be described later by Jane Newman from Social Finance.
  • Public Social Partnerships were funded by the Scottish Government. Further evaluation was needed and there were potential problems with longer term tendering and sustainability of services. PSPs were more attractive when there was genuine social change. A PSP might act as a barrier against Third Sector involvement since the provider could lose Intellectual Property and three years’ work. Large organisations could gain entry on the back of this.
  • Allia Bonds. Allia offers a range of bonds. Through on lending at a fixed rate to a social housing provider, the Charitable Bond allows the yield to be discounted either in part or full at the choice of the investor and paid upfront to the investor’s nominated charity.
  • Covenants, loans or other bonds might carry more risk. There were generally not resources for tracking risk and investors couldn’t set losses against investment.

Whereas Public Social Partnerships were worked out with the public sector, with SIBs and other investment, providers had more freedom to develop new delivery models. Social Impact and Allia Bonds had a more prescriptive approach. Social Impact Bonds could either cost too much or nothing.

Outcomes needed to be understood, especially to assess what delivered change. More independent assessment was needed of outcomes.

Following a detailed presentation, Ken’s conclusion was that, regrettably, currently in Scotland there was no clear route map for going forward.

David Hardie – Head of Venture Philanthropy at Inspiring Scotland

David described his role in Venture Philanthropy at Inspiring Scotland. He is also Senior Corporate Partner at Dundas & Wilson LLP.

The European Venture Philanthropy Association defined ‘Venture Philanthropy’ as ‘a field of philanthropic activity where private equity/venture capital models are applied in the non-profit and charitable sectors. 64 ventures were currently receiving investment from Inspiring Scotland.

Funding came from those investors which sought social change, including some attending the conference. An external review had shown that Inspiring Scotland was increasing efficiency in investment and maximising its return, creating more sustainable ventures and delivering outcomes which could change lives.

Jane Newman – International Director at Social Finance

Jane was keen to distinguish between Social Impact Bond projects under the Department of Work and Pensions Innovation Fund and the Social Finance fully developed approach, starting from social issues. Social Finance played a key role in the Peterborough Young Offenders Social Impact Bond Project. She offered an overview of future developments for an approach which she thought had potential.

In reply to a question from Huckfield on “sector blindness” and lack of guidance on sector eligibility under the Cabinet Office Social Outcomes Fund, in which Social Finance has a significant advisory role, Jane felt that the Cabinet Office would probably apply a filter process to encourage Social Enterprise and Third Sector organisations.

Ian Marr from YMCA Scotland and Adrian Bell, Partner at Morton Fraser LLP

Ian spoke on setting up the employability Social Impact Bond at Perth YMCA and Adrian described work in his firm to produce required documentation. He sought to produce a ‘regular package’ which was usable elsewhere.

Rachel Searle-Mbullu, Foundation Scotland and Carole Patrick, Life Changes Trust, Foundation Scotland

Huckfield and others found presentations from Foundation Scotland, formerly the Scottish Community Foundation, innovative since they described setting up Trusts for Jessica Scotland and Resilient Scotland. Where community organisations were distant from the market, their involvement in a Trust or Foundation might lend weight and credibility.

Carole spoke about Next Generation Trusts. The Life Changes Trust has £50mn from Big Lottery over 10 years and is working to help those leaving care and with dementia. Life Changes is an Independent Trust with Founding Partners. All this represents an innovative route forward, including development funding for new partnerships.

John Devine, Regeneration Manager for NG Homes

John was keen on Housing Associations providing supporting roles beyond housing provision. NG Homes had set up a Social Enterprise, training and jobs. The Association’s “School of Hard Knocks” Rugby initiative would feature on Sky TV. John’s video presentations drew significant applause.

Paul Bannon, Scottish Charity Finance Directors Group

Paul’s description of the intricacies of Scottish Charity Law and its operation was impressive. This was one of the sessions which would probably have merited closer and smaller discussion.

Chic Brodie MSP, Convenor of the Holyrood All Party Social Enterprise Group

Chic made his usual “onwards and upwards” windup for which he is renowned.

Pat Armstrong then closed the Conference – with yet another quotation – and expressed sincere thanks to presenters and attendees.

And, Finally

Huckfield concluded that the day was neatly summarised, when, just before leaving, he was asked by an Edinburgh Youth Club Worker what the day had achieved. The questioner described worries from his English colleagues about impact measurement increasingly required by funders, some of which they felt was not really relevant.

Huckfield’s response was that if the same conference had taken place in England, especially somewhere in the London Bubble, the whole event would have been overpopulated by Investment Bankers and Financial Advisers, talking nonstop about equity investment and impact measurement. Above all, the Conference had showed that Scotland is different and prepared to work things out for itself – without the hype and the bankers.

Huckfield caught the No 31 bus back into the City.

Big Society Capital’s £600mn – An Alternative Strategy for Supporting Social Enterprises

“Beware the Ides of March” (March 15 2013 AD, not 44 BC)

The Soothsayer’s warning to Julius Caesar on March 15 proved fatal.

While not wishing a similar fate for Big Society Capital, Social Enterprise UK and London Third Sector Organisations in the Big Society Capital Glee Club, Social Enterprises across the country have noted that during the second half of March 2013 things have not been going well for Social Investment Market protagonists. And all this despite the post Budget hype about possible tax relief on Social Enterprise investment!

Above all, most Social Enterprises believe that the £600mn allocated to Big Society Capital could be more effectively used. The first draft of An Alternative Strategy to Support Social Enterprises is shown below.

The following represents a brief summary of events since the Ides of March 2013:

  • Niahm Goggin’s Institute for Voluntary Action ‘Charities and Social Investment’ Research Report for the Charity Commission

    Page 18.“Most of the study participants in charitable trusts and foundations said that they had not reached their current limits for social investment and could do more. There was some scepticism about recent projections of market size.”

    Page 24. “Study participants in charities and some national bodies suggested that non-charitable social investment intermediaries were overly concerned with charity demand for investment rather than charity need for investment to meet the needs of their beneficiaries.”

    Page 25.“‘I want to bring elements of the casino to the social investment market, not bring the social investment market into the casino.’ (Intermediary)”

  • Mary Duffy’s Clore Fellowship ‘Shining Armour or Sheep’s Clothing?’ Report
    Page 23.“The Social Enterprise landscape is dominated by SMEs and the deals being sought by many investors are bigger than these organisations require. Some point to a ‘big hole’ at the <£50k investment level (even more acute at <£20k) and the failure to address this because of administrative costs and risk involved. They say that this gap is greatest at the start-up stage where organisations struggle to reassure investors that they are a good risk. There are concerns that smaller scale, tougher work will suffer, threatening creativity and diversification and cutting across the rhetoric about fostering social impact innovation across the funding arena". Page 27.“There is a view that many intermediary organisations populate their teams mainly with those from the finance side, demonstrating what they prioritise and what they are seeking in terms of direction. This leads to trust issues – are these ‘bankers out of work following the crash’ trying to cash in on something to ‘tide them over until they go back to earning big bucks’? Are they ‘rich ex City guys seeking salvation’?”

  • Nick O’Donoghue’s “Plan Vanilla” lending pronouncement, Wednesday 27 March 2013 – which represents a big shift in focus for Big Society Capital from his bold £100mn investment pronouncement on Tuesday 15 January 2013. This perhaps represents his first public acknowledgement of difficulties with Social Investment?
  • Vibeka Mair’s “White-washing Capitalism” piece in Civil Society on Wednesday 27 March 2013 in which she quoted Robbie Davison, Chief Executive of Community Interest Company Can Cook, and his accusation about “Big Society Capital, the biggest Social Investor in the UK, imposing a market-based ideology on the social investment sector”. She continued: “And he and others say that Social Investment intermediaries are concentrated in a City of London bubble with no real understanding of the finance needs of the voluntary sector”.
  • Reports on March 19 2013 about the Social Investment Business grant of £199,000 to Big Society Network
    “It is also not clear how the £199,900 has been spent and what, if any, social outcomes have been achieved, as the campaign that was meant to be funded by the grant appears never to have launched and has now been put on hold by the Cabinet Office.”

  • @j0nathanjenkins (Chief Executive of Social Investment Business) and his anguished Twitter exchanges last week, in particular, asking “@huckfield how wud u allocate 600m then to 3rd sector if the only given is you must do it in a sustainable way not a one off?”

@huckfield replied to @j0nathanjenkins, saying that alternatives would be posted on this site. The first draft of An Alternative Strategy to Support Social Enterprises is shown below.

But as all these ‘London Bubble’ events above have been unfolding, Leslie Huckfield Research and many others are most of all concerned that many Social Enterprises across the country face severe financial difficulties, are being forced to declare staff redundant and are eating into their reserves.

For them, Social Investment promoted by Big Society Capital, Social Investment Business, UnLtd and other intermediaries is irrelevant, inaccessible and serves none of their desperate needs.

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An Alternative Strategy to Support Social Enterprises

Leslie Huckfield Research offers the following proposals as a basis for further discussion. These are summarised below and set out in more detail in An Alternative Strategy for Supporting Social Enterprises under Hot Topics .

At this stage Leslie Huckfield Research offers this Initial Draft of An Alternative Strategy for Supporting Social Enterprises merely as a basis for discussion. But these suggestions are offered in the knowledge that they are more relevant to the real needs of Social Enterprises than the “structured investment products” promoted by Big Society Capital and its Social Investment Market intermediaries.

It is proposed that £400mn Dormant and Unclaimed Bank and Building Society Accounts, together with a further £200mn investment under the Merlin Agreement from four major banks – previously allocated to Big Society Capital and its intermediaries for development of a Social Investment Market – should now be reallocated to regional Social Enterprise Networks for their decision on spending priorities.

Following detailed consultation with appropriate regional Social Enterprise Networks, it is proposed that for future Social Enterprise support and development, these Networks might seek to pursue the following Menu Options:

    A) Supporting Social Enterprise Regional/Local Networks

    B) Public Social Partnerships And Change Funds

    C) Social Enterprise Markets Programme and Social Enterprise Infrastructure Support Fund

A) SUPPORTING SOCIAL ENTERPRISE REGIONAL NETWORKS
(the following to be discussed):

OUTCOME 1:
To ensure that Social Enterprises are better funded, informed, encouraged and supported to develop, grow and contribute to public and other service provision and delivery.

Objectives:

  • To encourage national and local government, Trusts and Foundations to create new Social Enterprise funding programmes, initiatives and availability, including investment in new structures.
  • To improve communication and connections, information sharing and links between social entrepreneurs and Social Enterprises across regional areas.
  • To provide up to date, relevant information and support of benefit to Social Enterprise and Social Firms at the level of individual organisations.
  • To ensure Social Enterprises are better informed on policy development and signposting to local, regional and national support programmes and initiatives.
  • To develop and promote mutual Social Enterprise support and inter-trading opportunities.
  • To optimise regional and local initiatives so that these incorporate and relate to local Social Enterprise and Third Sector developments.

OUTCOME 2:
To enhance the profile of Social Enterprises, their value to local communities, meeting regional and national objectives using policy engagement and media.

Objectives:

  • To raise the profile of Social Enterprise as a business model, through highlighting values and benefits of Social Enterprise to broad range of stakeholders.
  • To increase understanding and awareness of Social Firms and work integration opportunities.
  • To measure, record and disseminate economic progress of Social Enterprises and Social Firms and identify ways in which they can improve performance.

OUTCOME 3:
To ensure that influence and contributions from Social Enterprises to policy development locally and nationally is enhanced

Objectives:

  • To represent the needs and views of Social Enterprise to policy and decision makers at regional, local and national levels to assist proactive policy development.

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B) PUBLIC SOCIAL PARTNERSHIPS AND CHANGE FUNDS
(the following to be discussed):

1) Public Social Partnerships (further details and examples to be provided)

A Public Service Partnership (PSP) differs from other commissioning approaches since it is based on needs to be addressed, rather than services available. These needs become the driver for other partnerships. A PSP typically comprises three stages:

  • Social Enterprises work with public sector purchasers to design a service
  • A consortium of public, Social Enterprise and Third Sector Organisations may conduct a short-term pilot, helping to refine service delivery parameters
  • The service is further developed to maximise community benefit before being competitively tendered

The PSP Concept was developed in Scotland under the previous EQUAL Social Economy Scotland Partnership.

2) Change Funds (based on current Scottish Government funding models)

The Scottish Government currently operates 3 Change Funds – for Reducing Reoffending, Integration of Adult Health and Social Care and Early Years, which fund development and operation of Public/Third Sector Partnerships for developing integrated services.

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C) DEVELOPMENT OF MARKETS AND SOCIAL ENTERPRISE INFRASTRUCTURE
(the following to be discussed):

1)Developing Social Enterprise Markets (based on current Scottish Government Programme)

  • The Programme would complement the Public Services (Social Value) Act 2012 and other procurement initiatives.
  • This Programme would increase Social Enterprise engagement in service design to meet community needs and increase overall Social Enterprise sustainability.
  • Resulting from this public sector commissioners would be able to contract sustainably, maximise Social Value, and deepen their engagement with Social Enterprise.

2)Social Enterprise Infrastructure Fund (based on NCVO Funding Commission Report 2009)

Regional Social Enterprise Network Restructuring Funds might be established:

  • The Social Enterprise Infrastructure Fund might assist one-off support, legal costs re-structuring costs, including rationalising and/or restructuring regional and local infrastructure.
  • Regional and Local Social Enterprise Networks would provide a significant role in helping to reconfigure the present pattern of infrastructure, through:

    • Working with relevant regional structures and key funders like Big Lotery, Trusts and Foundations at the national, regional and local level.
    • Highlighting where investment needed to bring provision up to standards and ensuring best use made of ICT.
    • Encouraging Social Enterprise Infrastructure Networks to apply for support for developing merger or collaborative working and shared support

And, Finally

These proposals above represent the response from Leslie Huckfield Research to @j0nathanjenkins. Though the above proposals are based on funding and projects under programmes and recommendations elsewhere, they are offered here as a basis for discussion and detailed consultation with appropriate regional Social Enterprise Networks for their decision.

Since many of these proposals are based on those which are currently operating in Scotland, funding suggestions are offered primarily as a basis for further discussion with appropriate regional Social Enterprise Networks across England, and where appropriate, in other devolved nations.

Above all, these suggestions recognise the acute funding problems now faced by many Social Enterprises – which the Social Investment products offered by Big Society Capital and its intermediaries fail to understand and offer no solution.

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Thoughts from the Social Enterprise Exchange

Well done, Social Enterprise Scotland and CEIS

Heartiest congratulations are due to Social Enterprise Scotland and CEIS for their organisation of a highly successful Exchange at the SECC, Glasgow on Thursday 21 March 2013. Not only was the Exchange well-attended but it was less densely populated than last year by London investment bankers and brokers trying to sell Structured Social Investment Projects. Though the mood was of grim reality, many acknowledged that this was better than hyped up claims about Social Investment.

But there was still much discussion about Social Investment. It took Nigel Kershaw from Big Issue Invest to strike one of the Exchange’s more memorable moments, when, during an afternoon Theatre Session on “Financing Social Enterprise”, he questioned:

    “Finance is just a bloody tool. How do we embed the sense of Social Mission?”.

The Panel just looked nonplussed and could only mouth less than memorable platitudes in reply.

As a Board Member of the Social Entrepreneurs’ Network Scotland, Huckfield once more declares an interest. Senscot promotes its own definition of Social Enterprise, in which Social Mission is critical. These are the details of the Voluntary Code of Practice for Social Enterprise in Scotland – the Senscot Code

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Time to Draw a Line in the Sand on Social Investment

Many of us outside the “London Bubble” have been saying for a long time that it’s time to draw a line in the sand for Social Investment and that the £400mn unclaimed assets from dormant bank accounts and building societies could be more effectively used to support the real needs of Social Enterprise and the Third Sector

  • 10% of Social Enterprises. Despite nearly £1bn of funding from Big Society Capital, Big Lottery, the Cabinet Office and others to promote Social Finance and Social Investment, it will only ever be of interest and accessible to around 10% of Social Enterprises.
  • Out of reach, inaccessible and unwanted. Ambitious projections for Social Investment growth come from Big Society Capital and the supply side. Most evidence from the demand side in a long line of surveys shows that Social Investment is out of reach, inaccessible and unwanted by most Social Enterprises.
  • Unclaimed assets could be better spent. As shown below, others are becoming fed up with the way Big Society Capital is spending unclaimed bank and building society accounts. More are concluding that these are public assets which could be better spent.
  • Social Enterprise survival risk. With many Social Enterprise and Third Sector Organisations now eating into reserves, merging and declaring redundancies, there is a real risk that through this unrelenting emphasis on Social Investment, many smaller Social Enterprises which are desperate for grants or loans between £20,000 and £50,000 for working capital, to scale up or deliver services, may not survive.
  • Doubts about the intermediaries. As shown below, there are growing doubts about many so-called “Social Investment Intermediaries” which don’t understand the constitutions of Social Enterprises and Third Sector Organisations which don’t allow dividends.

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Continued Outpourings on Social Investment from the “London Bubble”

The deluge on Social Investment from those in London hardly allows the rest of to find shelter. This is a random sample:

Ten Reforms to Grow the Social Investment Market from Bates, Wells and Braithwaite in July 2012 on page 5 represents a typical example:

    “Funding Gap
    The 2011 State Aid application of the UK Government in respect of Big Society Capital, estimates that Social Enterprises are receiving £0.9-1.7bn less finance than they need, when compared to the level of financing of SMEs using information derived from the 2010 BIS SME survey”

    “Potential Growth
    A June 2012 internal study carried out by Big Society Capital estimates that total investment inflows into the UK Social Investment market has the potential to grow from £165mn to up to £750mn by 2015 on the basis of demand for Social Investment on the part of Social Enterprises”

The Report produces no evidence of this “potential to grow” and offers “special thanks” for comments and feedback to Social Enterprise UK and Big Society Capital!

Beanbags and Bullshit “Sense of Relief” posting . David Floyd’s posting last week, is rightly wary of Social Investment. But while he welcomes the Chancellor’s first steps towards tax relief for investment in Social Enterprise, he seems to overlook that it has been Third Sector Organisations within the “London Bubble” – ACEVO, NCVO and Social Enterprise UK – which have been pressing for tax relief just as hard as Big Society Capital’s Investment Bankers Glee Club.

The 2013 Budget : 10 Things You and Your Charity Need to Know by NCVO’s Head of Policy Karl Wilding, refers to Big Society Capital as “our partners” and then refers to the NCVO Commission on Tax Incentives for Social Investment Analysis and Recommendations January 2012 – produced by NCVO and Social Enterprise UK happily sitting alongside Big Society Capital, Social Finance and Bates, Wells and Braithwaite – the usual crowd of well-heeled intermediaries.

The Commission Report includes the perhaps remarkable quotation on page 11 from Bridges Ventures on “how the social sector’s potential is held back by lack of appropriate growth, development and risk capital”:

    “Bridges Ventures, for example, observed how the “traditional venture capital model is not appropriate for social ventures, where the social mission is core to the business usually are not comfortable aiming to sell onto another business or issuing shares on an ordinary exchange because the social mission may be compromised by the new owners’ desire to maximize profits”

Perhaps we should not be surprised about another recommendation on page 14?:

    “To ensure that the tax rules can be applied in a meaningful way to non-profit distributing bodies, equity-like investments for social ventures could be defined by the reference, not to profit, but to performance and results, however they may be defined. Instruments and arrangements which exhibit characteristics more akin to equity than debt should be treated as analogous to equity.”

In other words, in their Report NCVO and SEUK are saying that not only should performance and results should be measured to secure equity investment, but also to ensure tax relief on that investment. Surely many NCVO and Social Enterprise UK members are unaware of what London based organisations are saying on their behalf?

Bridging the Gap between the Social Investor and the Civil Society Organisation by Paul Henry and Chris Hardy in Pioneers Post on Saturday 16 March 2013 again perpetuates some of the myths:

    “Initially many viewed, or were led to perceive, Social Investment as a replacement for public sector funding. It has been said that the issue being faced by the sector is a lack of available Social Investment, leading the Government to focus on expanding the amount and types of social finance available.”

    “Our experience from engaging with grass roots Social Enterprises, charities and community groups is that the majority do not see Social Investment as an attractive proposition, or more often they have not considered it at all”.

Despite all this, the Pioneers Post piece concludes that it’s now up to Social Investment Finance Intermediaries to bridge the gap. Don’t they understand, as shown below, that there is no gap to be bridged? For the 90% of Social Enterprises, Social Investment, in all forms described in detail by Paul Henry and Chris Hardy, is either inappropriate, irrelevant or inaccessible for their real needs.

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The Evidence just keeps Building against Social Investment

In the face of this growing army of well paid intermediaries, many of them strangers to most Social Enterprises, there is a constant flow of Reports showing that the demand for Social Investment is minimal:

  • Investment Readiness in the UK by Dan Gregory, Katie Hill, Iona Joy and Sarah Keen (ClearlySo, New Philanthropy Capital and Big Lottery Fund) (page 9) “Furthermore, it seems that significant time and resources are being wasted by applicants and investors alike in working – but failing – to secure deals. This increases transaction costs and market inefficiencies and could be considered as a market failure. Conversion rates among social investors, (not including government-backed softloan and grant funds) appear to sit between 5% and 15%. At one extreme, Community Builders had 4000 enquiries leading to 200 applications and 37 investees – equivalent to less than a 1% conversion rate and thus a significant mismatch of perceptions between investors and applicants”.
  • Rethinking Community Practice – Gabriel Chanan and Colin Miller (Policy Press) “There is a scattering of good neighbourhood work by Locality and others, but the biggest current resource in this field, the £600m Big Society Bank, is misguidedly trying to turn all community and voluntary organisations into small businesses. This important fund ought instead to endow a system of grants and service level agreements which the myriad of small and medium sized community groups could safely operate to back up neighbourhood partnerships.”
  • Institute for Voluntary Action Research Charities and Social Investment by Niamh Goggin and Leila Baker (Research Report for the Charity Commission) (page 24) “Most study participants also said that Social Investment should not be seen as a panacea for the financial needs of all charities or for every social problem. Study participants in charities and some national bodies suggested that non-charitable Social Investment intermediaries were overly concerned with charity demand for investment rather than charity need for investment to meet the needs of their beneficiaries. Estimates of Social Investment demand have been based on projected growth of Social Enterprise opportunities to supply public services, rather than on charities’ need to grow in scale and scope to deliver on their charitable purposes”.

    (page 29) “The charity sector appears to be largely absent from conversations about the Social Investment market, while non-charitable intermediaries have been actively participating in them. Our study findings suggest that there is little movement between the practical experiences of charity investees and the theories and ideas behind the development of the Social Investment market”

  • Shining Armour or Sheep’s Clothing: View on Social Investment in the UK by Mary Duffy (Clore Social Leadership Programme/New Street) (page 4) “The involvement of for-profit ‘social businesses’ raises mission related concerns and there is discomfort among some about downplaying organisational structure for recipients of Social Investment.

    (page 18)“Even the ambitious (and contested) projected UK demand for Social Investment of £1bn by 2016 only equals the amount that UK charities currently borrow annually from commercial lenders yet the apparent lack of investees is used by critics to challenge rhetoric about the importance of Social Investment. Arguments framed in terms of a lack of ‘investment readiness’ among charities and social enterprises are further criticised by sceptics as an absurd laying of blame with the customer for not turning up at the store”.

    “….Notwithstanding how various investment readiness support programmes may support those seeking investment, in this context Big Society Capital‘s aspiration to invest an estimated £3 billion overall seems a considerable stretch. This is one reason why BSC and others are looking to widen the investment space beyond charities and not-for-profit social enterprises to include for-profit social businesses. Whilst not all for-profit social businesses are easy to slate, some organisations in this space are more readily cast as inconsistent with a core social mission.”

    (page 27) “There is a view that many intermediary organisations populate their teams mainly with those from the finance side, demonstrating what they prioritise and what they are seeking in terms of direction. This leads to trust issues – are these ‘bankers out of work following the crash’ trying to cash in on something to ‘tide them over until they go back to earning big bucks’? Are they ‘rich ex City guys seeking salvation’?”

Shortage of space rather than lack of evidence precludes the inclusion of even more reports. If Investment Readiness in the UK above, based on a survey of nearly 7,500 Voluntary, Community and Social Enterprise organisations, doesn’t convince Big Society Capital and its entourage that there are big problems with Social Investment, one wonders what will?

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And, Finally

Huckfield fears that as Big Society Capital and its entourage encounter more resistance from even more Social Enterprises turning their backs on Social Investment, the Government’s answer will be for the Cabinet Office and Office for Civil Society to step up the Technical Assistance funding to overcome a perceived “market failure”. Stand by for another £10mn for Investment and Contract Readiness.

  • Big Society Capital and its well heeled intermediaries are being funded from unclaimed and dormant bank and building society accounts – so it’s really our money. Surely we should have more say on the way it’s being used?
  • Social Investment is the Coalition Government’s Big Idea for the Lough Erne G8 Summit in June. Despite spending up to £1bn to create a Social Investment Market, the Government does not have the evidence to support its case. Since Social Investment isn’t working, Social Enterprises should be pressing their MPs to table Parliamentary Questions, asking how the nation’s unclaimed assets of dormant bank and building accounts are being spent.
  • A series of regional conferences and seminars might be convened for Social Enterprise and Third Sector Intermediaries, Trusts and Foundations to spell out clearly to the Government that there are more effective ways of spending nearly £1bn than supporting the lifestyles and ambitions of the Big Society Capital Glee Club.
  • If there is no turning away from Social Investment to meet the real needs of Social Enterprises and Third Sector Organisations, there is a genuine risk that many will go to the wall. Their capacity, their experience and their social mission and purpose may not be recoverable.

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Local Healthwatch – Ode to a Mouse!

Ode to a Mouse

Robert Burns had it right when in November 1785 he wrote “To a Mouse: On Turning Up Her Nest with the Plough”.

    “Wee, sleekit, cow’rin, tim’rous beastie,
    O, what a panic’s in thy breastie!
    Thou need na start awa sae hasty,
    Wi’ bickering brattle!
    I wad be laith to rin an’ chase thee,
    Wi’ murd’ring pattle!”

Burns is telling the poor little mouse, whose winter shelter he has just unearthed with the plough, that she doesn’t have to run away and that he means no harm.

Some of us who have written to Healthwatch England about its overdue Press Statement of Tuesday 05 February 2013 , on the new Local Healthwatch Regulations Sections 35 and 36, feel a bit like Robbie Burns. We reckon we’ve disturbed a mouse.

But the real problem – as shown below – is that Local Healthwatch organisations which are now being unearthed all across England, may be forced to be even more timid – by law!

The National Coalition for Independent Action was spot on and should be congratulated for its statement of Thursday 14 February 2013 How to Make a Toothless Watchdog – ‘Healthwatch’ Censored and Emasculated. The NCIA statement focuses on Section 36, which, as shown below, effectively prevents any new Local Healthwatch from any involvement in what might be deemed “political activity”.

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Section 36: Political Activities not to be Treated as being carried on for the Benefit of the Community

To save some time, you can skip these details of Section 36 here and go straight to What Does All this Mean? below, which analyses where Local Healthwatch organisations may now find themselves.

36(1) For the purposes of section 222(9) of the 2007 Act (Social Enterprises: activities for the benefit of the community) and regulation 35(1)(b), the following activities are to be treated as not being activities which a person might reasonably consider to be activities carried on for the benefit of the community in England:

    (a) the promotion of, or opposition to, changes in:

      (i)any law applicable in the United Kingdom or elsewhere; or

      (ii)the policy adopted by any governmental or public authority in relation to any matter

    (b)the promotion of, or opposition (including the promotion of changes) to, the policy which any governmental or public authority proposes to adopt in relation to any matter:

    (c)activities which can reasonably be regarded as intended or likely to:

      (i)provide or affect support (whether financial or otherwise) for a political party or political campaigning organisation; or

      (ii)influence voters in relation to any election or referendum.

(2) But activities of the descriptions prescribed in paragraph (1) are to be treated as being activities which a person might reasonably consider to be activities carried on for the benefit of the community in England if:

    (a)they can reasonably be regarded as incidental to other activities, which a person might reasonably consider to be activities carried on for the benefit of the community in England; and

    (b)those other activities cannot reasonably be regarded as incidental to activities of the descriptions prescribed in paragraph (1)

(3) In this regulation:

    “governmental authority” includes:

      (a)any national, regional or local government in the United Kingdom or elsewhere, including any organ or agency of any such government

      (b)the EU(1), or any of its institutions or agencies; and

      (c)any organisation which is able to make rules or adopt decisions which are legally binding on any governmental authority falling within paragraph (a) or (b) of this definition

    “political campaigning organisation” means any person carrying on, or proposing to carry on activities:

      (a)to promote, or oppose, changes in any law applicable in the United Kingdom or elsewhere, or any policy of a governmental or public authority (unless such activities are incidental to other activities carried on by that person); or

      (b)which could reasonably be regarded as intended to affect public support for a political party, or to influence voters in relation to any election or referendum (unless such activities are incidental to other activities carried on by that person)

    “political party” includes any person standing, or proposing to stand, as a candidate at any election, and any person holding public office following election to that office

    “public authority” includes:

      (a)a court or tribunal; and

      (b)any person certain of whose functions are functions of a public nature

    “referendum”includes any national or regional referendum or other poll held in pursuance of any provision made by or under the law of any state on one or more questions or propositions specified in or in accordance with any such provision

Without in any way proffering a legal opinion, many new Local Healthwatch organisations could not have been aware of these detailed restrictions on their potential activities when they tendered for contracts because they were not laid before Parliament until Monday 17 December 2012. Surely they may have been misinformed or misled?

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What Does All This Mean?

An examination of procurement procedures used by Local Authorities for tendering and contracts for these Local Healthwatch organisations shows that most of these preceded publication of these Regulations. Neither the Local Government Association’s Get in on the Act: Health and Social Care Act Guidance of June 2012 or the Department of Health’s Summary Report on Issues Relating to Healthwatch Regulations of July 2012 contain any information about these restrictions in Section 36.

The Local Government Association published Establishing Local Healthwatch : Governance in October 2012. This excellent and comprehensive document contains no reference to the Section 36 restrictions imposed on Local Healthwatch organisations.

The Local Government Association, Healthwatch England and Skills for Care issued their comprehensive Knowledge and Skills and Competences for an Effective Local Healthwatch in January 2013. This wide ranging document contains no reference to the Section 36 restrictions imposed on Local Healthwatch organisations.

So little advance warning seems to have been given about the content of these Regulations. Most Local Authority Commissioning Strategies and Invitations to Tender were decided in advance of their publication and most contracts for Local Healthwatch organisations are already awarded or being awarded.

This surely raises at least a possibility that some tendering or contracted organisations may have been misinformed about the powers and functions of Local Healthwatch bodies?

One example of these tendering procedures is Medway Council Invitation to Tender February 11 2013, which on page 95 gives the Strategic Objectives of Local Healthwatch:

    a) information and advice to the public about accessing health and social care services and choice in relation to aspects of those services

    b) make the views and experiences of people known to Healthwatch England helping it to carry out its role as national champion

    c) make recommendations to Healthwatch England to advise the Care Quality Commission to carry out special reviews or investigations into areas of concern (or, if the circumstances justify it, go direct to the CQC with their recommendations, for example if urgent action were required by the CQC)

    d) promote and support the involvement of people in the monitoring, commissioning and provision of local care services

    e) obtain the views of people about their needs for and experience of local care services and make those views known to those involved in the commissioning, provision and scrutiny of care services

    f) make reports and make recommendations about how those services could or should be improved.

These functions are taken directly from page 14 of the Department of Health’s own Local Healthwatch: A Strong Voice for the People: The Policy Explained of March 02 2012.

This is not being unfair to or singling out Medway – which has issued a very comprehensive document – since most Invitations to Tender are probably similar. But which Local Healthwatch organisation will now feel able or empowered to carry out these functions when restricted by Section 36 of the Local Healthwatch Regulations above?

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What Happens after the Francis Report into Mid Staffordshire Foundation Trust?

All this follows the outcome of the Francis Inquiry Report into Care Provided by The Mid Staffordshire Foundation Trust and the Department of Health’s announced intention to investigate other Trusts. The importance of Local Healthwatch organisations’ being genuinely representative of and rooted in their local communities, with unfettered rights to speak on behalf of NHS service users, should surely therefore be paramount?

Perhaps the best one might hope is that:

  • a Westminster Member of Parliament might table an appropriate Parliamentary Question, or
  • a newly appointed Local Healthwatch organisation may feel enabled to challenge its contract if it believes that it may have been misinformed

Though on Tuesday 05 February 2013 in a press statement Healthwatch England Highlighted Concern about Local Healthwatch Regulations, especially Sections 35 and 36, its position is that it only intends “to clarify any confusion”. The statement concluded:

    “Healthwatch England recommends that the above concerns be resolved in future statutory instruments.”

The Healthwatch England Press Statement was issued on the same day that Richard Francis QC presented his Mid Staffordshire NHS Trust Inquiry Report to the Secretary of State for Health.

Surely Healthwatch England should now seek the withdrawal of these Regulations?

Compared with previous NHS and other Health and Care service user structures, as they stand, together the definition and restrictions on the activities of Local Healthwatch organisations surely represent the weakest version of service user representation which has ever appeared in any Department of Health legislation?

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Who will Speak Out against the Financialisation of Social Enterprise?

As a Board Member of the Social Entrepreneurs’ Network Scotland, HUCKFIELD once more declares an interest. Senscot promotes its own definition of Social Enterprise. These are the details of the Voluntary Code of Practice for Social Enterprise in Scotland – the Senscot Code

Does Social Finance understand Social Need? by Robbie Davison

The wider Social Enterprise movement is much indebted to Robbie Davison for his Does Social Finance understand Social Need?

Robbie runs a Social Enterprise called Can Cook Studio, in Garston, Liverpool. His down to earth ‘reality’ exposition of Social Finance is overdue and should be required Red Box reading for Ministers and Senior Civil Servants at the Cabinet Office and the Office for Civil Society. Robbie summarises accurately the dilemma posed for the majority of Social Enterprises by the growing range of Social Investment Market intermediaries being encouraged by these Ministers. On page 9, for example, he writes:

    “Overcoming market failure is risky and expensive, requires research and development, innovation, and generally provides low returns on investment. This is the very space that the Social Enterprise sector is looking to operate in, although the social finance market seems to be looking in the opposite direction! Instead, social financiers seem to be casting out their nets to capture ‘dead certs’, disaggregating need into impact and consciously choosing to show lending on its own balance sheet that is of minimal or no risk”.

    “This presents a displaced picture of finance versus need; a picture that is at odds with the assumptions that most Social Enterprise practitioners have about the purpose of social finance. This picture also appears to have the social financiers conceiving new products in a vacuum. Wherein they negotiate with each other and seemingly launch product after product that is counter-intuitive to the needs of the Social Enterprise marketplace”.

To counter this, Big Society Capital, the Social Investment Business and others with a City of London financial background have well oiled and funded PR machines. Anthony Hilton’s piece in the London Evening Standard Tuesday 05 FebruaryThe Social Bonds making an Impact” reads as though based on one of their double spaced, easy to read media handouts:

    “In terms of money, there are now about £280mn of social bonds in issue, a figure that is predicted to rise to £750mn in 2015 and £1bn in 2016. That sum, or something near it, represents a serious injection of capital and expertise into a sector that has for a long time been short of both. Given that inequality is deemed by most people under 30 to be the most pressing social problem of our times, it is an innovation whose time has come”.

As might be expected, missing from this piece was any mention of cash flow difficulties, payment by results, impact measurement and the inevitable cherry picking. Will Anthony Hilton write in the same vein if he revisits some of these Impact Bonds in five years’ time and discovers that many of the “hardest to reach” still haven’t been reached?

HUCKFIELD in this posting wonders why some national Third Sector organisations are not more vocal about finding a way through this dilemma. Perhaps their members should be asking whether they are compromised by the roles of these organisations in Social Investment and how much this explains their failure to oppose Government initiatives. This posting gives some recent examples.

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Big Society Capital and Social Enterprise UK’s Interlocking Directorships

Nick Temple, Business Director for Social Enterprise UK had a convoluted piece in Third Sector News on Tuesday 08 January 2013 Social Investors Should Choose Horses for Courses. This sounded like Social Enterprise UK’s riding two horses:

  • “Plenty of Social Enterprises and charities are making use of social investment, at all scales of operations, to provide capital to deliver and expand their work and social impact. And there are plenty of others for whom the strategy is simply unsuitable or who find it difficult to access and navigate what is still a fledgling and fragmented market”.
  • “To use an old maxim, it is horses for courses. But first we need to help organisations on the ground better understand their particular ‘course’ (their needs, model and readiness) and then help them to understand the range of ‘horses’ available (including different types of finance, the various providers and the terms and restrictions involved). We must make it easier for them to get on board. It’s about finding what is appropriate and right”.

But wouldn’t it be better if Nick explained the delicate balancing act of his organisation? The Chief Executives of Social Enterprise UK and the Association of Chief Executives of Voluntary Organisations both hold positions on the Big Society Trust, which is supposed to ensure that Big Society Capital remains true to its mission.

Similarly, don’t expect much speaking out for Social Enterprise from the Big Society Capital’s Advisory Board. A hefty majority are either involved in some way in Social Investment or closely aligned with its mission.

And finally, for those readers who perhaps hadn’t noticed, the CEO of Big Society Capital is a Board Member of Social Enterprise UK. The “Companies and Markets” pages of the Financial Times would call this “interlocking directorships”.

So when dealing with Big Society Capital, who speaks up for Social Enterprise?

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NCVO Working with SERCO

Civil Society on Tuesday 05 February 2013 carried an amazing story – NCVO Collaborates with SERCO:

    “NCVO is working with SERCO to develop standards for the relationship between prime and sub-contractors delivering public contracts”

    “James Allen, head of public services and partnerships at NCVO, revealed the partnership today at a Public Administration Select Committee hearing on public procurement”.

    “Allen said NCVO was working with SERCO to develop standards around how the prime and sub-contractor relationship should work, including the level of support giving to sub-contractors and the availability of shared back office facilities”.

At the very least, Social Enterprises might hope that through collaboration with SERCO, NCVO might prevent Department of Work and Pensions Press Releases like that on Thursday 08 November 2012 More Voluntary Sector Organisations join Work Programme:

    “Twenty new voluntary sector organisations have joined the programme since January.‪ Just 15 organisations from the sector have left in this time”

    “These new entrants take the total number of voluntary and community sector organisations taking part in the Work Programme to 368. This means nearly half – 47% – of all sub contractors are from this sector”.

DWP statements like this hardly square with the difficulties which NCVO itself recently identified in the Work Programme. An NCVO Statement NCVO:Rehabilitation Reform must not repeat Mistakes of Work Programme on Wednesday 09 January 2013 ran totally counter to that above of the Department of Work and Pensions:

    “However, under its most significant public service reform so far, the Work Programme, many charities have found themselves squeezed out by large commercial providers. In the interests of helping ex-offenders who could benefit from charities’ expertise, the government must ensure the mistakes of the Work Programme are not repeated”.

This was endorsed by the Independence Panel for the Voluntary Sector Independence under Threat: The Voluntary Sector in 2013, on page 37 of its Report in January 2013:

    “The Work Programme appears to be having a damaging effect of the finances of voluntary sector organisations. In research published by the NCVO in October 2012, which surveyed 98 voluntary sector providers to the Work Programme, seven out of ten indicated that their contract was at risk of failure and 47% feared that their contract would fail in the next six months. In more than half of cases the number of referrals had not matched expectations, and a third of providers had not received any referrals at all – these were mostly providers offering specialist services. Worryingly, almost half of providers were subsidising their Work Programme delivery from their reserves, and respondent said that primes were doing little to shield voluntary sector providers from risk – in one extreme case a charity had received more than 50 referrals without any payment.”

In the face if all this, does NCVO really believe that the role of Social Enterprises and Third Sector organisations can be enhanced through closer collaboration with SERCO?

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Social Investment Business and Social Enterprise

The Social Investment Business Group is less guarded about its composition and mission. The SIB Group has just appointed five new Board Members:

Civil Society on Thursday 31 January 2013 reported that Chair of the Social Investment Business Group, who is also the Chief Executive of the Association of Chief Executives of Voluntary Organisations, said of the appointments:

    “These are top-class recruits and I remain privileged to lead such talented boards. Our new appointments are the product of a rigorous search process and highlight the capacity of our sector to attract the very best.”

Three of the five have financial backgrounds. One is an ex Tory Minister. Another is from the City of London. While in no way seeking to challenge their motives or competence, was it not at all possible to find at least one at least with some kind of Third Sector background?

There is a similar one sided tilt in appointments and involvements of ‘providers’ under the Social Investment Business Group’s promotion of the Investment and Contract Readiness Fund – a £10mn Cabinet Office fund to prepare Social Enterprises for Social Investment. If you try to Find a Provider under the Social Investment Business Investment and Contract Readiness Fund, you’ll find that there are no less than 27 from which to choose:

  • The Association of Chief Executives of Voluntary Organisations. ACEVO’s Chief Executive is also Chair of the Social Investment Business Group.

  • The Advantage Business Agency, A “Global Network of Specialists which provides Consulting, Accounting and Financial Services”
  • ATQ Consultants who “work across the public, private and third sectors to help commsisioners, providers and investors improve and reform public services”
  • Banks Cannell LLP which comprises former “senior managers and practitioners from the NHS, education and private sectors who are passionate about health, education and social services and their role in our society”.
  • Bates, Wells and Braithwaite LLP which has been a leading advocate for changes in Charity law to permit more Social Investment
  • Bidright UK whose “aim is to provide the highest standard of bid-writing possible, combined with excellent customer service and high win rates”.
  • Bridge Consulting “Typically our clients are small and medium sized enterprises (SMEs) who are experiencing or planning for growth and who wish to manage that process effectively”.
  • Can Invest. “CAN is also a co-founder of SEUK and Unltd and Strategic Partner of the Cabinet Office on social entrepreneurship, social finance and impact”.
  • Claridge Capital Corporate Finance “We have great networks of companies, investors and professionals around the world to make deals happen”.
  • ClearlySo. “This Fund is not just restricted to those organisations with non-profit legal forms and we welcome applications from profit distributing entities who deliver social impact”.
  • Cogent Ventures “We help our clients create and deliver competitive advantage in an increasingly commercial and often financially constrained environment”.
  • Deloitte “Deloitte is one of the UK’s largest professional services firms providing audit, consulting, financial advisory and tax services to clients across all industries, including extensive work with the third sector, public sector and with social purpose businesses”.
  • Eastside. “Social ventures will have to work in partnership with an approved Investment and Contract Readiness Provider to make an application to this Fund”
  • Equity Development. “Our senior management has substantial experience in both developing social businesses and in capital market activities”.
  • Gecko. “have track-record of working to develop concepts through partnerships, into winning tenders that lead to robust implementation plans and social impacts”.
  • Hogan Lovells. “a global legal practice that helps corporations, financial institutions, and governmental entities across the spectrum of their critical business and legal issues globally and locally”.
  • Impetus Trust. “We use our highly effective venture philanthropy model to accelerate the growth of carefully selected charities and social enterprises so they can help many more people living in poverty.”
  • Inspire2Aspire “We specialise in strategic development, feasibility studies, business planning, coaching and exit strategies leading to profitable organisations.”
  • Investing for Good. “We have a vision for a financial system that enables investors to make investments that reconnect money to social value.”
  • Locality. “Our mission in Local Partnerships is to support the delivery of investment in local infrastructure and local services, and this means we work across central and local government, and the community focused third sector”.
  • PWC (Price Waterhouse Cooper). “We bring together people from across the firm and our key partners to provide all the services social enterprises need to be ready for investment or contract delivery.”
  • Pulse Regeneration. “has been awarded a major new Government contract to help social ventures prepare themselves ready to secure social investment of at least £500,000 or to bid for a public service contract with a value in excess of £1mn”.
  • Resonance. “If a Social Enterprise is looking to find gap funding, there are often a number of steps and processes it needs to work through in order to become attractive to private equity investors.”
  • Social Enterprise Support Centre.. “SESC supports social enterprises to become financially sustainable, deliver quality services, and where appropriate, supports their efforts to gain and deliver public service contracts”.
  • Social Finance. We support social organisations to raise and deploy capital; we work with government to deliver social change; and we develop social investment markets and opportunities.”
  • Stepping Out. “What makes a social business or mutual special is that it engages staff, citizens and communities in ways that makes services even better. And profits get recycled back into the community”.
  • Triodos Bank. “we believe that profit doesn’t need to be at the expense of the world’s most pressing environmental problems.”

After the management fees, commissions and other payments to 27 providers, how much of the Investment and Contact Readiness Fund is left over for Social Enterprises?

By any stretch of the imagination in the above list, those providers recognised by most Social Enterprises as “speaking for them” are easily outnumbered four to one by those with financial and legal interests.

So when dealing with the Social Investment Business Group, HUCKFIELD again asks who speaks up for Social Enterprise?

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The Independence of Social Enterprise and the Voluntary Sector

If there are still some readers of this posting not yet convinced that national Third Sector Organisations seem to be falling under the Government’s spell, it’s worth returning to Independence under Threat: The Voluntary Sector in 2013 by the Independence Panel funded by the Baring Foundation in its Annual Report in January 2013 on page 26 says:

    “..26% of small and medium size enterprises badge themselves as Social Enterprises. The voluntary sector brand is being abused: ‘Social Enterprise’ is a totally unregulated or defined concept and, for some, just a convenient brand”.

    “On the one hand, the voluntary sector is being seen as a desirable brand. On the other, the distinctive value an independent voluntary sector can bring is not being unrecognised in commissioning arrangements. We think there is a real danger of parts of the sector being subsumed into the public or private sectors as boundaries are not just blurred but crossed. Some organisations are already being ‘dragged’ into unwelcome sub-contracting relationships with the private sector because it is difficult to gain prime contracts or are being forced to mimic other sectors to qualify for public sector funding”.

The Report of the Independence Panel continues tellingly on page 43:

    “And yet we suspect there is a growing reluctance in the sector to speak truth to power, partly because it is so hard to gain the ear of Government for the voluntary sector, as discussed below. For example, leading infrastructure bodies came under attack from within the sector when they wrote as ‘charity leaders’ to the Economic Secretary to the Treasury on 19th October 2012 saying that they ‘were looking forward to working with you to build a more sustainable economic future for our country, by stimulating growth and tackling the deficit’. The letter was seen by some as placing the voluntary sector at the disposal of the government machine”.

Conclusion

David Floyd in his Beanbags and Bullshit posting Helping the Least Needy on Saturday 02 February 2013 wrote:

    “It’s vitally important that our social investment eco-system develops approaches that can manage the trade-offs between short-term financial viability, innovation and social need. That means finding ways to invest in risky social enterprises and projects that have the potential to deliver big social impacts. And also finding ways to invest in less commercially viable Social Enterprises and projects that tackle the most severe social needs”.

HUCKFIELD believes that the problem with this approach is that national Third Sector Organisations seem to have fallen for the Government’s message on Social Investment. Perhaps the time has come for Social Enterprises themselves to do more to amplify the excellent case made by Robbie Davison? For most of us, the essence of the case he makes is not based on meeting Social Finance half way or reaching a compromise. It’s much more about stopping Social Investment in its tracks before large swathes of public service delivery are funded by the whim of private Social Investment.

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Private Philanthropy is not the Answer to Public Spending Cuts

HUCKFIELD offers sincere apologies that a previous posting with the same title was withdrawn earlier this week on account of technical problems. Though some of these are still being resolved, this narrative and contents represent the updated and final version.

As a Board Member of the Social Entrepreneurs’ Network Scotland, HUCKFIELD once more declares an interest. Senscot promotes its own definition of Social Enterprise. These are the details of the Voluntary Code of Practice for Social Enterprise in Scotland – the Senscot Code

This posting provides details on these issues:

  • Massive Public Spending Cuts. Central Government Departments and Local Councils face massive expenditure cuts. As shown below, before 2020, many Local Councils will be forced to decommission many mainstream services.
  • ISAs Fund Public Services Delivery. Alongside all this, a central plank in the UK Government’s policies is clearly set out in the Growing the Social Investment Market White Paper in February 2011. Page 7 says: “Our vision could eventually see individuals and families choose some Social Investments as part of their ISAs or pension fund. And it could help unlock a slice of the £95bn of UK charitable income and endowment assets for social investment.”
  • Financialisation of Social Enterprise. To stimulate the Government’s vision of a Social Investment Market, up to £1bn funding is being made available through the Cabinet Office, Big Lottery, Big Society Capital and other agencies.
  • Loose and conflicting definitions of Social Enterprise. Many Social Investment Funding intermediaries have loose and conflicting definitions of those organisations eligible for funding to build a Social Investment Market – so that Companies Limited by Shares and private shareholders and companies could be beneficiaries.

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The Size and Scale of Public Spending Cuts

The following represent examples of the size and scale of public spending cuts which are imminent:

The Local Government Association Response to the Chancellor’s Autumn Statement on Wednesday 05 December 2012 summarised the situation as follows:

  • “Local government has borne the brunt of cuts to public spending so far and, while it is pleasing our campaigning has resulted in councils being protected from additional cuts next year, the extra two per cent cut in 2014/15 is unsustainable.
  • “Local authorities already face a possible £1bn cut to funding for 2013/14 on top of the 28% reduction set out in the spending review and the further 2% now announced for 2014/15.
  • “It is generally recognised that councils have managed the cuts so far by maximising efficiencies and redesigning services. With further cuts on the horizon, this will be impossible to repeat and impacts on the local frontline services that residents rely on and value are very likely”.

London Borough of Barnet’s ‘Graph of Doom’


    The Institute of Local Government Studies at the University of Birmingham on Wednesday 23 May 2012 provided a handy summary to accompany this Graph:

    “Barnet Council estimates that over the four-year Spending Review period it will lose roughly 30% of its income, requiring matching reductions in spending. The bar chart plots the predicted spending on adult social care and on children’s and family services over the coming decade – showing that, without significant changes in the way these services are provided and/or in councils’ funding, the increasing numbers it will be supporting mean that by 2022-23 it would be providing only social services, there being no money left for anything else”.

City of Birmingham’s ‘Jaws of Doom’

    The Birmingham Mail of Sunday 13 January 2013 summarised the situation “Birmingham City Council’s ‘Jaws of Doom’ Budget Gap is Widening:

    “The ‘jaws of doom’ budget gap surrounding Birmingham City Council’s finances have widened to £625mn, the Labour Leader Sir Albert Bore has revealed. Sir Albert said that the city is now facing a budget gap £20mn higher than first thought following recent Government funding announcements.

    “It means that Council services, including libraries and leisure centres, community support services and parks could all be under threat of either being shut or contracted out. Last October the Council Leader announced that they had to make £605mn of savings over six years from 2011 to 2017 – of which only £275mn have been achieved to date.

    “Appearing before a Council Scrutiny Committee he said that a root and branch review of council services is now underway and that consultation on major cuts, including the decommissioning of services, will begin in the summer.”

Continuing Cuts to Scottish Departmental Expenditure Limit Settlement

Chapter One of the Strategic Context for (Scottish Government) Draft Budget 2013-14 on page 3 shows that Scotland is not exempt from these spending reductions:

“The Chancellor indicated in this year’s UK Budget that significant reductions in public spending are likely to continue beyond this Spending Review period (ie after 2014-15), which would mean that real-terms spending power in Scotland is again limited by decisions made in London. Scottish total DEL for 2016-17 would be 17% lower in real terms than that for 2010-11. As highlighted in Figure 1 above, given that 2012-13 DEL is 7% lower than 2010-11, we are currently not yet half way through the budget cuts indicated by the UK Government”.

These examples above show the size and scale of public spending cuts now taking place. These represent the disappearance of public services on which people depend.

Alongside this, the following Section shows that the UK Coalition Government will be spending up to £1bn to stimulate the creation of a Social Investment Market. Even if all outputs and projections offered by the Cabinet Office and various agencies were realised, they cannot replace the public realm which will disappear.

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Social Investment Funding from the Cabinet Office

The Social Outcomes Fund, launched by the Cabinet Office on Friday 23 November 2012, is managed directly by that Department for promotion of Social Impact Bonds through helping charities to win Payment by Results contracts.

The Expression of Interest Form for the Social Outcomes Fund for Social Impact Bonds summarises its purpose:

    “The Social Outcomes Fund is an innovative new top-up fund that will create many more Social Impact Bonds that make a difference to people’s lives. It will attract new money by bringing in investment to help finance early, preventative programmes on some of the most complex and expensive social problems. The fund will be used to provide a ‘top-up’ contribution to PbR (Payments by Results) or SIB (Social Impact Bonds) contracts that are designed to deal with complex and expensive social issues. ….The Fund will only top up a minority proportion of outcomes payments, and the average across the Fund is expected to be 20% of the total outcomes payments. The aim of the Fund is to support 10 – 20 new PbR/SIB contracts. It aims to leverage at least £60mn of social investment.”

Main applicants to the Fund, which operates only in England, will be Government Departments, Local Councils and other Commissioning Bodies, like Police Forces or Clinical Commissioning Groups.

On eligibility, page 4 of the Expression of Interest Form shows:

    “1.5 Who Can Apply?
    “..It will preference propositions that catalyse new and innovative service provision, encourage active engagement from the Voluntary Community and Social Enterprise (VCSE) sector and enable service redesign. Expressions of Interest may therefore be submitted by any interested party such as a commissioner, service provider, intermediary or investor”.

There is nothing elsewhere in the Guidance which defines eligibility for specific types of “Voluntary, Community or Social Enterprise” or what structural requirements these should have. Huckfield is among others asking what kind or organisations might ultimately benefit from this funding. Without requirements for profit distribution and an asset lock, these might be Companies Limited by Shares.

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Social Investment Funding from Big Society Capital

Big Society Capital has £600mn at its disposal to stimulate the Social Investment Market. Big Society Capital on Monday 14 January 2013 set out its targets:

    “Big Society Capital (BSC), the world’s first Social Investment Bank, has today set a target of investing between £75m and £100m in new projects during 2013 after committing £56m in its first nine months.

    “Since it was formally launched in April 2012, BSC has committed investment to 20 Social Investment projects totalling £56mn. This has included supporting six Social Impact Bonds, and being the cornerstone investor in an array of Social Enterprise funds. In addition BSC has helped develop the Social Investment market in the UK, investing in the development of a social stock exchange; providing funding to support the growth of ClearlySo, a firm dedicated to helping social organisations raise capital; and collaborating with 14 Social Investment Intermediaries to publish best practice guidelines on evidencing social outcomes.”

Big Society Capital’s Definition of Social Sector Organisations includes for profit companies. The requirements for funding ‘For Profit Social Sector Organisations (SSO)’ are described in Big Society Capital’s Governance Agreement.

    “Section 1.2.2
    “…have a policy in relation to the distribution of profit after tax that ensures surpluses are principally used to achieve social objectives. Practically this means that the payout of cumulative profit after tax to shareholders will be capped at 50% over time, and therefore ensures that any surpluses generated over time will be mainly:

    • reinvested in the business
    • applied in advancement of its Social Objects or
    • distributed or donated to other social sector organisations

    “Section 1.2.3
    “have a constitutional or contractual lock on its Social Objects, dividend and surplus distribution policy and ensure the disposal of assets is compatible with the Social Objects embedded in its constitutional documents”

Huckfield is surely among many others asking whether for profit organisations should feature among Big Society Capital’s investees.

But there is a further difficulty in this definition of eligibility. Since Big Society Capital only invests in Social Investment Intermediaries, this does not always correspond with the definitions of Social Enterprise required by its investees – as shown below by the example of ClearlySo.

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Social Investment Funding from ClearlySo

In April 2012, ClearlySo published its Guide for the Ambitious Social Entrepreneur. Page 7, Chapter 3 The Social Enterprise Sector, says:

    “The common characteristics of a Social Enterprise are:
    “It is a business that trades with the aim of tackling social problems by improving communities, people’s life chances and/or our environment; it has a clear sense of its mission and how its activity addresses a particular need.

    “It differs from straightforward Charity because it is run as a business, earning money from trade and making surpluses which in part are used to finance further activities which generate social benefit”.

The Big Society Social Sector Definition says:

    “The statute which governs the establishment of BSC defines them as organisations that “exist wholly or mainly to provide benefits for society or the environment” This definition includes regulated social sector organisations such as charities, Community Interest Companies or Community Benefit Societies”.

As an investee, how does ClearlySo reconcile this looser definition when deploying Big Society Capital investment which is governed by different rules of eligibility? As shown below, even when there are tighter structural definitions for organisations, there is still a risk that these may be bought out by the private sector.

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Social Investment Funding from Big Venture Challenge

Big Lottery Fund has given a £15.5m boost to fund social enterprises. UnLtd will receive just over £8.5m to run the next phase of the Big Venture Challenge. Following an earlier pilot, in January 2013 Unltd, ClearlySo and theShaftesbury Partnership launched the Big Venture Challenge with the following invitations:

  • “For Entrepreneurs
    The Big Venture Challenge is an intensive 12 month programme that is designed to help you raise external investment (debt or equity) of between £50,000 to £250,000. This means working with you to build a compelling growth story, finding investors, making strategic connections and supporting you as an entrepreneur during the journey”.
  • “For Investors
    We are looking for investors – private individuals (angels), foundations, family offices, institutions and corporations – interested in investing £50,000 – £250,000 in some of the most exciting early-stage social ventures in England.
  • “For Supporters
    We are building a network of supporters – individuals and organisations– who can help 30 of England’s most ambitious social entrepreneurs to reach scale.

The Big Venture Challenge Application Guidance Notes show on page 4:

    “Social entrepreneurs with ventures of any legal incorporation form may apply – that includes charities, not-for-profit Companies Limited by Guarantee, Community Interest Companies or for-profit Companies Limited by Shares”.

This gets more complicated when the Social Investment Business which “will support Big Venture Challenge winners by managing the match-funding process”, refers inquirers to KnowHowNonProfit, part of NCVO, which includes another definition of ‘Social Enterprise’:

    Diagram Two - A Spectrum of Organisational Models

    Diagram Two – A Spectrum of Organisational Models

    “There is a greyed-out box cover circles 2-6. This is labelled ‘Grey area in which organisation are often loosely referred to as Social Enterprises’.

Conclusion from this Section. The example of Big Venture Challenge and others above demonstrate that often the Government, the Social Investment Intermediary and the final beneficiary may each have a different definition of ‘Social Enterprise’.

HUCKFIELD therefore asks who is keeping track of these significant sums of funding in a wide range of funding programmes – and there are many more – and who knows what kind of organisations are the final beneficiaries?

There is surely a possibility that many beneficiaries claiming a “social purpose” may be Companies Limited by Shares owned by private shareholders or companies?

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Does Social Enterprise need Social Investment?

The following research shows that Social Enterprise is neither ready nor asking for Social Investment.

Investment Readiness in the UK July 2012 by ClearlySo and New Philanthopy Capital represents one of the largest surveys into investment readiness by those organisations for which a Social Investment Market is being designed. The survey’s Research Methodology on page iv shows:

    “As part of this research, we surveyed 7,420 VCSE organisations from the Big Lottery Fund’s grantee database and ClearlySo’s membership database; 1,255 organisations completed the survey, which equates to a response rate of 17%. We also carried out a literature review and over 40 interviews with investors, intermediaries and support providers across the four countries of the UK.”

Other Sections of the Report show that there is no big demand for Social Investment:

    Is there an Investment Problem? on page 9 shows:
    “Successive governments have spent (or “invested”) significant sums in the last decade – over £400mn in Community Builders, Future Builders, the Social Enterprise Investment Fund and other mixed grant/loan funds to support organisations towards investment. But while these programmes have no doubt supported a number of individual organisations, at a systemic level the investment readiness of the sector as a whole is still perceived to be lacking.

    “….Conversion rates among social investors, (not including government-backed soft loan and grant funds) appear to sit between 5% and 15%. At one extreme, Community Builders had 4000 enquiries leading to 200 applications and 37 investees – equivalent to less than a 1% conversion rate and thus a significant mismatch of perceptions between investors and applicants.”

    Not Interested in Social Investment on page 32 shows:
    “Just under half of those surveyed are not interested in investment. Those in this category are largely strongly against taking on finance that needs to be repaid to support their plans — only 8% agree that they would consider it. Three quarters feel that charitable money should be spent on delivery, not on repaying loans”.

Cabinet Office/IPSOS Mori National Survey of Charities and Social Enterprises National Results in December 2010, showed that many organisations were not ready for Social Investment:

  • Page 16 shows shows that in 2010, Access to Loan Finance for your Organisation was Not Applicable for 59%, with only 3% Fairly Satisfied
  • Page 18 shows that in 2010 only 9% showed that Income from Investments was most important for the Organisation’s Success

‘Lighting the Touchpaper’ by the Boston Consulting Group and Young Foundation. November 2011 showed on page 12, Exhibit 5 “Share of Social Investments Made in 2010 by Type”:

    “The Social Investment Market is therefore far from the vision of risk taking social investors with equity stakes in ambitious Social Enterprises. In fact, equity and quasi equity investments together account for just 5% of the total market, less than £10mn in total.”

None of this seems to show any great enthusiasm for the investment products offered from Social Investment intermediaries above.

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Definitions of Social Enterprise, Restrictions on Distribution of Profits and Asset Locks are Important

The following are recent examples where either employee ownership or an asset lock under a Community Interest Company still may prevent private sector acquisition.

The Saga of EAGA
As shown in Construction Inquirer, February 28 2011, EAGA was bought by Carillion for £306mn despite strong protests of more than half its workforce. The story continued:

    “The Eaga Partnership Trust holds 37% of the company on behalf of the staff in a similar ownership structure to John Lewis.

    “But the Eaga trust’s board has voted to forgo cash payment following the sale and transfer its holding into Carillion shares without consulting staff”.

Ealing Community Transport
In June 2008, ECT Recycling was bought by the for-profit May Gurney construction company for £15mn. Other divisions of ECT were disposed of, or separated from the parent group, leaving ECT to focus on its core transport operations. This restructuring meant that assets held for the interest of the community were transferred into private hands, despite ECT’s being registered as a Community Interest Company.

Rory Ridley Duff and Mike Bull on page 219 of Understanding Social Enterprise: Theory and Practice (Sage 2011) analysed what took place.

    “In ECT’s case, the Regulator confirmed that ECT operated within its own rules (Gosling 2008) and that money raised from the sale of subsidiaries enabled ECT to service debts in its parent business. The events surrounding ECT, however, highlight two things about CICs and income streams: firstly, income can be generated for Social Enterprises by selling CIC assets to the private sector: secondly, the ‘asset lock’ does not effectively prevent CISs from transferring their income streams to organisations outside the Social Economy.

All this shows that even with strict definitions of ownership, profit distribution and an asset lock, it is still possible for assets held for employees or the community may still pass into private ownership.

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Private and Corporate Sectors Watch and Wait

Examples above show that without strict definitions and monitoring of structures which restrict distribution of profits and insist on an asset lock, some organisations which claim a “social purpose” may be “fattened up for the market”. Social Enterprise UK has produced an excellent Shadow State: A Report about Outsourcing of Public Services. December 2012, which shows:

    “Introduction on page 9:
    “Consider the latest numbers: the Probation Services are commissioning £600mn worth of their work a year (this amounts to 60% of their annual spend); Atos is now in receipt of £3bn worth of Government contracts; the estimated value of NHS contracts, since the passage of the Health and Social Care Act is £20bn; the Welfare Reform Bill, passed in March 2012, is expected to yield another tranche of contracts worth between £300mn and £5bn”

    “Children’s Social Care on page 31:
    “Advanced Childcare was England’s biggest operator, with 143 homes and 1,400 staff; it was bought in 2011 by American private equity house, GI partners, having previously been owned by Bowmark Capital. Advanced Childcare went on to purchase Continuum Care and Education, which was previously owned by 3i. Castlecare, in Northamptonshire, runs 40 children’s homes; it was bought by Baird Capital Partners Europe for £9mn in 2004. The company has expanded by buying two smaller childcare companies, Quantum Care and Sovereign Care, for £1mn and £1.3mn respectively.”

These “real world” examples of public service delivery highlight the context and environment in which a Social Investment Market is being stimulated. Above all, these show the need for strict controls and monitoring to ensure that Social Investment does not become a precursor to takesovers by private equity and the corporate sector.

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Conclusion

In this posting Huckfield has sought to provide a basis for these conclusions:

  • These examples above show that against a background of massive public spending cuts, even if Social Investment Market intermediaries exceeded all their targets, these efforts cannot repair or replace the damage being caused to public services. As Local Councils are forced to decommission mainstream services, Social Impact Bonds and Payment by Results are not a dependable replacement.
  • Under a gradual Financialisation of Social Enterprise, ISAs, private savings and individual Social Investment through private philanthropy, through seeking a return on investment, should not become the basis of mainstream delivery of public services on which people depend.
  • Loose and conflicting definitions of structures eligible for accessing Social Investment funding may mean that ultimate beneficiaries are Companies Limited by Shares and private shareholders through dividends.
  • Even with controls over profit distribution and asset locks, there is still a risk that some of these structures may fall prey to take overs and buy outs by private equity and the corporate sector.

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A Requiem for Social Enterprise?

The Importance of a Definition for Social Enterprise

(As usual, 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. However, views expressed in this posting are Huckfield’s own.)

In seeking to clarify a definition for ‘Social Enterprise’, this posting in no way aspires to argue against other Third Sector colleagues. Most mutuals, cooperatives, Social Firms, Development Trusts and many others are on the same side of this argument.

This posting argues to keep the private sector and the corporates out of ‘Social Enterprise’. This is why, like many others, Huckfield encourages continuing alignment and adherence to the Senscot Code for Social Enterprises.

The contribution from Social Enterprise UK to the Guardian’s “Tax Break Treatment for Health Firms” Monday 14 January 2013 doesn’t really help.

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Previous Attempts to Define Social Enterprise

Since many people don’t understand Social Enterprise, despite several previous definitions, there remains a need for clarity to exclude the private sector. Here are some examples:

Social Enterprise: a Strategy for Success. July 2002. Department of Trade and Industry

    Section 1 Social Enterprise Explained. 1.1 Definitions and Characteristics on page 13:

    “A Social Enterprise is, first and foremost, a business. That means it is engaged in some form of trading, but it trades primarily to support a social purpose. Like any business, it aims to generate surpluses, but it seeks to reinvest those surpluses principally in the business or in the community to enable it to deliver on its social objectives. It is, therefore, not simply a business driven by the need to maximise profit to shareholders or owners.

    “Social Enterprises are diverse and operate at many levels. They include local community enterprises, social firms, mutual organisations such as co-operatives, and large-scale organisations operating nationally or internationally. What they have in common is a commitment to meeting the social and financial double bottom line, with some adding a third – environmental.

    “While some Social Enterprises start off as businesses, most are in transition from their beginnings as voluntary sector organisations, dependent largely on grants and volunteers, and working to increase traded income. A recent National Council for Voluntary Organisations (NCVO) report said that up to 35% of general registered charity income is derived from trading activities”.

The Role of the Voluntary and Community Sector in Service Delivery: A Cross Cutting Review, September 2002: HM Treasury.

    Chapter 5, Social and Community Enterprise on page 23:

    “5.1 Social Enterprises are not for profit businesses driven by social objectives. They are an expanding part of the wider voluntary sector. And, in reality, there are a substantial number of VCOs that share some of the characteristics of social enterprises. A Social Enterprise is defined by DTI’s Social Enterprise Unit as:

    “a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community. (Social Enterprises) include local community enterprises, social firms, mutual organisations… and large-scale organisations operating nationally or internationally.”

Our Health Our Say: a New Direction for Community Services. January 2006. Department of Health

    Glossary on page 220 defined ‘Social Enterprise’ as:

    “Businesses involved in social enterprise have primarily social objectives. Their surpluses are reinvested principally in the business or community”

Welcoming Social Enterprise into Health and Social Care: A Resource Pack for Social Enterprise Providers and Commissioners. January 24 2007. Department of Health

    i. What is a Social Enterprise? on page 4

    “Social Enterprises are business-like entrepreneurial organisations with primarily social objectives. Their surpluses are mostly reinvested back into their business or the community to help achieve these objectives and change people’s lives for the better. Social Enterprises are not driven by the need to maximise profit for shareholders and owners.

    “In essence, social enterprises use business solutions to achieve public good. They tackle a wide range of social and environmental issues and operate in all parts of the economy, helping make it stronger, more sustainable and socially inclusive”.

The Future Role of the Third Sector in Social and Economic Regeneration: Final Report July 2007. HM Treasury and Cabinet Office:

    Introduction on page 6 in Box 1.1 Diversity in the Third Sector recognised a continuing definitional dilemma:

    “Social Enterprises – in 2005 there were over 55,000 Social Enterprises, some of which also come into the categories of VCOs or cooperatives. The annual turnover of social enterprises is around £27 billion and they contribute about £8.4 billion to GDP. Social Enterprises are active in a wide range of economic activity, in sectors such as training, social care, housing, leisure and childcare. They include organisations such as those selling fair trade goods such as Café Direct, organisations established to provide employment opportunities for people facing disadvantage (Social Firms) and development trusts”.

While these examples are not an exhaustive list of all occasions on which ‘Social Enterprise’ has been mentioned in various Government documents, they do show that because previous definitions lacked clarity, the door to the private sector and corporates remained ajar.

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A Requiem for Social Enterprise

The big risk is that every time some Social Enterprise organisations seek to clarify or define “Social Enterprise” more precisely, it may sound like a Requiem for Social Enterprise.

For example, on Monday 14 January 2014 on the Beanbags and Bullshit site, Social Enterprise UK commented:

    “It’s also worth noting that it’s not the first time the DH (Department of Health) has done this – see Health and Social Care Act 2008 where in order to establish the Social Enterprise Investment Fund the Government Department had to determine some legal parameters on the form that organisations needed to take in order to qualify – it’s this experience too that helps inform our view on this. If we believed this posed a threat to the Social Enterprise movement, we would tell the DH, and we’ll continue to monitor this and speak out if we feel the need to.”

So what about the threat from the Department of Health’s December 2012 Regulations for new Local Healthwatch Bodies, which many believe open the door to private providers? 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 Health and Social Care Act 2012.

As shown in detail in 2013 – a Defining Year for Social Enterprise, many organisations, including Social Enterprise UK, were consulted about these Regulations, and either aquiesced or did nothing about it.

It’s also notable that a range of other organisations from Though Cowards Flinch to Venturesome: Charities Aid Foundation have raised concerns about these Regulations.

The reference above to ‘Health and Social Care Act 2008‘ by Social Enterprise UK presumably means guidance issued by the Department of Health Social Enterprise – Making a Difference. A Guide to the ‘Right to Request’. November 2008. NHS Directorate of Commissioning and System Management and Social Enterprise Coalition, which reads:

    ‘Section 2: What is Social Enterprise’ on page 6

    “All Social Enterprises have social or environmental objectives or both. While many private businesses also consider themselves to have social objectives, Social Enterprises are distinctive because their social or environmental goals are central to what they do”

    “…..Likewise, any Social Enterprises created under the ‘right to request’ would reinvest the profits they generate back into improving health services for NHS patients and local communities”

But Social Enterprise UK has itself undermined its support for this definition through its Criteria for the Social Enterprise Badge, under which 50% of profits can be distributed elsewhere for a “return on investment”:

    “Reinvests or gives away at least half of its profits towards its social purpose

    “What a Social Enterprise does with its profits can be critical to how its social mission is delivered. We believe the majority (more than 50%) of an organisation’s profits should be reinvested to further the social or environmental mission. We believe this leaves sufficient scope to allow a return on investment when required while retaining clear commitment that the core purpose of the organisation is social”.

So despite Social Enterprise UK’s apparent intercession with Department of Health about the Social Enterprise Investment Fund in 2008, this definitional confusion lingers. This is reported in a recent evaluation in: Start-up and Growth: National Evaluation of the Social Enterprise Investment Fund (SEIF). December 2012. Third Sector Research Centre:

    7.3 Organisational Characteristics on page 42:

    “Whilst the Social Enterprise Investment Fund (SEIF) set out no prescription of legal format for investees, they are expected to have not for profit status. However, our survey also suggests some evidence of companies limited by shares which may enable members to receive profits (although this could be an indication of CICs which can issue shares that pay capped levels of dividends)”

So the reference above to “If we believed this posed a threat to the Social Enterprise movement, we would tell the DH ,” sounds like ’empty vessels’!

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Conclusion – ‘Social Enterprise’ after the Local Healthwatch Definition

Huckfield is among many who continue to believe that the ‘Social Enterprise’ doorway is being pushed open ever more widely to the private sector and corporates – as shown in detail in 2013 – A Defining Year for Social Enterprise:

Each time this happens, it increases the risk that for many in the media and wider public, ‘Social Enterprise’ continues as 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. That surely doesn’t help Social Enterprise?

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2013-A Defining Year for Social Enterprise

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

Background

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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Who knew Charities’ Letter to HM Treasury was being sent?

Charity Chief Executives write to the Treasury

On Friday 19 October 2012, the Chief Executives and Secretaries of several large UK Charities sent a Letter to Sajid Javid MP, Economic Secretary to the Treasury, which led many of its readers to believe that they had not only signed up to the Coalition Government’s Spending Cuts, but to its Welfare Reforms too!

These are some important points from their letter:

  • “As leaders from the voluntary sector, we are looking forward to working with you to build a more sustainable economic future for our country, by stimulating growth and tackling the deficit. In particular, we are writing to inform Treasury negotiations for the Autumn Statement and Budget 2013”.
  • “Firstly, our sector stands ready to make a greater contribution to the Government’s Open Public Services agenda. Crucially, we need the opportunities to do this. National and local commissioners need more encouragement and support to engage with the sector”.
  • “Thirdly, as the Government’s welfare reforms take effect, we know that some of the most vulnerable people in our country will be affected – including children. Our sector will be at the frontline – helping individuals and families prepare for and manage change. Naturally, the Government wants to support people off benefits and back into jobs wherever possible. But we know that it can end up costing Government more if vulnerable people are not supported through these processes appropriately: the costs associated with contested work capability assessments are an example of this. We therefore ask Ministers to give special consideration to the important work that our sector, and particularly advice services, can play in relation to welfare reforms and preparing for their impact”.

The organisations which signed this letter include:

All these organisations have Boards, Trustees and Members which range across the length and breadth of the Voluntary, Community, Social Enterprise and wider Third Sector in England, Wales and Northern Ireland. Some extend their reach into Scotland too. Many should surely be asking how their organisations became associated with this letter?

No wonder that on Wednesday 21 November 2012 NCIA (the National Coalition for Independent Action) reckoned that these umbrella bodies had signed up to privatisation and welfare reform and responded:

  • “NCIA says the open public services agenda is code for privatisation and termination of public services. “We question whether we should connive in delivery of policies about which there is growing evidence of damage to our common wealth and to vulnerable people. Our starting point should always be the expressed needs of our beneficiaries and those with whom we stand in common cause.”
  • “NCIA also criticises the letter’s reference to welfare reforms, “because these are not reforms. They are cuts, the effects of which we observe daily, and are being monitored nationally. The clear inference is that the sector is, through these leaders, offering increased levels of volunteering to compensate for shrinking public services.”
  • “NCIA adds that the letter to Javid does not mention the role of voluntary and community groups campaigning alongside service users, trade unions and public sector staff against cuts. Or the difference between national and local organisations; or service delivery and campaigning bodies.

And all this comes in the wake of Unite Voluntary Sector members calling for Charities to leave ACEVO. Unite’s Community, Youth and Not for Profit members working in organisations like Crisis, Greenpeace and Amnesty International and Unite’s London and Eastern Region, have been calling for action at national level.

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Brief History of Third Sector Organisations and Coalition Government Policies

The reality is that we should not be too surprised by any of this. As long ago as Thursday 08 March 2012 in Killing Social Enterprise Softly Huckfield wrote a lengthy chronology stretching from New Labour’s introduction of Flexible New Deal in 2009 as the forerunner to the Work Programme to various Coalition Government proposals throughout 2010 and 2011 for the gradual privatisation of public service delivery. Killing Social Enterprise Softly showed in detail how the main London based Third Sector Organisations did not oppose any of these initiatives in principle and instead only sought some small amendments.

Is it any wonder that, following these organisations’ failure to oppose the Coalition Government’s Agenda, The Guardian on Thursday 02 March 2012 referred to John Lister’s “Teach Yourself Lansley“, which defined Social Enterprise as follows:

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

The following represent Coalition Government initiatives, seeking to introduce private finance in to into public service delivery, which were not opposed by these organisations:

  • “Modernising Commissioning Green Paper”. December 2010.

    This Green Paper sets out the Coalition’s intention to widen public sector commissioning procedures. The Social Enterprise Coalition ““Response to Modernising Commissioning: Increasing the Role of Charities, Social Enterprises, Mutuals and Cooperatives in Public Service Delivery”” January 2011, was hesitant on payment by results.

    The SEC Response said on page 4: “We would support mechanisms where parts of payments are dependent on the outcomes delivered but not the entire payment. We know of examples of contracts where 20%-30% of payment is dependent on outcomes and results delivered”

  • Growing the Social Investment Market: A Vision and Strategy. February 2011.

    This White Paper outlined the potential of the Social Enterprise contribution of 1.5% of GDP to “help unlock a slice of the £95 billion of UK charitable income and endowment assets for social investment”. The National Council for Voluntary Organisations (NCVO) set up a Working Group which produced the NCVO Commission on Tax Incentives for Social Investment: Analysis and Recommendations in January 2012, which included Social Enterprise UK. Basically the Report seeks to extend direct private investment in Third Sector Operations. On page 22 “Recommendations”, the Report says:

    “Second, the Government should consider how equity or equity-like investment made directly into enterprises established for community or social benefit should be eligible for CITR (Community Investment Tax Relief)along the following lines:

    “The meaning of “CITR” would be extended to read: “entitlement to tax reductions in respect of amounts invested by [individuals or companies] in community development finance institutions or through equity or equity-like investment into enterprises established for community or social benefit”.

    In other words, this NCVO Commission signed up in principle to support Social Impact Bonds.

  • Open Public Services White Paper. July 2011.

    This White Paper is specific about opening public service delivery to wider tendering and commissioning. ACEVO’s Response to the Open Public Services White Paper on October 10 2011 under “3. Open public services require a healthy provider market for commissioners and service users to choose from; the Government therefore needs to take steps to promote a healthy provider market” the ACEVO Response encouraged more competition in public service delivery:

    “In both cases we believe there is a case for Government to promote a health provider market, ensuring that the shape of the provider market is determined primarily by what is in the interests of taxpayers and service users, not what is in the interests of particular providers”.

    Under “2.There needs to be greater emphasis on the delivery of reform, and accountability for delivery”, the ACEVO Response continued:

    “We recently surveyed all third sector subcontractors involved in the Work Programme (with 148 responding, ie. just under a third of all third sector subcontractors) and found that 42% thought DWP’s differential pricing would not be adequate to ensure the Work Programme helps harder-to-reach client groups, with 47% unsure and only 9% responding that it would be adequate. At the very least this suggests that there is a need to ensure that the success of the Work Programme in supporting the hardest to help is monitored, and remedial action taken if it is found not to be wanting”

    Though this ACEVO response advocates a “Right to Redress” and adherence to the Merlin Standard, the trouble is that any “Right to Redress” comes too late when bad practice has been carried out and Social Enterprises and other Third Sector groups have already lost work.

  • Department of Business, Innovation and Skills “Improving Access to Non-Bank Debt – Call for Evidence” November 2011

    This Section describes NCVO and Social Enterprise UK proposals for tax incentives to stimulate private investment in the Third Sector.

  • On Friday 27 January 2012 Social Enterprise UK in a “Letter to respond to the Department for Business, Innovation and Skills: Improving Access to Non-Bank Debt – Call for Evidence” sought relaxation of regulations to permit more direct private investment:

    “Other initiatives that we believe the government should explore include:

    “Reform of tax incentives – We would like to see the government seriously consider the recently submitted policy recommendations from the Commission on Tax Incentives for Social Investment, of which Social Enterprise UK are members”

    “Regulatory framework reform – In particular, we would like to see the government review the current financial promotions rules with a view to providing exemptions for community and social finance offers. Underpinning any exploration into reforming the regulatory framework, we would also like to see how individual socially motivated investors could be benefitted and supported. In the same vein, to look at collective investment models/products designed around actively courting retail investment – e.g. retail social impact bonds, crowd funding – which could perhaps work in a similar way to ISAs with protections against exploitation such as caps”

These NCVO and Social Enterprise UK responses seek to encourage further Social Investment by private investors in Third Sector and Charitable activities. They also represent broad support for the direction of the Cabinet Office Paper “Growing the Social Investment Market:A Vision and Strategy. February 2011“, the main purpose of which is to encourage more private investment in Third Sector delivery.

This surely represents a national policy shift towards privatisation which is not supported by most of these organisations’ Social Enterprise or other Third Sector members?

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Investment in Third Sector Organisations

These Third Sector Organisations should take note of evidence provided by their own members. “Investment Readiness in the UK”, July 2012, published by ClearlySo, New Philanthropy Capital and Big Lottery, shows that most Third Sector Organisations are totally unprepared for this kind of investment. This was a very big survey, as shown on page iv of the Executive Summary:

  • “As part of this research, we surveyed 7,420 VCSE organisations from the Big Lottery Fund’s grantee database and ClearlySo’s membership database; 1,255 organisations completed the survey, which equates to a response rate of 17%. We also carried out a literature review and over 40 interviews with investors, intermediaries and support providers across the four countries of the UK. Five case studies were conducted to provide further practical insights into the journeys taken by organisations to secure investment”.
  • As page 8 says:

    “Successive governments have spent (or “invested”) significant sums in the last decade – over £400m in Community Builders, Future Builders, the Social Enterprise Investment Fund and other mixed grant/loan funds -to support organisations towards investment. But while these programmes have no doubt supported a number of individual organisations, at a systemic level the investment readiness of the sector as a whole is still perceived to be lacking”.

  • “…..At one extreme, Community Builders had 4000 enquiries leading to 200 applications and 37 investees – equivalent to less than a 1% conversion rate and thus a significant mismatch of perceptions between investors and applicants”.
  • Or as page 41 “Mismatch No 3: Investor Readiness for Investing in Social Returns” says:

    “This mismatch is further evidenced by the type of capital demanded by and offered to the sector. Our survey respondents predominantly seek risk capital on sub-commercial terms of between the £10,000 and £100,000 range. However, if what is on offer from investors is larger asset-backed capital on near commercial terms, there is a market failure, captured in the typical exchange between investors and potential investees who accuse each other of “not understanding the social enterprise model” or “not being investment ready”.

These quotations are from a very large survey of Social Enterprises, Voluntary and Community Organisations across the country. The “Investment Readiness in the UK” Report’s conclusions are hardly a clarion call for the kind of policies supported by Third Sector umbrella organisations above!

Conclusion

The National Coalition for Independent Action is right to ask whether these Third Sector Organisations support the Coalition Government’s agendae for privatisation and welfare reform. It is difficult to imagine that this is what most of their Social Enterprise, Community Action and Voluntary Sector members want.

But as shown above, and in Killing Social Enterprise Softly for these organisations to be supporting Coalition Government initiatives which are not in the interests of most Third Sector Organisations is nothing new.

In December 2012, Social Enterprise UK published The Shadow State: A Report about Outsourcing of Public Services. Pages 5 to 7 show:

  • “An unknown amount of public money is being taken out of the social economy and redistributed to private individuals and investors through shareholder dividends, rather than being retained in areas where services are commissioned, or being reinvested in service improvements”.
  • “Years of purchasing services from the lowest bidder on price has left authorities with little real choice over who they can buy services from. For example, children’s and adult social care markets are dominated by private providers and the largest players are often private equity companies who that have bought out other providers. Costs can skyrocket when there is little or no choice of provider”.
  • “While social enterprises are growing and gaining confidence in consumer and business-to-business markets, our research shows that the ones working mostly in public service markets are drastically low in confidence. Many are making redundancies and turning away from public service markets in order to survive, just when they are needed most. They cite public-sector procurement policy as one of their biggest barriers to sustainability”.

Is it any wonder that all this is happening when Social Enterprise UK and other Third Sector Organisations, rather than opposing Coalition Government policies, just keeping offering their broad support?

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Daily Mail reveals Inconvenient Truth in Perth Prison

A Night to Remember

Prisoners’ Week Scotland, organised by Prison Chaplains, has organised a commendable series of events throughout this week. But on Wednesday 21 November, few of the 60 of us attending might have anticipated that an evening in Perth Prison would cause the Scottish Daily Mail to reveal its own Inconvenient Truth.

As a panel member, Graham Grant, the paper’s Home Affairs Editor, unashamedly admitted that his paper’s editorial policy was driven by giving its readers what they wanted to hear. His paper simply sought to reflect the views of its readers.

Earlier, in reply to a question sent in from Peterhead Prison about publishing “good news stories”, he didn’t think that prisons were for “healing souls” or for spiritual healing. The perspective of his readers was that too little was spent on victims. It was hard to find a “champion of prisoners’ rights”.

His parting shot for the evening was that prisoners should serve the full sentence and the Scottish Penal System faced an “identity crisis”.

Perhaps he was pretending not to hear the evening’s careful opening contribution from Mike Ingles, Perth Governor, who had started as a Prison Officer in 1995. Following £80mn public expenditure in Perth Prison, he saw his job as turning this investment into outcomes. The refurbished prison was a platform for safer communities and reducing reoffending.

Clarion Calls for Reform

The Governor might also have been thinking of a series of recent reports advocating reform of Scotland’s Criminal Justice System to reduce reoffending:

  • Scotland’s Choice: Report of the Scottish Prisons’ Commission July 2008.

    In para 3.45 on page 41, under “Community Justice, Prisons and Resettlement”, Henry McCleish’s Commission reported: “The most important drivers of offending and reoffending are beyond the reach of the penal system; some suggest that recognition of the social and cultural causes of reoffending makes it unwise to overstate the role that the penal system can play in reducing reoffending”

  • Audit Scotland’s “An Overview of Scotland’s Criminal Justice System” September 2011.

    On page 33, para 98 the Report says “In 2002, the UK government estimated that the cost to the criminal justice system of each prisoner who reoffended on release was £65,000 (around £80,000 at today’s prices). In 2006/07, 6,890 people in Scotland were released from custody and more than 4,200 had reoffended within two years. The costs to the Scottish criminal justice system resulting from this level of reoffending have not been estimated but they are likely to be similarly high”.

  • Scottish Government Justice Analytical Services “What Works to Reduce Reoffending: A Summary of the Evidence” October 2011.

    Page 44 “Concluding Remarks” says “Key events in offenders’ lives such as parenthood and re-integration in the local community impact on their motivation to stop reoffending” and

    “Rehabilitative interventions with the strongest evidence base are cognitive-behavioural programmes and supportive and interpersonally skilled supervision”.

  • Elish Angiolini’s “Commission on Women Offenders” April 2012.

    This Report goes much wider than Cornton Vale. Page 85, para 312 says:

    “There is also a lack of a shared vision or common goal directed at delivering the best outcomes for women offenders; fragmented and short-term funding; and an absence of any systematic measurement of outcomes or of what programmes are effective in reducing reoffending.”

    Page 85, para 313 continues:

    “This has resulted is inconsistent and ineffective service provision, which has seriously impacted on the positive outcomes which are being achieved for women offenders and undermines confidence in the efficacy of community disposals”

  • Scottish Government’s “The Strategy for Justice in Scotland” September 2012

    Page 49 on “Reducing Reoffending” says “We understand that closer integration of services to rehabilitate offenders is essential to address the root causes of offending, and ensure a longterm solution for future generations. Much better links must be developed with employment, housing, education and health services, helping offenders to access the services they need to desist from crime”.

  • Audit Scotland’s “Reducing Reoffending in Scotland” November 2012.

    Page 34, para 124 says “Given the findings of this audit, improvements are required in all of these areas. Overall, a more coherent approach at national, regional and local levels is required, with a shared commitment to reduce reoffending among all the bodies who work with offenders, including criminal justice bodies, councils, the judiciary, the NHS and the third sector”.

There is a strong and coherent threat running throughout all these Reports – that Scotland’s Criminal Justice System has not been as effective as it might be in reducing reoffending.

But throughout the evening in Perth Prison it was some of the prisoners attending who themselves provided the best response to the Daily Mail. One “lifer” was proud of the hairdressing certificate he had attained. Another recognised prison as a place of rehabilitation. When asked by Gordon Grant who they thought paid their wages, their blunt riposte was that they earned their pay through doing work in prison.

Communities of Grace

One of the more thoughtful contributions of the evening came from a fellow panelist on the platform, Rt Rev Albert Bogle, the new Moderator of the General Assembly of the Church of Scotland. Responding to questions about those leaving prison, he offered the services of the Church of Scotland as a hosting place for organisations coming together for supporting released offenders. Some church groups already formed the basis of Family Centres. Though he recognised that communities outside often had concerns about those released from prison, he also recognised the qualities and skills of those working inside prisons and how these might be used beyond prison walls. Churches might offer “communities of grace” to assist in this process.

The Prisoners’ Forum Panel Chair, BBC TV Presenter, Isabel Fraser, reminded us about One Stop Shop Community Justice Centres or “hubs” in Elish Angiolini’s Commission on Women Offenders.

There were several contributions, including from prisoners, about difficulties encountered on release, inadequate temporary accommodation and the temptations of reversion to previous addictions and other problems.

Marina Shaw, Manager of Circle Scotland’s Families Affected by Imprisonment team, urged more preventative work before offenders were caught up in the Criminal Justice System and more restorative justice. She recalled a Barlinnine Prisoner who said that when people in society came to him he felt he could return to society. Plans for leaving should start at the beginning of sentences rather than at the end. Her team sometimes worked with those released and their neighbours for some months.

Pete White, Founder and Coordinator of Positive Prison, Positive Futures, said that despite the Daily Mail’s coverage, some good services were available. There should be more help not to get into prison and more help when coming out. Earlier he said that if society supported the Criminal Justice System, it should also offer more support to those leaving it.

Franny McGrath, Operations Manager for Perth and District YMCA, shared concerns about the quality of accommodation available on release and advocated working with prisoners before they came through the gate. He felt that the Third Sector often showed more consistency.

Public Social Partnerships and Reducing Reoffending Change Fund

During the evening there were several contributions about the roles of public and Third Sector providers and their working together.Huckfield is concerned that there was not more awareness of the Scottish Government policy of Public Social Partnerships and its £7.5mn Reducing Reoffending Change Fund, administered by a very competent team at The Robertson Trust.

There are other Charitable Trust and Foundations which take an interest in projects for previous offenders re entering the community and to prevent reoffending.

And, Finally

At both the Perth evening and at the Barlinnie “No Offence” Conference on Wednesday 07 November, Huckfield was struck by the number of Prison Officers and inmates who attended and were obviously taking a real interest in proceedings. Though some prisoners spoke, you could see that some Officers also had something to say. Huckfield hopes that future occasions will provide an opportunity for Prison Officers’ contributions too. At the recent Prison Officers’ Association Scotland Conference in Peebles on Wednesday 31 October 2012, delegates welcomed what the new Scottish Prison Service Chief Executive said about their role outside prisons too.

Once again, Rev Kenneth McGeachie, the Perth Chaplain and Scotland’s Prison Chaplains are to be congratulated for their organisation of Prisoners’ Week Scotland. Those attending in Perth Prison last Wednesday evening were appreciative of their endeavours in providing a bridge between those working for Scottish Prison Service and those “outside”.

All Together in Barlinnie

Throughout this posting, important pointers for those involved at a local level in delivery of the Community Justice Agenda, including Social Enterprises, Development Trusts and Local Community Organisations, are highlighted in this colour. All these will have increasing roles to play in the Scottish Government’s proposals for Criminal Justice reform.

A Day to Remember

Huckfield believes that last Wednesday 07 November was one of those days to be remembered. And it happened in Barlinnie Jail.

No Offence: the Criminal Justice Community Network should be publicly congratulated on its success in bringing together a widely drawn cast list of those across Scotland and beyond interested in Criminal Justice Reform.

Everyone was saying the same. No one spoke up for the English Criminal Justice Reform Agenda based on external commissioning from Serco and G4S of HM Prisons and the Probation Service, payment by results and even Social Impact Bonds.

These following notes summarise contributions from the main speakers at Barlinnie:

Derek McGill, Barlinnie’s Governor, welcomed those attending, gently reminding us that we would observe that this was a working prison.

Huckfield and those attending were struck by the supportive attitude of Prison Officers who let us in and made sure we could get out – not an easy task for a conference of more than 80 inside a secure unit.

In Barlinnie, they even stir your tea for you!

Miranda Alcock, Justice Portfolio Manager, Audit Scotland introduced Audit Scotland’s new Report Reducing Reoffending in Scotland which shows that though £419mn was spent by the Scottish Prison Service, Community Justice Authorities and Scottish Government in 2010/2011 on dealing with convicted offenders, only £128mn was spent on reducing reoffending. Miranda’s Presentation at Barlinnie showed the mismatch of 430 Skills, Learning and Employability programmes to prevent reoffending, compared with only 80 on housing and accommodation and a mere 5 on money and debt management.

She said that Community Justice Authorities (CJAs) represented an extremely complex landscape, without clear accountability for reducing reoffending. “CJAs and local councils should improve their understanding of the unit costs of different criminal justice social work activities”.

Colin McConnell, the new Chief Executive of Scottish Prison Service sounded very much the proverbial new broom. He had set in motion a major restructuring which he hoped would make SPS more responsive to the changing Criminal Justice Agenda.

He said “If you have any ideas, please bring them to us”. During tea breaks (again, with tea stirred for you!) many said they welcomed hearing that said from SPS.

Joe Griffin, Deputy Director, Scottish Government Criminal Justice Division, spoke about the need to move resources into reducing reoffending. Joe’s Presentation at Barlinnie reminded us of the background and context:

These Reports, together with others mentioned below in Delivery of a Reform Agenda, have effectively set the Agenda for Criminal Justice Reform in Scotland.

Christine Scullion from Robertson Trust, which manages the Scottish Government’s “Reducing Reoffending Change” Fund, spoke of the need to link local authorities and others in the public sector to more permanent funding changes for reform of the system. Christine’s Presentation emphasised the Robertson Trust’s guiding themes:

  • We look at hard issues where no-one else has gone and identify gaps in service provision where our resources can have the greatest impact

  • Take a partnership approach and work with other funders over a long period of time

  • Seek engagement with statutory partners to ensure longer term uptake

The Robertson Trust’s management of the Scottish Government’s Reducing Reoffending Change Fund demonstrates a prime example of the Scottish Government’s Public Social Partnerships Policy. Under the Public Social Partnership (PSP) approach, public and Third Sector Organisations join together in the co-production and design of services, enabling Third Sector Organistions to take advantage of new market opportunities.

All this operates in stark contrast to the UK Department of Work and Pensions’ Work Programme model, under which service delivery is commissioned from private sector providers funded through payment by results.

Fergus Neil from the Scottish Centre for Crime and Justice Research ended the day with his Presentation on Rehabilitation and Reintegration, Rehabilitation was “the action of restoring something to a previous (proper) condition or status”.

Various other presentations during working groups included:

All these projects demonstrate that continuing investment in community-based Third Sector delivery can be more effective than more expensive short term prison sentences.

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Delivery of a Reform Agenda

Under the Management of Offenders etc (Scotland) Act 2005, the Scottish Government set up eight Community Justice Authorities (CJAs) across Scotland under a National Advisory Board, chaired by the Justice Secretary. Their task is to work with the Scottish Prison Service, local authorities, NHS Boards and other local partners to distribute funding for criminal justice social work in local areas for management of offenders and to reduce reoffending rates.

CJAs have only been operational since 2007 and face a difficult task. Though they show some good practice examples, their performance varies and in reports below some issues have been raised about their effectiveness in reducing reoffending:

  • The Scottish Prisons Commission Report, July 2008: “Scotland’s Choice”: Under “Community Justice and Criminal Justice Social Work” on page 43, the Report said “The CJAs (Community Justice Authorities and the NAB (National Advisory Board) have been in operation for less than two years. Though it is too soon to assess their successes and failures, we remain concerned about the capacity of the CJAs to deliver on reducing reoffending, given their very limited powers and resources”

  • The Scottish Government’s Justice Analytical Services “What Works to Reduce Reoffending: A Summary of the Evidence” October 2011 on page 44 said: “Interventions that help offenders find employment, develop prosocial networks, enhance family bonds and increase levels of self-efficacy and motivation to change are those more likely to have the strongest positive impact on the risk of reoffending”.

  • Audit Scotland’s “Overview of Scotland’s Criminal Justice System”, September 2011 on page 37, said “Although CJAs were established in 2007, there are no agreed measures to assess their performance or impact. As a result, CJAs use a range of different performance indicators developed locally with different systems for reporting and presenting data”.

  • The Commission on Women Offenders (Angiolini) Report, April 2012 said on page 87, “Based on all the evidence we have read, seen and heard, we recommend that a new national service, called the Community Justice Service, is established to commission, provide and manage adult offender services in the community. Its objective would be to protect the public, reduce reoffending and promote rehabilitation”.

    Page 88 of the Report said the new Service would “take overall responsibility for the management and delivery of criminal justice services in the community, including Community Justice Centres and multi-disciplinary teams”.

  • The Scottish Government’s “Strategy for Justice in Scotland”, September 2012 on page 49 under Priority 4 said: “Reducing Reoffending: As a justice community, we will look to understand what the obstacles are to this happening, and work through programme structures to remove these obstacles and improve the commissioning and performance of rehabilitation services. This will involve, among other things, a fundamental review of funding for community justice, moves to implement a new performance management framework and a formal review of Voluntary Throughcare”.

Community Justice Authorities (CJAs) with their present powers have a difficult job. These above Reports show that despite some good practice examples, CJAs’ reducing reoffending performance is varied.

Since Third Sector Organisations have a vital interest in local service delivery, Huckfield hopes they will submit evidence, especially on the need for continuity of funding, to the Consultation on CJAs which the Scottish Government is launching shortly.

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Meanwhile, in another part of Scotland

A week before the Barlinnie conference the Prison Officers’ Association Scotland Annual Conference in Peebles on Wednesday 31 October gave an “indicative view” against the motion that “That Scottish Prison Officers are better off under a United Kingdom”

The POAS Conference rejected the “English Agenda” of HM Prisons and Probation Services commissioned from SERCO and G4S.

The Report of the Prison Officers’ Association Scotland Conference shows that they were also appreciative of the approach of Colin McConnell from Scottish Prison Service:

  • “Particularly pleasing to the ears of conference was his view that Prison Officers have much more to offer the justice system as a whole and utilising our skills and attributes in the broader context of the management of offender’s and the Scottish Governments aim of achieving a `Safer Scotland`, including working externally to the establishment, should be developed and expanded upon. A view purported by this union for some time. We look forward to working with SPS and other partner agencies on this in the future”

And, Finally

This means that those attending at Barlinnie and the Prison Officers’ Association Scotland Conference were supporting some important elements of the emerging Scottish Agenda for Reform of the Criminal Justice system.

Huckfield hopes that this rejection of the “English Agenda” may form the basis of Third Sector Organisations and others in Scotland seeking reform of the Criminal Justice Agenda and working with POAS on all of this.

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European Funds – Time to Have Your Say


Huckfield offers this posting as a background briefing on the European Union’s proposed Structural Funds Programmes for the period 2014 to 2020, especially for Scotland. This is written alongside increasing Parliamentary pressure – Conservative and Labour – for a reduced European Budget. What Scotland and the UK might receive in EU Structural Funds depends on the size of the future EU Budget.

Important comments for Social Enterprises, Development Trusts and Local Community Organisations throughout are highlighted in this colour. These may also interest Housing Associations since in appropriate parts of proposed programmes they also may access EU funds.

Meanwhile, as required by the EU Commission, on Friday 02 November 2012 the Scottish Government invited tenders for the “Ex Ante Evaluation” of proposed EU funding and how this fits with Scottish Government objectives.

Between December 2012 and July 2013 this Ex Ante Evaluation process provides an opportunity for Social Enterprises and Third Sector Organisations to become involved and feed in comments on the shape and size of programmes.

Though the EU’s proposed Common Strategic Framework includes a range of funds, this posting focuses on European Regional Development Fund (ERDF) and European Social Fund (ESF) – with which readers are probably most familiar. ERDF may be used as part funding for some capital and revenue spending projects. ESF may be used for revenue projects. A key determinant is whether proposed projects fit within the EU Commission’s proposed Thematic Objectives for EU Funds 2014-2020

Though it is too early to predict how much EU Funding and programme details for Scotland and UK regions, analysis in Allocation of EU Funds 2014-2020 projects categories of regions with an initial broad indication of their possible funding percentages, based on documents currently available.

INTRODUCTION

1) This Note is based entirely on current EU policy documents and Scottish and UK Government sources. For 27 Member States, it is currently proposed that €336bn EU Structural Funds might be available, including €226bn for investment in jobs and growth.

2) Though this Note and its links to documents are accurate at the beginning of November 2012, EU Structural Funds Programmes for 2014 to 2020 will be determined by the size of the EU Budget – which is not yet agreed. There are no current indications of the financial size of various programmes or their allocation to Member States. Allocation of EU Funds 2014-2020 shows the EU’s proposed different regional categories, including those for Scotland and the UK. The EU Commission proposes four basic categories of regions, including new “Transition Regions”.

The size of the future EU Budget is a contentious issue. Britain’s Prime Minister has argued for a freeze. On Wednesday 31 October 2012 the House of Commons voted for a reduction in the EU proposed 2014-2020 Budget.

3) As a background to all this, Timetable for EU Structural Funds 2014-2020 highlights the main documents and possible timescale for Scottish and UK Coalition Governments.

4) The EU Programme for Scotland will be within a UK National Programme. Huckfield has long argued that the Scottish Government should directly handle negotiations for EU Programmes rather than Whitehall Departments of Business, Innovation and Skills, Work and Pensions and Communities and Local Government. Future ESF Community Initiatives which may follow EQUAL and ESF Innovation, Transnational and Mainstreaming Programmes should also be handled by the Scottish Government, rather than the UK Department of Work and Pensions.

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DRAFT EU REGULATIONS FOR 2014-2020 PROGRAMME

These links highlight the EU Commission’s draft Regulations for proposed Structural Funds Programmes 2014-2020:

4) Notes on these proposed Regulations and Articles highlight why early discussion – especially during the Scottish Government’s Ex Ante Evaluation of proposed EU programmes – is needed to secure the implementation of important provisions for Social Enterprises and Third Sector Organisations, including Housing Associations, for local operation.

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PURPOSE OF THIS POSTING

For Social Enterprises, Development Trusts, Housing Associations and Local Community Organisations, these Draft Regulations are significant since in many areas they emphasise local development strategies and include provision for their local management and administration. Previous EU Programmes have not included these specific references.

1) Preparation in England and Scotland. Throughout England, Social Enterprise and Third Sector Organisations are already preparing policy implementation proposals for EU Structural Funds and other Programmes for the period 2014-2020. In Scotland, as shown above, the Ex Ante Evaluation process begins in December 2012 and offers similar opportunities.

2) Social Enterprise and Third Sector Organisations. Social Enterprise and Third Sector Organisations represent represent large numbers of people, organisations and resources in the Third Sector. Many may not currently be aware of these specific references, enabling their significant role in EU funds. Based on these references, it is appropriate that Social Enterprise and other Third Sector Organisations, including Housing Associations with their wider role, should press for local involvement in operation of these Programmes.

3) Local Management and Operation. Proposed 2014-2020 EU Programmes include significant provision for Community Led Local Development, Integrated Territorial Investment and Joint Action Programmes – all of which are explained in a detailed analysis in Local Management of EU Funds 2014-2020

COFINANCING AND TECHNICAL ASSISTANCE

Huckfield apologises for introducing too much Euro-Jargon.

1) CoFinancing, as explained in more detail in ESF CoFinancing – EU Funds 2014-2020, means that a Central, Public or Local Government Organisation provides match funding for ESF or ERDF so that applications are made for 100% funding. Applicants do not have to secure their own match funding. There are many current examples of CoFinancing Organisations in England, including the Department of Work and Pensions and Skills Funding Agency. An example in Scotland is the Scottish Funding Council’s CoFinancing of the Priority 5 ESF “Employability Pipeline”. Future ESF and ERDF might be CoFinanced for Social Enterprise and Third Sector Organisations, especially for locally managed programmes described above.

2) Technical Assistance, as shown in more detail at Technical Assistance for EU Funds 2014-2020 may be available to support programme management, operation and administration, including operation of local programmes described above. Many EU Funds Conferences and Seminars about programme operation and management attended by Social Enterprise and Third Sector Organisations are funded through Technical Assistance. Technical Assistance for locally managed infrastructure organisations might fund training in management, record keeping and administrative systems.

AND, FINALLY

Huckfield has tried to simplify a detailed and complex series of available documents, on which EU Funds for 2014-2020 will be based.

There are many organisations and previous applicants which have abandoned EU funding because of its complexities, onerous administration, auditing requirements and difficulties in securing match funding.

However, in proposed EU Programmes for 2014 to 2020 there are many more detailed references to Social Enterprise and local community involvement than in previous programmes. There are also many more proposals for these funds to be managed at a local level which is more appropriate to Third Sector Organisations.

Huckfield hopes that all this is sufficient to encourage these organisations to become involved in the Scottish Government’s Ex Ante Evaluation process of proposed EU programmes which starts in December.

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Now is the time to look for different fundraising sources

To save time, most important Huckfield comments below are highlighted in this colour.

Background – Charities and Voluntary Sector will lose £3bn by 2015/2016

As probably the best up to date summary of the effects of public spending cuts on Charities and the Voluntary Sector, NCVO publishes the NCVO UK Civil Society Almanac. The current version forecasts the scale of looming cuts:

“The formation of the coalition between the Conservatives and Liberal Democrats in May 2010 produced a deficit reduction plan with an ambitious target (the “structural” deficit eliminated by 2015) and a reliance on spending cuts to achieve this. Public expenditure is forecast to fall by roughly £30 billion in real terms between 2009/10 and 2015/16, a fall of 4%.

“Local government spending is estimated to fall by 11.4% between 2010/11 and 2015/16. If these cuts are passed on to local charities this would suggest a fall in local government income to charities of around £800 million per year by the end of the period. The equivalent figures for central government suggest a fall of around £450 million.

“The UK voluntary sector is therefore estimated to lose around £1.2 billion in public funding a year by 2015/16, a fall of 9.4%. Cumulatively, the sector stands to lose £3.3 billion over the spending review period (2010/11-2015/16). All these figures depend on voluntary sector income from government falling at the same rate as total government spending”.

Sir Peter Housden’s Memo – Even Worse to Come

Sir Peter Housden has been Permanent Secretary of the Scottish Government since July 2010. He was previously Permanent Secretary of the Department for Communities and Local Government.

On Thursday 30 August 2012, the Guardian published its own summary of the now-famous “leaked Housden memo“, warning of at least £10bn more cuts to come:

“The timetable for the next round of spending cuts was highlighted in an internal memo by Sir Peter Housden, permanent secretary for the devolved Scottish government in Edinburgh, who warned staff of a “sobering” assessment from the Treasury at a meeting in London in May.

“Housden said of the meeting at the Foreign Office, which was addressed by William Hague and Danny Alexander and senior officials from the Treasury and Department of Work and Pensions:“They reminded us that the UK strategy for fiscal consolidation implies that the next spending review (due next year, it is thought) will involve a reduction in spending of the same order as in the current programme, and further substantial reductions in welfare spending, beyond those currently in the pipeline”.

Cuts will Affect Local Spending too

Just in case any readers reckon that most of this represents cuts at national level, on Monday 03 September 2012, Centre for Cities published: “Pound Land: What might austerity look like over the next few years?”:

“Last week, the leaked Housden Memo said the Chancellor is drawing up plans to announce a further £10 billion reduction in welfare cuts. The memo points out the next spending review—set for 2013, though still up for debate—will need to see welfare reduced by £10 billion through 2016, otherwise other areas such as education will need to be cut further.

“Whether the cuts amount to £10 billion in the end is less important than the notion that additional cuts are in the pipeline. Some of these cuts will affect national welfare spending (such as JSA), but it will affect local government spending as well.

“…..In sum, local government’s spending power has fallen almost 9% since the 2010/11 Spending Review. The Housden Memo suggests further cuts could be equivalent to 20% reductions from 2012/13 budgets”.

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Funding from Trusts and Foundations

Many Charities and Third Sector organisations are now seriously beginning to think about approaching Trusts and Foundations for funding. There are nearly 9000 of them which donate to a wide range of charitable causes. Most are not service deliverers and many are sophisticated in the way they handle funding approaches.

It is interesting that their total annual donations amount to around £3bn annually – roughly the same amount as Charities and Voluntary Sector organisations may lose before 2015/2016. But since this annual £3bn already contributes to these organisations, it’s by no means a simple replacement funding process!

The following are gentle Huckfield reminders about new approaches to Trusts and Foundations:

  • Each Trust or Foundation is very different. They may be family, company, community, private or charities set up by London Livery Companies. Though their sites usually state their application process and timetable, many have exclusions.
  • Few are as wide in their coverage as the public sector funding sources with which many readers may be more familiar.
  • So it’s not a good idea simply to “cut and paste” over a wide range of Trusts and Foundations. Considerable research is needed beforehand to establish the purpose, areas covered and other comments. A Trust usually needs to see the accounts and constitutional details from organisations which is might fund.
  • If you reckon that making a funding application to public sector bodies and organisations is sometimes difficult, take a deep breath. Funding approaches and applications to Trusts and Foundations need some really detailed research first and big reserves of strength and determination.

Huckfield will soon be publishing more on approaches to Trusts and Foundations and other approaches which Charities and Third Sector Organisations might make.

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Killing Social Enterprise Softly – II

BACKGROUND

These are fast growing trends in England which take further some of the themes developed in Huckfield’s Killing Social Enterprise Softly briefing posted in March. All of these increasingly portray the delivery of public services as an opportunity for private investment, with dividends and returns from that investment.

Taken together, these five main themes described below represent the gradual privatisation of the Third Sector and much of what is sometimes called Civil Society.

To save time most important Huckfield comments are highlighted in this colour. These headings below link to later Sections of this briefing.

1)THE GOVERNMENT’S AGENDA: “GROWING THE SOCIAL INVESTMENT MARKET”

In February 2011 the Cabinet Office published its White Paper “ Growing the Social Investment Market: A Vision and Strategy which set out the Government’s vision of moving significant private philanthropy investment into charities to fund delivery of public services.

2)SOCIAL IMPACT BONDS

held a very well-attended Conference on Social Impact Bonds in Bristol on Wednesday 20 June 2012 which Huckfield attended. This Section summarises some Conference presentations and describes mounting enthusiasm for public service delivery funded by Social Impact Bonds.

In Not So Good for Providers this Section describes the effects of these developments on providers and asks What about Local Communities?

3)CHANGING THE LAW ON CHARITIES

are among organisations submitting evidence to the current review on Charity Law to enable Registered Charities to pay a dividend on investments.

This Section includes the Hodgson Review of Charities Act 2006 and the Charity Commissioner’s Farewell Speech

The Government also has a dilemma over how to enable private providers to secure returns on possible investment in Higher Education.

4)THE MOVE TO MUTUALS

The transfer of services and staff from public employment to become mutuals or social enterprises is increasingly a political decision, which is seen as a means of de risking cheapening public service delivery. This Section covers the Social Enterprise Model and Teach Yourself Lansley

5)THE RISE OF THE INTERMEDIARIES

Social Investment Business is among those promoting a growing number of intermediaries taking their percentage out of “structured investment products” for investment in a growing “social profit” sector.There are also proposals for a Social Stock Exchange. This Section includes Investment and Contract Readiness and Financial Intermediaries

6)CAN SCOTLAND FIND ANOTHER WAY?

This Section looks at emerging alternative concepts for Social Enterprise and the Third Sector in Scotland. These include Public Social Partnerships and A Community/Social Enterprise/Third Sector Bank for Scotland?

7)AN ALTERNATIVE TO ‘SOCIAL TURBO CAPITALISM’

Huckfield’s conclusion is that these alternatives to ‘Social Turbo Capitalism’ which have emerged in Scotland are worthy of further focus, exploration and further development.

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MAIN HUCKFIELD BRIEFING BEGINS HERE:

Links have already been provided above to those sections which now follow.

1)THE GOVERNMENT’S AGENDA:”GROWING THE SOCIAL INVESTMENT MARKET”

A Routemap for Third Sector Privatisation

The Cabinet Office publication in February 2011 of “Growing the Social Investment Market: A Vision and Strategy” effectively offers the Government’s routemap towards the gradual privatisation of the Third Sector. Its Introduction and Executive Summary on page 7 makes plain this intention:

“So our vision is to create nothing less than a longterm ‘third pillar’ of inance for our crucial social ventures, alongside traditional giving and funds from the state. This pillar of finance is social investment, money that blends inancial return with social return. Our vision could eventually see individuals and families choose some social investments as part of their ISAs or pension fund. And it could help unlock a slice of the £95bn of UK charitable income and endowment assets for social investment”.

Section 2.3 on page 17 is equally candid:

“2.3 We do not underestimate the degree of challenge, or the timescale required to realise our vision. But the opportunity is large. UK charitable investment and endowment assets alone account for nearly £95bn. If just 5% of these assets, 0.5% of institutionally managed assets and 5% of retail investments in UK ISAs were attracted to social investment, that would unlock around £10bn of new finance capacity”.

Third Sector Organisations in England, including ACEVO, Social Enterprise UK (which so calls itself, when there is already a Social Enterprise Scotland) and NCVO all seem to have bought into this.

It is significant that Polly Toynbee’s Monday 16 April 2012 Guardian piece “On Charity, George Osborne must stand up to the self-interested super-rich” represented almost a lone voice in supporting George Osborne’s Charity Tax Donation capping.

All of these Third Sector Organisations said the Chancellor was wrong. Now that the Government has changed its mind, it will be interesting to see whether charitable philanthropists maintain or increase their giving.

2)SOCIAL IMPACT BONDS

Various semi public agencies, including Big Society Capital, Social Investment and Department of Work and Pensions, are prominent in encouraging the concept of a return on investment for the delivery of public services. There are now companies offering their services for measuring the impact of Social Enterprise services.
One Site, the ““The “Online Finance Degree” site makes Social Impact Bonds sound like the solution to the world’s problems:

“Essentially, SIBs are an economic arrangement between government and a private entity with the intent to resolve a specific social need and where the private entity is compensated only if a mutually agreed upon outcome is achieved. SIBs are uniquely different from other “pay for success” financial strategies. Unlike more traditional bond measures, taxpayers are not expected to pay anything unless the private entity meets its obligation”.

Bristol’s Council House was the venue for a packed Social Impact Bond Conference on Wednesday 20 June 2012, promoted by Social Finance, which Huckfield attended and which included some very persuasive presentations.

Delivering a Social Impact Bond

The presentation by Lisa Barclay on “ Delivering a Social Impact Bond ” showed “A cycle of underinvestment”:

  • Only 4% of UK health spending is on long-term preventative services
  • Budget cuts restricting services to core ‘crisis intervention’
  • Political pressure not to divert funding from core services
  • Public sector often lacks success in rolling-out promising interventions
  • Little evidence about what actually works
  • Innovative programmes seen as just too risky

Lisa Barclay continued:

  • Because complex and preventative programmes have shown particularly variable performance, there is a strong case for transferring the implementation risk to funders who have a strong interest in achieving particular social outcomes
  • By transferring implementation risk to investors, SIBs are either cash neutral in the downside case or cash positive for commissioners in the upside case

All this represents a very seductive message. If it doesn’t work out, it costs the commissioner nothing. If it does work, there is the possibility of longer term savings. The commissioner only pays for successful outcomes.

Social Impact Bonds in Worcestershire

The presentation “ Worcestershire:Exploring the Feasibility of a Social Impact Bond ” by Trish Haines, Worcestershire’s Chief Executive, was equally persuasive:

  • 107,000 people >65 years – projected to rise by 30,000 by 2020
  • 41,000 people with diabetes; 25,000 with heart disease; 15,000 with chronic lung disease; 9,000 living with cancer – projected to rise as the population ages
  • 45-50,000 emergency hospital admissions annually – cost £85mn
  • Almost 1/5 of the NHS budget is spent on last year of life
  • Council purchased social care services for >65 years covered 4,700 people in 2011 – cost £63mn”

In her “Synergy with Local NHS Acute Hospital Review”, Trish Haines continued:

  • “Aim to shift balance from acute care to community health and social care
  • SIB provides potential model to plan and fund radical change with sufficient critical mass to make an impact”

Both of these presentations – and others at the Conference – highlighted the Unique Selling Point of Social Impact Bonds – that they represent an almost cost-free and risk-free strategy for local authorities and others facing public spending cuts.

This is all persuasive stuff. While no one doubts the genuine motives or sincerity of these presentations or their enthusiasm for doing this, is this the only way forward?

As shown below in 6)CAN SCOTLAND FIND ANOTHER WAY? there are other ways of moving towards longer term preventative spending.

The following Section shows that these moves towards commissioning funded by private investment and using Payment by Results are not good for providers.

Not So Good for Providers

Throughout the Social Enterprise and wider Third Sector, alarm bells are ringing about the fragility of their structures and stability. In January 2012, the NCVO UK Civil Society Almanac reported on the generally deteriorating state of Third Sector finances:

“The UK voluntary sector is therefore estimated to lose around £1.2 billion in public funding a year by 2015/16, a fall of 9.4%. Cumulatively, the sector stands to lose £3.3 billion over the spending review period (2010/11-2015/16). All these figures depend on voluntary sector income from government falling at the same rate as total government spending”.

In February 2012, New Philanthropy Capital published its detailed survey “When the Going Gets Tough – Charities’ Experiences of Public Service Commissioning“. Though these were mainly medium to larger charities, this showed that charities are losing income and the general atmosphere of uncertainty being created:

  • Cuts to local authority funding appear to be hitting charities particularly hard, compared to other commissioners. 59% of charities say they are experiencing cuts in funding from local authorities, and 23% say that these cuts are over 20%. Smaller organisations appear to be slightly worse affected: 61% report cuts to local authority income compared to 55% of larger organisations (page 23)
  • Some charities are keeping afloat by dipping into their reserves: 62% of respondents have already used their reserves or plan to use them in the next 12 months to cover shortfalls in income (page 27)
  • Over 65% of respondents have closed or expect to close front-line services as a result of cuts. Redundancies and pay freezes are also affecting more than half of respondents (page 29)
  • Over 90% of survey respondents believe that their charity now faces greater risk. More than half (56%) believe that the current commissioning environment is much more risky for charities (page 30)
  • Charities feel they cannot compete on this basis and are often undercut by other bidders, particularly private sector organisations. ‘With the opening up of the sector to the private sector, we will continue to lose work where bigger organisations (A4E/Deloittes etc) are able to undercut and provide reduced rate services’ (page 31)

At the beginning of 2012, Dina Gojkovic, of the Third Sector Research Centre, University of Southampton, made a presentation “Results from a Survey of National Survey of Offenders – Why is Awareness and use of the Third Sector Services so low?”. This showed:

  • Almost 60% of organisations that identify offenders and their families as their main beneficiaries depend on public sources of income, which is higher than for other groups of VCS service users.
  • Additionally, almost 27% of VCS organisations working in this area reported having very little or no income at all, almost twice the figure for the VCS as a whole

This shows the fragile state of Voluntary and Third Sector Organisations working in Criminal Justice and how ill-equipped these are for future funding through Payment by Results.

These findings were reinforced at the beginning of 2012 in a further survey by CLINKS, which represents the Voluntary and Community Sector working in Criminal Justice, and published “When the Dust Settles” as an update on “The impact of the economic downturn and changing policy and commissioning environment on the Voluntary and Community Sector working in Criminal Justice”. The survey reported:

  • Over 80% of organisations surveyed have experienced a reduction in income combined with increased competition for shrinking funding sources. Respondents reported an average reduction in income from grant funding of 42%, from public fundraising of 30% and earned income of 21%. The income loss particularly affects smaller organisations, employing 1-10 staff (page 3).
  • “Widespread redundancies have continued over the last 6 months – and will continue into 2012. By the fourth quarter of 2011, 55% of respondents had made redundancies that year. 40% had staff on redundancy notice, or expected to imminently (page 6)
  • To deliver the PbR (Payment by Results) programmes, 59% of the organisations are using their financial reserves and some (14%) have taken out loans. The remaining 27% are using a mixture of finance – private funds, the Transition Fund and being paid up-front. One organisation is receiving half the contract up-front and a local authority is paying another organisation the majority of the fee with a PbR top-up. The fact that organisations are only able to deliver PbR programmes using reserves or taking out loans is limiting the number of programmes they can take on.(page 14)
  • Organisations with 1-10 staff were more affected than larger ones in percentage terms – they lost an average of 44% of their staff whereas organisations with 11-50 employees lost 24% and those with over 50 staff lost 16% of their employees.

The New Philanthropy Capital Survey May 2012 mainly covered medium and larger charities. The CLINKS “When the Dust Settles” Survey from January 2012 covered many smaller charities.

These and other surveys show that all sizes of charitable organisations have at best a precarious base on which to develop and build Payment by Results systems.

What about Local Communities?

While most of the presentations at the Social Finance Social Impact Bond Conference at Bristol on Wednesday 20 June 2012 concerned proposals at the Feasibility Study stage, a range of Social Impact Bonds is already in operation. These include:

Huckfield hopes that in some of these there will be appropriate consultation and involvement of local communities. It was notable that there was little mention during the whole Social Finance Bristol Conference on Wednesday 20 June 2012 of any need for the involvement local communities.

When one questioner asked about local community involvement, no one really answered. The only answer seemed to be was that “we consult the beneficiaries”.

While the packed attendance at the Social Finance Conference in Bristol on Wednesday 20 June 2012 shows a rapidly growing interest in Social Impact Bonds, this doesn’t show that they they represent the only way forward.

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3)CHANGING THE LAW ON CHARITIES

Hodgson Review of Charities Act 2006

With the Conservative Peer, Lord Hodgson, as its Chair, the Government is conducting a Review of the Charities Act 2006, which should report by the Summer. Lord Hodgson has a background in specialist merchant banking. His Terms of Reference include:

“Therefore, the review should take a broad approach and should seek to address these three issues: what is a charity and what are the roles of charities?; what do charities need to have/be able to do in order to be able to deliver those roles?; what should the legal framework for charities look like in order to meet those needs (as far as possible)? Note, however, that formal recommendations should relate only to the third of these”.

“In addition, within the context of the three main questions set out above, the review should consider the following specific matters, which have all been brought to the attention of the Government by the sector and others as issues requiring consideration”. These include:

h) Measures to facilitate social investment or “mixed purpose” investment by, and into, charities”

Mixed Motive (or Mixed Purpose) Investment

Lord Hodgson issued a Call for Evidence on Mixed Motive (or Mixed Purpose) Investment , which included:

“Until relatively recently, investments were generally justified as either:

  • Offering the best financial return for a given acceptable level of risk, that return being spent on furthering the charity’s aims (financial investment)
  • Offering the best way of directly furthering the charity’s aims (programme-related investment)

“However, a third category is now developing whereby the trustees consider that the investment is in the charity’s best interests even though it cannot be entirely justified on either one of these grounds alone. These investments may, however, be justified in terms of a combined or mixed financial and charitable return (provided there is no other reason for making the investment, such as private benefit). In other words, these investments will enable charities to further their charitable purposes whilst also providing a financial return (albeit likely to be a lower or less predictable financial return than a purely financial investment). Investments that can be justified on these grounds are known as mixed purpose or mixed motive investments; they will be referred to as mixed motive investments throughout this document”

The solicitors Bates, Wells and Braithwaite in April 2012 made a Supplementary Submission on Social Investment to Lord Hodgson , which included on its page 7:

“6.3 We do not believe that it is appropriate in an investment context to require private benefit to be “necessary, reasonable and in the interests of the charity” or “legitimately incidental” in the ordinary senses in which these phrases are used, for example, in grant-making contexts. In a social investment context, a charity investor is expecting to receive a return on its investment and so it would be more appropriate for private benefit to be “reasonable and proportionate” in all the circumstances

Higher Education and Reform of Charity Law

The Queen’s Speech on Thursday 10 May 2012 did not include the Higher Education Bill which the Government needs to implement some of its proposed changes following the Higher Education White Paper “Students at the Heart of the System” of Tuesday 28 June 2011 . There has been speculation on how David Willetts, the Higher Education Minister would open the door wider to private providers.

This speculation has heightened since the purchase of London College of Law by Montagu Private Equity – effectively the purchase of a Charity with Royal Charter and its transformation into a Profit Distributing Entity. Except for Oxford, Cambridge and the newer Universities formed after the 1992 Further and Higher Education Act, most Universities are also Charitable Chartered Corporations. Post 1992 Universities do not have Royal Charters and are Higher Education Corporations. They cannot issue bonds.

An expert on all of this, Andrew McGettigan, in his postings on Critical Education, has written much more on this in “Government Response – Part 3 Changing Corporate Form“.

All this means that the Government may have Higher Education reasons for the reform of Charity Law, which might enable payment of dividends or returns from private investment in Universities.

Charity Commissioner’s Farewell Speech

Dame Suzi Leather, the retiring Chair of Charity Commission, made a carefully crafted and final public Speech to the Almshouse Association Annual Conference on Tuesday 12 June 2012:

“But what really concerns me is a less tangible, less visible and longer-term challenge to charities’ future.

“Namely whether charities will continue to be able to demonstrate that they are fundamentally different from other types of organisations.

“Will charity continue to mean something special? Sufficiently unique to earn the trust the public places in charities and the privileges they enjoy?

“The past few years have seen the emergence of a plethora of new organisations from social enterprises to community interest companies, and a new emphasis on older forms, such as mutuals and co-operatives.

“The definition of these organisational forms is sometimes rather hazy, and they can, superficially, appear quite similar to charities.

“Indeed many do have a lot in common with charities – some have a social mission, some are not-for-profit, some work with and for vulnerable people and worthy causes.

“And at the same time, charities themselves are becoming ever more similar to other types of organisations.

“Charities are encouraged to become business-like, including by collaborating with corporations, and many charities have trading arms that operate much like businesses.

“Charities are also entering into new areas of public service provision, including by joining consortia with other charities and organisations to provide services say in the criminal justice system.

“None of these developments are necessarily problematic per se.

“But, collectively, they contribute to a perceived blurring of boundaries.

“….So there’s evidence that charity as a concept is not well understood by the public”.

While not in any way prejudging any conclusions which might arise from Lord Hodgson’s Review, Huckfield notes that Lord Hodgson’s Call for Evidence, the Supplementary Submission from Bates, Wells and Braithwaite, the Government’s Higher Education dilemma and Dame Suzi’s Farewell Speech all seem to point in the same direction – so that the law may be changed to permit some charities to pay dividends.

The ‘Social Profit’ Sector

A posting in the Alberta Calgary Herald about the “social profit” sector from Gena Rotstein of Dexterity Consulting on Tuesday 12 June 2012 on “The Industrialisation of Philanthropy will change the Meaning of Charity” perhaps offers a foretaste of what Dame Suzi had in mind?

“How will this affect our current social system? I think we will see a new type of charitable sector (social-profit sector), one that is not built upon paperwork filings to government, but on focusing in on the complex social issues affecting our communities (locally and internationally) and the opportunities for creating solutions that drive societies forward. This industrialization will encourage donors to move away from the question about operating budget and tax filings, to “what is my role in building vibrant communities and social systems?”

The concept “Social Profit” was derived from a piece in The Chronicle of Philanthropy on July 26 2007 “Let’s Put the Word ‘NonProfit’ Out of Business” by Claire Gudiani, which read:

“Nonprofit should be nonexistent — the term, not the type of organisation. The time is right to insist on a term that focuses on the investment, risk taking, and entrepreneurial imagination that have always been so essential to organizations that serve the social good. “Social-profit organizations” is a term that can better capture the contribution made by entities that have too long been known as charities or nonprofit groups”.

Huckfield is not at all suggesting that any of this is advocated by those pressing for Social Investment or Social Impact Bonds. These pieces are only shown here as examples of far out thinking to which some of this can lead.

What all this does demonstrate is that:

    Enthusiasm for Social Investment and Social Impact Bonds is growing rapidly

  • These will do little to ease the growing uncertainties faced by growing numbers of charities trying to deliver public services
  • An alternative or “better way” forward needs to be found – especially in Scotland, where the pressure for Commissioning, Social Investment and Social Impact Bonds is not yet strong.

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4)THE MOVE TO MUTUALS

Social Enterprise Model
The transfer from public employment to become mutuals or social enterprises – very often by a political decision since this is seen as a means of de risking and cheapening public service delivery.

This was exactly summarised in a piece by Rosie Jolly of Social Enterprise Network in Liverpool Daily Post of Thursday 07 June 2012

  • All too often social enterprise tends to be encouraged not because it makes enterprise more socially responsible, but because it puts the enterprise into social
  • This raises important questions around the current public service reform agenda
  • It is envisaged that 1m public sector staff will transfer to mutuals or social enterprises by 2015
  • Is social enterprise really the most appropriate model for public sector reform or are we likely to see social enterprises muscled out of the way by the private sector in a few years time?

No wonder Rosie Jolly’s piece concluded:

“We want to clear the mist that shrouds the term social enterprise and bring some clear eyed objectivity to the debate. Debate will naturally remain about what constitutes a true social enterprise, but perhaps JM Keynes got it right when he said: “It is better to be vaguely right than precisely wrong.”

Rosie Jolly’s piece in the Liverpool Daily post appeared on the same day on which there was a Cabinet Office Announcement about £19bn additional Department of Health funding for Social Enterprises:

“Alongside this work, the Department of Health is also announcing a further investment of £19m over the next year for Social Enterprises, on top of the £100m already invested by them over the last 5 years. The money will be used to support frontline staff to run services that provide what their local population really need”.

The Cabinet Office Announcement of Thursday 07 June 2012 continued:

“On the extra funding, Andrew Lansley, Secretary of State for Health, said:

“We have already seen 600 Social Enterprises within the NHS offering staff more freedom and giving patients more tailored health care. The extra funding announced today will help roll out more of these services across the health service and shift power and control to frontline workers.”

Francis Maude, Minister for Cabinet Office, said:

“The team from the Department of Health know how Rights to Provide work and will bring valuable expertise to the Cabinet Office as we roll out these rights across government. Now is the time for entrepreneurial public servants to take the initiative and push for ownership.”

This Section concludes with a gentle reminder to Huckfield’s first Killing Social Enterprise Softly, from which this is an extract:

Teach Yourself Lansley

What the Department of Health might have in mind was in 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”

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5)THE RISE OF THE INTERMEDIARIES

Investment and Contract Readiness
There are a growing number of intermediaries taking their percentage out of “structured investment products” for investment in the sector.

Under the Investment and Contract Readiness Fund, The Social Investment Business now offers grants between £50,000 to £150,000:

  • “to purchase specialised investment and contract readiness support and to cover some of the costs of putting the investment or contract readiness plan into action in the social venture itself
  • “Specialist support from an approved investment and contract readiness provider with a track record in supporting social ventures to secure social investment will be a significant proportion of what the fund offers”

Approved providers include:

  • ClearlySo “- which provides corporate finance and financial advisory services to social businesses and enterprises
  • Locality – the network for community-led organisations
  • Resonance – a boutique corporate finance intermediary specialising in social enterprise and impact investing, and
  • Social Finance – providing a range of financial advisory services to help build the social investment market.

The Measurers

As Matilda Macduff said in her New Philanthropy Capital blog “The Power of Thinking Positive” on Tuesday 12 June 2012:

“Small charities can, and do, measure their impact very successfully, making use of the wealth of free data and resources that are already out there”.

“When we analysed Elmore Community Services in Oxfordshire way back in 2008, for example, we were very impressed with its impact measurement, highlighting it as an example of good practice on our website. The charity had a turnover of less than £500,000, and ten staff members. Despite the challenges—its work is complicated, supporting vulnerable people with multiple problems who often fall through gaps in provision—the charity had an excellent track record of measurement. It uses the Outcomes Star to track changes in clients’ lives, demonstrating improvements across various areas such as housing and mental health. And more importantly, it uses this data when thinking about how to improve services and make its work more effective”.

Elmore Community Services is an excellent example of a quality organisation delivering excellent services. But in continuing with this posting, New Philanthropy Capital gave the game away in “The Power of Thinking Positive”, by Matilda MacDuff on Tuesday 12 June 2012:

“Measuring impact is important because it allows charities to think about how they can make their work better, help more people, and have a bigger positive impact on society. And it helps funders to channel their money to the most effective charities, so they ensure it makes the biggest possible difference and doesn’t go to waste”.

In other words, measuring impact helps to show investors the returns they might make.

Financial Intermediaries

is a good example of the financial intermediaries which are springing up.

“Our vision is to become recognised as the key driver of young philanthropy in the UK, to represent multitude of Syndicates across the UK and to become renowned for the quality of our Young Philanthropy Networking events. By the end of 2012, we aim to have over 15 Young Philanthropy Syndicates up and running, with an investment portfolio of over £100,000”.

The Social Stock Exchange (SSE) seeks to become a Financial Services Authority (FSA) authorised and regulated investment exchange for the trading in securities of social enterprises and other social purpose businesses. It will become the premier trading venue for social businesses wishing to raise risk capital and for social impact investors who wish to find global businesses that reflect their values”.

If the growth of Financial Intermediaries continues and the proposed Social Stock Exchange develops, Huckfield wonders how long it will be before we see the social version of Investors’ Chronicle or “Money Week“.

The only difference between other financial institutions in the City of London and what is described above is that somewhere in the title “social” usually features.

6)CAN SCOTLAND FIND ANOTHER WAY?

Public Social Partnerships

The Scottish Government funded the Public Social Partnership Project as part of the commitments it made in the Enterprising Third Sector Action Plan 2008-11. The Project, involving 10 pilots was delivered by PricewaterhouseCoopers LLP, in conjunction with Forth Sector Development. All this followed some pioneering work by the EQUAL Social Economy Scotland Partnership in 2007, which featured the Renfrewshire Alternative Procurement Project, the Public Social Partnership Recycling Initiative and the Edinburgh ILM Project as PSP initiatives.

In July 2011, the Scottish Government published a detailed “Practical Guide to Forming and Operating Public Social Partnerships

The Executive Summary of the Guide on page 4 says:

“A PSP differs from other commissioning approaches in that it starts with the need to be addressed, not the services available, which can often be the driver for other partnerships. A PSP typically comprises three stages:

  • Third sector organisations work with public sector purchasers to design a service
  • A consortium of public sector and third sector organisations may conduct a short-term pilot, helping to refine service delivery parameters
  • The service is further developed to maximise community benefit before being competitively tendered

“PSPs can enable the delivery of public services more efficiently and with more person-centred outcomes for users of services, by putting co-production at the heart of service design. As well as the centrality of co-production, PSPs have the added benefit of giving all partners the opportunity to test out new service designs through piloting. This allows operational issues to be addressed and user feedback to be incorporated into the final design of the service.”

While none of this means that a Third Sector Organisation may get the delivery contract, it does enable the exploration of a wider range of issues than in Social Impact Bonds. This also means that local community interests are also considered.

Results shown in the Practical Guide to Forming and Operating Public Social Partnerships include:

  • Changes in the scope and purpose of an Edinburgh City Council Care at Home Services tendering
  • Greenlink SROI, which showed a social return of £7.63 for every £1 invested
  • St Mary’s Place Guest House, which showed a social return of £6 for every £1 invested

These are early results and there are Public Social Partnership Projects still being evaluated. These will feature in further Huckfield briefings.

A Community/Social Enterprise/Third Sector Bank for Scotland?

Huckfield is an enthusiastic supporter of proposals for a separate Community/Social Enterprise/Third Sector Bank in Scotland, which would operate in a different way from Big Society Capital. The Bank would be owned by the sector and supported by organisations and individuals with similar values. Huckfield would also like to see Housing Associations and other similar organisations involved.

7)AN ALTERNATIVE TO ‘SOCIAL TURBO CAPITALISM’

Huckfield apologises for the length of and the details in this posting. Examples in Scotland are at an early stage and have a long distance to travel.

The conclusion is surely that just because a kind of “Social Turbo Capitalism” is emerging in England, in this Age of Austerity we should be examining the alternative ways forward in Scotland.

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