Home > General Politics > Social enterprise redefined and the privatisation of public involvement

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.

Categories: General Politics
  1. tom muir
    December 29, 2012 at 12:53 pm

    Really useful / important that all observations/initiatives are tagged with relevant geographic areas of relevance (like Radio4 news do). If articles are aimed at citizens of the United Kingdom. – England only?, England & Wales?, Scotland, England & Wales?, England, Wales, Scotland, & Northern Ireland? If we don’t understand what refers to where and how the UK is governed what chance have we got?

  2. December 30, 2012 at 9:42 am

    Let me show you where I think the government has borrowed from. I haven’t been able to find any other paper arguing the case for it. The case is for at least 50% of profit invested in community objectives, the remainder retained for growth with no dividend distribution. It was introduced as a social enterprise model to UK government in 2004, and by the look of it has since been ‘twisted by knaves’


    • paulinlancs
      December 30, 2012 at 6:28 pm

      Yes, that ‘s possible, thougj actually I think it may be related somehow to this CIC guidance from BIS http://www.bis.gov.uk/cicregulator/guidance/chapter-6 though 50% is’nt present there.

      btw your comment wasn’t deleted earlier (I saw your suggestion that it was at your blog). It was automatically sent to spam – possibly because something earlier from yourself had been flagged as spam by one of the contributors – we do get a lot and it may be that something has been inadvertently so flagged. I do delete comments when they are unnecessirably abusive or simply not relevant, but I don’t delete simply because I don’t agree.

      • December 30, 2012 at 7:14 pm

        Thanks for the explanation Paul,

        In 2004 when I verified with the DTI, 50% of profit for community objectives qualified as one of their definitions of a social enterprise. From then on I referred to us as a social enterprise. Last year, I was one of those protesting in Gloucestershire about the imposition of a CIC for primary healthcare services. I’m greatly concerned at the way in which government parnerships with corporations is undermining those of us involved in human and economic rights activism. For example where our efforts overseas to leverage childcare reform were sidelined by commercial interests:


  3. January 3, 2013 at 6:48 pm

    Do you know if this horrendous definition is likely to be used for other contracts, either within or outside the NHS?

    Also, is there anyone contesting these regulations?

    • paulinlancs
      January 4, 2013 at 11:39 am

      Richard, I just don’t know.

      The complicity theorist in me fids it hard to believe that they would go to such lengths around expanding eligibiltiy in this way for what are relatively small beer contracts if there wasn’t a plan of some kind to use the wording now enshrined in law as some kind of precedent, but I can’t be sure of that.

      In any event, any extension of its reach is likely to be a matter decided in the courts, with caselaw thus established, when a private sector operation seeks judicial review of a decision to exclude them from a contract/grant etc. To what extent this will be tied to the health service, and whether it will follow on legal action by a private operation to enforce their eligibility for Healthwatch, time only will tell.

      Further, I can’t see any direct implication of these regulations for softening up of the NHS & Social Care Act on the ‘49% only’ rule, given the wording of that bit of the Act, but there may be a route I’ve not spotted.

      In any event, I may do a FOI request to gather the consultation submissions made prior to this regulation being imposed, although I suspect much of the lobbying didn’t take such a transparent form.

    • paulinlancs
      January 4, 2013 at 11:41 am

      Sorry, missed one. I don’t know of anyone or any body legally contest the regs. It might be interesting to know if Soc Ent UK or another industry body were alive to the situation and whether they might consider some kind of action, but I suspect it’ll be felt not to be worth it, given the dount about whether it is actually precedent.

  4. January 4, 2013 at 3:52 pm

    Paul just wanted to add my thanks for your work on the heads-up on this whole issue. I have beavered away to disseminate the facts online (Richard above had already usefully contributed to one to the subsequent Linkedin Group discussions).

    One needn’t be paranoid to wonder what is going on. The more we shine the searchlight of scrutiny and enquiry, the more we can expose matters that need discussion, accountability and consent. David Floyd pointed up today the disturbing piece in the Guardian that portrays the emerging wider global social enterprise infrastructure as being to to serve politicians and commercial interests. And from my own work in the worklessness field I’m aware of this kind of little undertone:

  5. January 7, 2013 at 11:40 am

    Paul and others here with an interest and concern in this matter I can strongly recommend a visit to the commendable initiative on the website of the redoubtable Les Huckfield. (Complete with ackowledgements to ‘Though Cowards Flinch’). His ambition is that social-mission driven social enterprise (and potential ones) adopt the perspective of, ‘A Local Healthwatch for each Local Authority – a Major Opportunity for Social Enterprise?’

    • paulinlancs
      January 14, 2013 at 4:33 pm


      Ta for link. Interesting. I’ve done a bit of a follow up on this today in light of Monitor’s corporation tax exemption recommendations.

      • January 14, 2013 at 7:35 pm

        And it seems that the predatory cross-sector tendency has an international dimension, with some in Spain willing to benefit from the Country’s (unnecessarily) enforced Austerity. The similarities with the scenario in England is uncanny is it not?

  6. January 8, 2013 at 11:35 am

    The Economist has just tweeted their current feature on Jeremy Hunt at Health. There is a comments facility – some folks might want to post something?:


  1. December 30, 2012 at 12:41 pm
  2. January 13, 2013 at 5:09 pm
  3. January 14, 2013 at 2:24 pm

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