Social Entrepreneurship

A Skills Approach

Durkin, Christopher, Gunn, Robert, Christopher Durkin, Robert Gunn

• Publisher: Policy Press
• Year: 2016
• Print ISBN: 9781447331711
• eBook ISBN: 9781447331728
• Edition: 2
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

The second edition of this popular book has been inspired by the increasing interest around social entrepreneurship scholarship and the practice of delivering innovative solutions to social issues.

Although social enterprises generally remain small, the impact of social entrepreneurs is increasing globally, as all countries are endeavouring to respond to increasingly complex social problems and demands for welfare at a time of government cut backs.

Additional chapters and international case studies explore new developments, such as the rise of the social investment market, the use of design thinking and the increasing importance of social impact measurement.

Part One

Skills in policy analysis

TWO

The place of social enterprise in UK contemporary policy

Ian Buchanan

Introduction: history and context

Social enterprise is not new to Britain. In the 19th century philanthropy or charity coupled with voluntary action was an important part of the social, political and religious fabric. For much of the 20th century it was misleadingly regarded simply as a stage in the development of a modern welfare state. This is an oversimplification, although it is true that many welfare functions that have been taken on by the state were met first through the actions of social entrepreneurs and voluntary activity. The National Society for the Prevention of Cruelty to Children (NSPCC) was founded in 1884 and became the most important of a number of child welfare organisations that emerged at that time to combat what has come to be known as child abuse (Prochaska, 1988). Over the years the NSPCC has had a complex relationship with the growing state but it has never been replaced by the state. Its importance lies in its continuing but changing range of services and influence rather than its anticipation of state intervention.

Voluntary and state activities have developed together. In the 1960s a range of organisations emerged in response to perceived failures in state welfare provision, including Shelter in 1966 (see www.shelter.org.uk/) and Child Poverty Action Group in 1965 (see www.cpag.org.uk/).This era marked the realisation that the British welfare state could not and should not attempt to meet every welfare need through government agencies, a realisation that subsequently resulted in a proliferation of interest groups, alternative, self-help and complementary services. The division of labour was in the main locally determined and there were, as there are now, significant local and regional differences in the size and capacity of the third sector (Brenton, 1985).

Social enterprises and social entrepreneurship have developed as distinctive features in the 21st-century third sector. They play a significant part in contemporary UK government policy, ranging from economic and social regeneration to more traditional welfare provision. Welfare voluntarism has always been influenced and regulated by government but since the late 1980s it has been transformed and joined by newer social enterprises to meet policy objectives that often blur distinctions previously made between welfare, community life, health and the economy. The larger more expansive role that social enterprises have is a product of ‘marketisation’ – recourse to markets as opposed to direct state provision and grant aid or charitable funding in the reconfiguration of the post-war welfare state and to their specific value and place in policy formulation (Spear, 2001).

Marketisation created the conditions for third sector development. Social enterprises and other not-for-profit organisations have also played a part in policy formulation, the effects of which are apparent in regulation and a role for not-for-profit organisations. It is argued here that despite their contribution to policy, engaging with the market has had most influence on recent development of not-for-profit organisations.

This chapter now explores:

• the parameters of third sector activity;

• the influence of policy on social enterprises (governance and regulation and community development);

• how markets influence the development of social enterprises;

• the policy context on the future and sustainability of social enterprises.

Parameters of third sector activity and social enterprises

The third sector is synonymous with social purposes. The first two sectors are the state (government) and the market (private enterprise market production). Production for social purposes differentiates social enterprises from directly delivered public services and private enterprises. That is not to say that the state and private enterprise do not have social purposes. The distinction is that the third sector is exclusively concerned with social purposes (Bridge et al, 2009).

The third sector is a generic term for organisations or associations that are part of civil society, neither within the direct control of government nor solely products of the market economy. Civil society comprises individual citizens acting collectively and autonomously to meet social purposes. This definition encompasses organisations as varied as sports clubs, community groups, national charities and trades unions.

The influence of policy on social enterprises

In relation to the provision of welfare, volunteering has always been an important part of the third sector. An example of this is the system of charitable trustees who give their time voluntarily to manage organisations. However, paid employment has always had a place alongside volunteering in the traditional third sector (for example, professional staff in the NSPCC). New social enterprises tend to employ staff but some also engage with volunteers or unpaid trainees.

Changes in governance have tended to reduce the influence of voluntarism in the sector. There has been a shift from governance by trust boards (regulated by charity law) to company boards as many organisations have chosen to become companies limited by guarantee (regulated by company law) (Spear, 2001). Recourse to company law provides protection from the risks associated with individual financial liability, in the event of the organisation becoming insolvent, and civil liability (being sued for damages by service users).

Criticism of the failings of direct state service provision (statism) came from both the political right and left before the reconfiguration of the welfare state began (Klein, 1993). Although marketisation, a favoured policy option of the rising new right in the 1980s, was largely triumphant, social ideas that underpin the third sector have also been influential in debates and continue to help shape policy. With its social purposes the third sector is associated with concepts that are important to civil society like community, citizenship and collectivity. The career of Michael Young exemplifies putting these community development concepts into action (Briggs, 2001). Young went from co-authoring famous studies of post-war community life (Willmott and Young, 1960; Young and Willmott, 1957), to help found the Consumers Association (the champion of the individual consumer) and the Institute of Community Studies (devoted to community action and latterly to the idea of social entrepreneurship), which merged with the Mutual Aid Society in 2005 to form the Michael Young Foundation (see www.youngfoundation.org).

The dominant political influence on the development of the third sector in Britain in the early 21st century has been New Labour, which has drawn on the tradition of community development and associated action aimed at inclusive individual and community empowerment (Mandelson, 1997; Social Exclusion Unit, 1998). Coming from Britain’s socialist party this has involved little difference in principle between right and left, although it is a distinct approach. It has drawn the third sector in as a partner along with the private sector, using market mechanisms (competitive contracting) associated previously with Britain’s new right. The approach has stimulated new social enterprises and social entrepreneurship. The Deakin Commission into the voluntary sector (NCVO, 1995) resulted in the introduction of voluntary sector compacts and the establishment of better infrastructure (advice and development) support for contracting and market activity. Gordon Brown, UK Prime Minister between 2007 and 2010, was influential in shaping third sector policy from his previous position of Chancellor of the Exchequer (finance minister) (Brown, 2004). The Treasury (department of finance), which traditionally has not been involved in operational policy, was a significant source of policy ideas and publications in this area (HM Treasury, 2002).

A more expansive policy role for the Treasury can be explained in part by the content of the policy as well as by Gordon Brown’s personal commitment. The Treasury is concerned with the performance of the economy, and within New Labour’s policy of inclusion empowerment came to involve deprived communities taking responsibility for their own revival (Brown, 2004). Although it is not an exclusively UK phenomenon, economic renewal and individual and community empowerment were brought together to play a central role in policy. The way the policy was implemented and its market orientation was not exempt from criticism.

Amin (2005), for example, points out that it is surprising that so much should be asked of economically deprived communities but does not dismiss the idea itself in arguing for ways of working that give people greater control and autonomy.

The nature of Brown’s personal commitment is best understood through his affinity with a famous fellow Scot from the same home town, Kirkaldy: Adam Smith. Brown subscribes to the reinterpretation of Smith’s intellectual work that draws on The theory of moral sentiments to identify Smith with community values and with individual moral responsibilities to fellow citizens (see McLean, 2006). Brown’s attempt to square markets and global competition with social goals is grounded in the tradition of Smith’s contribution to the Scottish Enlightenment.

New Labour’s policy might have developed differently had more radical elements from Michael Young come to the fore. Government policy has resulted in the exclusive use of competitive tendering processes to select suppliers of services but could have used different ways of producing services, that is, alternative modes of production. Such an alternative approach would not have implied a return to state monopoly provision. Advocates of developing approaches to producing services that align needs with empowerment include Hirst (1994), a promoter of modern cooperation and democratic participation. Hirst, a founding signatory of Charter 88, the democratic reform organisation, argues for ‘associative democracy’ to produce more involvement in social and economic action based on social principles and associationism. Working in this way would give preference to cooperative production, user-controlled organisations and community enterprises for social production. Enterprises of this kind exist but they do not constitute a preferred mode of production or the dominant approach to social provision.

Defining community participation in this way has a shared lineage with Michael Young’s activities through the promotion of the third Enlightenment value, fraternity (community orientation). An important element of this approach is that empowerment and participation require engagement beyond the market and being a consumer. This contrasts with the basis for competitive tendering that is made in relation to people using social care services through the entirely reasonable sounding statement that people who use services do not care who provides them, only that they meet their needs. It is, however, difficult to square such a value-free statement with individual and community empowerment and autonomy and control.

Market influence on the development of social enterprises

Markets have influenced the development of social enterprises through changed funding arrangements. In the 19th and first half of the 20th centuries voluntary organisations funded their pressure group activities, innovations and services by raising funds directly from the public by donations or through large gifts. After the advent of the welfare state they continued to fulfil these roles, increasingly relying on local or national government grants, including those from the National Health Service (NHS). The share of sources of income varied enormously in different voluntary organisations, however before marketisation, government funding increased to become the greater share of voluntary resources. There was a consequent fear that reliance on the state might tend to undermine the independence and autonomy that are central to voluntarism. Marketisation changed the method of allocating funding from grants (with a presumption of continuity and significant discretion over provision) to issuing specific time-limited contracts through competitive tendering processes.

These changes are well illustrated if we return to the example of the NSPCC, a notably successful organisation under both grant aid and contracting. In the 19th century, as a new organisation with wide public appeal, the NSPCC was one of the most successful at raising money by donation through community collectors and the support of privileged middle class children (Prochaska, 1988). With the advent of the welfare state it combined significant fund raising with government and local authority grant aid and has subsequently adapted well to contract culture. Although it has retained very significant fund raising capacity (for example through its ‘Full Stop’ campaign to combat child abuse, gift and other product sales), central and local government contracts have tied the organisation closely to national child care policy. The NSPCC has, however, retained sufficient independence to have influence on the shape of national child care policy’s development and implementation (see www.nspcc.org.uk/).The same may not be true of large organisations with limited independent funds, smaller voluntary organisations or new social enterprises. In their case they may be forced to respond to policy changes in order to ensure continued funding rather than help shape them, notwithstanding their participation in consultations and in local implementation and planning through Local Strategic Partnerships (LSPs).

Marketisation allied to Britain’s powerful central government has shaped the third sector. Central government is no longer neutral, with the passing of the system that saw the role of central government largely in terms of providing a legislative framework and accompanying regulation. These set the parameters for services while leaving responsibility for implementation and development largely to the local state (local government and local NHS administration) (Day and Klein, 1987).The public sector management revolution, with its focus on performance measured through goals and targets, sets a framework which provides opportunities for third sector social enterprises (Pollitt, 2003).The transformation of these arrangements and the extension of central government power are best understood through a brief case study of the introduction and development of Community Care Reform in the 1990s.

The latest community care policy reformulation in Britain followed a review, Community care agenda for action (Griffiths, 1988), a White Paper, Caring for People: Community care in the next decade and beyond (Department of Health, 1989) and new legislation, the 1990 National Health Service and Community Care Act. There were many facets to the reforms but for the current purposes two were particularly significant: the introduction of care management and the creation of a mixed economy of care. These were aimed at extending choice, matching the assessed needs of recipients of community care support and services. Choice was to be increased without turning them into direct consumers, spending money in the marketplace. Instead a system of quasi markets, which gave impetus to marketisation, was formed.

The introduction of care management resulted in care managers being promoted as a way of ensuring that older people, people with disabilities, people with mental health problems and others who need support and care paid for from public funds can exercise choice over...

Table of contents

• Coverpage
• Title page
• Copyright
• Contents
• List of figures, tables and boxes
• Notes on contributors
• Acknowledgements
• Preface
• one: Introduction: Christopher Durkin and Robert Gunn
• Part One: Skills in policy analysis
• Part Two: Skills for social entrepreneurship
• Part Three: Skills in practice
• Appendix: Internet resources