Survival of the fittest: will social enterprises thrive in the new world?

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We've consistently heard the government message that the NHS should become 'the largest social enterprise sector in the world'. Tied into the government's Big Society vision, it is hoped this will promote local ownership and community interest in public services.

At the same time, the government is committed to promoting greater competition in the health service by allowing any qualified provider to deliver services – a policy which has raised fears over the privatisation of the NHS. Does the encouragement of social enterprise demonstrate a more politically acceptable alternative, ie, a greater diversity in provision, but delivered by organisations with a social purpose, and a commitment to reinvesting any surplus for the benefit of their patients and staff (rather than into the hands of shareholders)?

This all sounds good in principle. The question is whether these emergent organisations can really compete with the likes of private companies and large voluntary sector providers – who may have more experience in negotiating contracts with commissioners. In particular, large private sector providers of NHS care may have more of the necessary business acumen to operate and grow in a competitive market. They can also keep costs down through economics of scale and can provide services across large areas.

In contrast, many social enterprises have emerged from primary care trust (PCT) provider arms – some taking the entire provider service with them, and others breaking away into smaller enterprises that deliver distinct types of care. In our report, Social enterprise in health care, we found that some of these organisations decided to move in this direction because they could see the benefits of freeing themselves from central management and giving staff more control over the way the organisation is run. However, there were others that jumped ship much more reactively – seeing social enterprise as a way of securing a long-term contract with their PCT and protecting themselves from being taken over by another organisation.

This security is no longer available – these long-term contracts are not guaranteed and the government commitment to any qualified provider means that these breakaway organisations will not automatically become the preferred provider. Instead commissioners will be looking for providers that deliver value for money and can demonstrate a track record of achieving outcomes. Social enterprises might again be vulnerable to failure when pitted against larger and more experienced providers, making it very difficult for them to compete in this environment.

The intention of competition is that it drives efficiency and innovation. Social enterprises – without the constraints (but also the security) of the Department of Health oversight – have the freedom to become more efficient in the way they deliver care, and think intelligently about how to grow their services. It is only through developing more sophisticated and long-term business models that meet and anticipate the needs of the patient populations that social enterprises will be able to compete with the big players.

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Comment date
04 August 2011
The last drive to support this initiative was exclusively for PCT staff, which was rather cosy but missed the opportunity to devolve more expensive elements from secondary care. Will this initiative offer genuine encouragment for the latter?

Paul Shannon

Consultant Anaesthetist,
Comment date
05 August 2011
Any change in structure will only be of benefit if the strategy can change. In particular, if restrictive nationally-negotiated contracts can be modified. The current Consultant contract is highly restrictive and not aligned to the needs of organisations. For example, it is difficult to incentivise doctors to do more work. Contrast this with the success of private hospitals with government contracts in Spain. They employ doctors on their own contracts and productivity increases.

It's not rocket science!

Mark Easton

Comment date
05 August 2011
The killer question is always: what happens if the social enterprise goes bust? Either they end up underwriten by the NHS, or the staff who transfer from the NHS take a lot of personal risk.

Bernadette Speight

Social Enterprise Development Specialist,
Comment date
12 August 2011
As long as the New social enterprises operate truly to the NHS / SE Values and can evidence their social, environmental and economic impacts through social accounting, they will become more proactive and responsive services for their community because they will encourage accountability and collaboration in design and delivery of local health & well being services. Having beneficial health and social outcomes as part of their mission must be a competitive advantage for the SE sector as opposed to the purely profit driven private sector. The country needs to decide whether we are comfortable with the profit motive being part of our health and social care services? But how can services be 'better' where the driver for the business delivering the service is profit rather than person centred health and social care services. Beware of 'fake' social enterprises - there are organisations out there already saying they are social enterprises but they do not operate according to the values and principles that the movement has been built on over years and years before the movement was called social enterprise. We must challenge companies to deliver more collectively and holistically to achieve more with the limited resources available.

Peter Edwards

Comment date
07 September 2011
After a career mostly in the public/health sectors, I now work with two health charities and a Community Interest Company. I therefore have direct experience of introducing 'efficiencies' in the public sector and the social enterprise model in action. For those enterprises that are well established in the local community and care system there may be little problem initially, though they risk being drawn into new ventures that could be disruptive to currently successful activities, or being replaced by new, bigger, 'low cost' providers. Two of the major difficulties (and there are many) are: 1. the vested (medical) interests will fight to restrict access for good new providers by setting up systemic barriers to entry - this will prevent the true change that really is needed, and; 2. the present model of commissioning of services from social enterprises is cost-and-target focused and not value-focused, with very narrow boundaries drawn around specific services that do not take account of the wider health and social context. It is common for one provider to lose a contract to another, who then employs the same staff to do the work but on reduced wages. Large 'expert' companies will be drawn in to introduce 'efficiencies of scale and improved contractual arrangements' that will in fact drive out local influence. 'Unnecessary' costs (such as high quality training and flexibility) will be stripped out leaving a sterile, centrally driven 'system'. This tendency will be accelerated because under-resourced and inexpert commissioners will not be able to set up multiple local contractual arrangements so there will be a tendency to have fewer, large scale contracts that do not by nature account for local needs. Just watch for the National Commissioning Body as it moves to 'efficient' national contracts. 'Silo budgets' (ie the separation of health, social care, education, justice and other departmental budget decisions - all of which affect health) will also continue to prevent joined up working and efficient commissioning. Big is not necessarily efficient; look at what has already happened in other public sector organisations where, for example, maintenance people working under new national contracts were sent from Bristol to change the clock settings in a Courtroom in Plymouth (after the local caretaker had been sacked). We risk a system of profit-driven oligopolies that will be uncontrollable (ref Murdock, the banks, the energy companies). The Government's 'vision' is either totally naive or a cynical ploy to disrupt the NHS to allow for future privatisation. I suspect the former but fear the latter. Think of the profits waiting for private companies when that happens! CEOs all across the world must be drooling...
The only thing I will say in defence of the the Government is that it must be hell to manage the NHS, and many senior people in the NHS have to take responsibility for being so self-serving and pig headed. What else can a government do but wield the biggest stick it has?

Mary Taylor

NHS until 1st October
Comment date
08 September 2011
I am employed by one of the PCTs about to become an SET in the south west. We thought social enterprise was about inclusiveness and clinician involvement. So far, we seem to be very wrong. What will happen to the 3000+ staff when/if the SET fails? Do you think we will all hang around to work for a profiteering private Co?
I would like to know where we will get the money for all the extras like VAT etc. After all, we keep being told that the surplus will be ours, unlike in the public sector. Woopee. I seem to remember surplus being a rare thing and with the 20 billion savings I cant imagine there will be that much. Perhaps they will reduce the use of bandages or dump one or two of our dept's out to the private sector like in Hull.
Still, at least we got to vote for the new logo. And at least the TUPE will protect us for a few weeks.

Anne Weir

Policy advisor,
Comment date
15 September 2011
I would welcome comments on a proposal we are looking at to turn the challenge of building social enterprise in the NHS on its head. Rather than relying solely on spin offs from the public sector to prove the SE model, has anyone looked at the option of requiring all Monitor-licenced providers with a threshold share of NHS/care spend (say in the region of 1-5%) to operate through a UK registered Social Enterprise. This would level the playing field and bring expertise into the sector. Your ideas please.

sara jarman

Comment date
30 June 2013
reorganisation has occurred 2 times since tupe from pct to becoming a social enterprise. Cost v quality well it appears certainly to be cost driven, as posts are deleted, new posts offered, but lower bands, no rationale really provided just described as according to policy. no wonder people are sceptical about commissioners motivation for providing a comprehensive service. low cost generally means less experience, skills and training.

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