Social enterprise redefined and the privatisation of public involvement
Local Healthwatches, I’m sure you remember, are the local bodies which, in April 2013, will replace Labour’s Local Involvement Networks (LINks). See the Health and Social Care Act here, though that’s a bit confusing, because it amends Labour’s Local Government and Public Involvement in Health Act 2007, which is here. Essentially, though, each local authority-sized Healthwatch will be responsible for public involvement in the design and implementation of health services.
Regular readers will know that my key concern about these new arrangements is exactly what kind of organisation will be eligible to deliver Healthwatch services. given the Health and Social Care Act’s wording on this:
The arrangements must be made [by local authorities] 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
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.
After a long delay, these regulations were issued on 18th December. This is how these criteria, by which a corporate body can be regarded as a social enterprise, are set out (my emphasis):
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 per cent 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).
(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(17) (charitable incorporated organisations)).
Strip away the legalese, and the bizarre reality emerges. Jeremy Hunt is allowing private firms to define themselves as social enterprises for the purposes of winning Local Healtwatch contracts, as long as they retain 50% of their profits in any financial year. The other 50% can be distributed. He is allowing this arrangement as a specific addition to the kind of organisational form normally associated with social enterprises (set out at para 3, though why the older form of Industrial and Provident Society is not included here is beyond me).
Clearly, the private health company lobbyists have been hard at work. This is the first time the term ‘social enterprise’ has been defined in law, and its definition turns out to be nothing like what most people understand by social enterprise. Impressive stuff.
So what happens now?
Well, as set out here, most local authorities have already issued tenders for the provision of local healthwatch services, prior to the issuing of the regulations. They had little choice, given the fact that the new arrangements are due to take effect in just over three months. Many of the tenders issued have assumed, quite reasonably, that a defining feature of the organisations eligible for the work would be that they would be wholly non-profit, and have a full ‘asset lock’ written into their constitution. Now that the regulations allow for private sector delivery of Healthwatch services, I anticipate either a panicky withdrawal/amendment of tenders by many local authorities, or legal challenge from the companies who have been lobbying behind the scenes for the very concept of social enterprise to be redefined by Jeremy Hunt, in a way designed to privatise public involvement.