Transcript Slide 1

Social enterprise
and public service delivery
John Maddocks
cipfa.org.uk
Changing service delivery landscape
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Health
Localism
Modernising Commissioning
Review of service delivery and funding arrangements
Personalisation of social care
Promotion of social enterprise models
Big Society
Public Service Reform
“… support the creation and expansion of mutuals, cooperatives, charities and social enterprises, and
enable these groups to have much greater
involvement in the running of public services”
(The Coalition: Our Programme for Government)
cipfa.org.uk
Different policies different models
 Health
 Foundation trusts with greater freedom
 Employee led trusts
 Stakeholder trusts
 Localism
 Diverse supply of providers
 Voluntary & community organisations
 Staff mutuals
 Free schools
 Stakeholder models
 Personalisation
 Diverse range of providers – micro budget holders
cipfa.org.uk
Social enterprise
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‘A social enterprise is a business with primarily social
objectives whose surpluses are principally
reinvested for that purpose in the business or in the
community, rather than being driven by the need to
maximise profit for shareholders and owners.’
DTI 2002
‘… social enterprise if:
 the person or body is carrying on a business;
 the business’s activities are being carried on primarily
for a purpose that promotes or improves the social or
environmental well-being …;
 the greater part of any profits for distribution is
applied for such a purpose.’
Public Services (Social Enterprise and Social Value) Bill
cipfa.org.uk
A social enterprise …
 Undertakes trading activities
 Has a social purpose
 Profits are reinvested
= social enterprise
 Independent
 Asset lock
 Accountable for social goals
= social enterprise mark
 Participatory structure?
= participatory social enterprise
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Main types of ‘social enterprise’
 Charities
 Over 171,000 charities in UK
 Annual income approx £35bn
 Community interest companies
 Over 4,600 community interest companies
 Mostly smaller organisations
 But number is growing rapidly
 Mutuals
 Turnover approx £100bn
 1million employees
 Co-operatives (part of mutuals)
 Over 4,900 co-ops in UK
 Turnover approx £33bn
cipfa.org.uk
Variety of legal structures
Including:
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Company limited by guarantee
Company limited by shares
Company limited by guarantee & registered charity
Company limited by guarantee & registered CIC
Company limited by shares & registered CIC
Industrial & Provident Society- for benefit of
community
Industrial & Provident Society- bona fide co-op
Limited liability partnership
Charitable incorporated organisation
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Different models different
characteristics
 The results of choices made over legal structure and
rules will be seen longer term. It impacts on:
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Regulation
Governance
Property rights
Financing
Trading
Tax
Accounting
Participation
Long term purpose
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Differing characteristics - examples
Characteristic
Charity
Co-op
CIC
Open membership
Optional
Yes
Optional
All surpluses retained
Yes
Optional
Optional
Asset lock
Yes
Yes, but1
Yes
Charitable status
Yes
No
No
Issue member shares
No
Yes, if2
Yes, if2
Tax advantages
Yes
Limited
No
Footnotes:
1. Co-ops and companies able to revise asset lock terms in their governing documents
2. Can issue member shares if not a company limited by guarantee
cipfa.org.uk
Choice of business model
depends on what is important
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Proven models of service delivery
Effective as well as efficient
Ability to leverage sources of financing
Potential range of operational income sources
Reinvestment of surpluses
Tax advantages
Boundaries of trading activities
Local economic development
Community involvement
Member based control
Anchoring capital
Staying close to knitting
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Tower Colliery
British Coal closed mine in 1994
Employee buy out - £2m raised by 239 miners
Employees pledged £8,000 each from redundancy
Mine reopened 1995
300 permanent and 100 contracted employees
£28m turnover, profits of £2.7m. and a 26.8 per
cent return on capital (2002)
 Colliery closed in 2008
 Employees own 350 acres
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Sandwell Community Caring Trust
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Registered charity
Funding £1.2m (previous year £1.6m)
Initial 5 year contract
Reduced number of managers
Reduced spending on admin
Increased spending on service delivery
Culture of valuing staff
Low absenteeism
Low staff turnover
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Sandwell Community Caring Trust
Indicator
Number of managers
1997
2008
24
12
(1.2m budget) (9.5m budget)
Administration costs
22%
6%
Spending on service delivery
62%
85%
22 days
0.34 days
20%
4%
Absenteeism
Staff turnover
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Sunderland Home Care Associates
Initially CLG – 20 members £1 share each
Changed to CLS to allow for share allocations
Shares distributed to employees in two ways:
Annual free allocation linked to salary
Annual sale
Board includes 5 employees (3 year term) and
tax/legal expert
 360 employees
 £3.5m turnover
 £168,000 pre tax profit (2009)
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Eaga: from social enterprise … to Plc
… to …. Carillion
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Started by 5 staff to address fuel poverty
Initially a CLG
Switched to CLS then Plc
Established employee benefit trust (EBT) and
transferred share ownership
Established charitable trust to fund research
into fuel poverty and wider energy issues
Floated 49% of business on Stock Exchange
4,000 partners (2007)
Partners council
Revenue £762m, 51m pre tax profit (2010)
Now Carillion Energy Services
cipfa.org.uk
Sir Thomas Boughey Co-operative
Business and Enterprise College
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Co-operative trust school
Company limited by guarantee (no shares)
Multi-stakeholder co-op membership structure
Students, parents/carers and local community
Major sponsorship from Co-operative Group
Ofsted - Outstanding 2010
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Lessons?
 The choice of legal structure matters
 It takes time to develop services, governance,
management and participation
 It requires different ways of ‘thinking’
 Membership can provide advantages
 The enterprise can benefit from a focus on a
particular purpose
 Choose structure for right reasons
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New opportunities
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Changing relationships
New service delivery models
New financing and funding models
New training and support services
Organisational difference and what it offers to
users and providers
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New publication
 What is a social
enterprise?
 Types of social enterprise
 Legal structures part 1
 Legal structures part 2
 Financing
 Charity trading
 Tax and social enterprise
 Governance
 Tupe
 Considering options
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“Social Enterprise in a Box”
Understanding
the sector
Appraisal of
legal structures and
business models
Working with a range
of partners to deliver
informed support
On-going
Support and advice
Addressing
procurement issues
Transfer and
establishment
of services
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CIPFA Big Society website:
www.cipfa.org.uk/bigsociety
Building skills and competencies
to support commissioning
Developing social
enterprises
Supporting member-based
organisations
cipfa.org.uk
Questions - discussion
 [email protected]
 http://www.cipfa.org.uk/bigsociety
 http://www.cipfa.org.uk/panels/charity