New Labour Reinvents Social Enterprise for the Public Service Delivery Market

Leslie Huckfield gives a thumbnail sketch of his recently published book How Blair Killed the Coops, published by Manchester University Press. He describes how “social enterprise” has been reinvented by academics and third sector “actors” to deliver cut-price public services.


In any literature review of the third sector, a personal guiding light has long been The Revolution will not be Funded: Beyond the Non Profit Industrial Complex first published in 2007 and latterly updated in 2017. Its chapters by academics and activists demonstrate the role of US Foundations in undermining the social and moral purpose of many genuine community campaigning organisations.

There is no vacancy for a similar role in the UK, since this is already occupied by third sector national infrastructure organisations, which have been eager to “take the Government’s shilling”, irrespective of the New Labour and Conservative policy strings. From the 1980s onwards, national third sector organisations have led a forward march towards neoliberalisation and marketisation, culminating in Social Enterprise UK’s and Cooperatives UK’s open encouragement of market-based approaches.

Social Enterprise in the 1980s from Beechwood College

Despite widespread academic and political claims that social enterprise was a Blairite innovation, the first social enterprise manifesto appeared in 1981 when Beechwood College, Leeds published its Social Audit Toolkit: A Management Tool for Cooperative Working. Beechwood sold 2,000 copies – nearly 20 years before New Labour – which formed a social enterprise training manual.

Following Labour’s Industrial Common Ownership Act in 1976 and the Cooperative Development Agency Act in 1978, around 60 local cooperative development agencies provided start up assistance for coops and social enterprises.  Coops’ registration figures from 1976 till 1999 show 4,131 companies limited by guarantee, 637 limited liability partnerships and only 32 Industrial Provident Society cooperatives. Following the new definition of “common ownership” in the 1976 Act, most of these were registered through the Industrial Common Ownership Movement (ICOM). Despite different nomenclatures, Charlie Cattell, who was ICOM’s registration specialist during these years, has recently confirmed that most of these local community structures were identical with today’s social enterprises.

Whose Business is Business, published in 1981 by the Community Ventures Business Unit, showed these 1970s structures as “community companies (limited by guarantee or by shares), community cooperatives, workers cooperatives, neighbourhood cooperatives, and a variety of ‘purpose-built’ models”. Many of are still in existence, to show that social enterprise was alive and well before Blair.  

Following Labour’s 1983 General Election defeat, policies were being developed for more flexible delivery of lower cost public services and a diminution of the public sector. Julian LeGrand and Saul Estrin promoted their concept of ‘quasi markets’. LeGrand described 1988 and 1989 Conservative legislation to outsource and introduce competition into education, health and social services as the “big bang”, to include third sector organisations. This culminated in John Smith’s Commission on Social Justice Report in 1994 as a response to Labour’s further defeat in the 1992 Election.

These policy shifts sought to enable the refocusing of public service delivery and soon meant a political rupture with the Cooperative Movement at least as politically significant as Labour’s repudiation of Clause Four of its Constitution in 1995. Rather than a transfer of emphasis from cooperatives in the 1980s to social enterprise in the 2000s, this was an intense policy divergence between the Labour and Cooperative Movements. Labour’s turn to social enterprise was more a political move than a structural change. 

New Labour’s social enterprise intentions were heralded by Marxism Today and the think tank Demos, with its pamphlets The Other Invisible Hand: Remaking Charity for the 21st Century by Mulgan and Landry in 1995, the Rise of the Social Entrepreneur by Charles Leadbeater in 1997 and To Our Mutual Advantage by Leadbeater and Christie in 1999. Many contributions still refer to Leadbeater’s 1997 contribution as a founding document for social enterprise in the UK. Following the 1994 Commission on Social Justice, Demos promoted Blairite moves for welfare reform and greater private sector involvement as a New Labour mutation from US President Clinton’s 1996 Personal Responsibility and Work Opportunity Act, which he described as “the end of welfare as we know it”.  This replacement of welfare by “workfare” was part of process often described as the ‘Clintonisation of the Labour Party’.

Alongside this, following the 1978 Wolfenden Report on the Voluntary Sector, Charles Handy’s brand of managerialism within the National Council for Voluntary Organisations (NCVO) culminated in its Deakin Commission in 1996, with its recommendation of a government ‘compact’ with the third sector. After New Labour’s taking office in 1997, its rapid adoption of a Compact in 1998 formed a public services delivery agreement with the third sector.

North American and European Discourses

This concept of independent social entrepreneurship had been imported from North America, which became more dominant in the UK. Though social enterprise in North America operated in a different market environment, for the UK the influence of US Business Schools at Stanford, Harvard and Duke Universities has been significant.

UK academic contributions have also borrowed from mainland Europe, heavily influenced by the Emergence de l’Entreprise Sociale en Europe (EMES) Research Network, with its restricted focus on social enterprise as a narrower marketised variant within a wider social economy. Typically, EMES focuses on Work Integration Social Enterprises (WISEs) – social enterprises which compete for contracts to deliver public services. Work placements were key to the French Revenu Minimum d’Insertion programme during the 1990s, when various third sector associations made reintegration of the excluded their objec­tive. Bidding for contracts and performance-pay subsidies induced many WISEs to provide little assistance to those with little change of finding work.

New Labour Contrasts with Quebec and France

Despite their emulation of North American and EMES models, most academic and other contributions fail to mention contemporary developments in Quebec and France. In Quebec the Forum for Full Employment during the 1980s, the 1995 Women’s March on Poverty and 1996 Social Economy Summit with representatives from the state, market, and civil society all came together in the Work­ing Group on the Social Economy which in 1999 became the Chantier de l’Economie Sociale. The Chantier became an overarching framework for the wider social economy in Quebec, with a direct funding contribution from the Provincial Government.

Also contemporaneous with social enterprise developments in the UK, a French Green MEP Alain Lipietz produced a major report on the social economy to Martine Aubry, France’s Minister for Employment and Solidarity in September 2000. As the daughter of former European Commission President Jacques Delors, Aubry held senior Cabinet positions so that the Lipietz Report was significant. But it achieves no mention in UK academic contributions.

Alongside these developments, in October 1997 financial difficulties drove London Industrial Common Ownership Movement (LICOM) and London Cooperative Training jointly to commission a consultants’ report, followed by a Steering Group to set up Social Enterprise London. Despite its foundation exclusively by London cooperative organisations in 1997 to promote cooperatives, community businesses and credit unions, one year after its inauguration Social Enterprise London in 1999 was already referring in Possible Social Enterprise Solutions – Potential included to public service outsourcing to the private sector.

In April 2000, Gordon Brown sought a role for external private finance in community development and set up a Social Investment Task Force under venture philanthropist Ronald Cohen to undertake “an urgent but considered assessment of the ways in which the UK can achieve a radical improvement in its capacity to create wealth, economic growth, employment and an improved social fabric in its most under-invested, that is to say its poorest, communities”.

His extended role for private investment was shown in Strategy for Success, New Labour’s first definition of social enterprise from the Department of Trade and Industry (DTI) in July 2002:

“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.” 

The insertion of “principally” was necessary to ensure that Brown’s external private investment, promoted by the Social Investment Task Force, could be accommodated within this definition.

This was followed in September 2002 by the Treasury’s Cross Cutting Review: The Role of the Voluntary and Community Sector in Service Delivery – essentially a technical assistance manual for contracting with the third sector. In the same month Private Action, Public Benefit: A Review of Charities and the Wider Not for Profit Sector was published by the Cabinet Office Strategy Unit and in March 2003 Enterprise for Communities: Proposals for a Community Interest from the DTI began a consultation on private investment in new Community Interest Companies, for which legislation was introduced in 2004. In 2002 and 2003, consultant Peter Lloyds’s Report for the new Social Enterprise Coalition, formed alongside the Strategy, projected a funding and contracting regime which has endured throughout New Labour and Conservative Governments.

So four years of New Labour policy from 1998 to 2002 had already set the stage for social enterprise for the next twenty years, with Social Enterprise London from January 1998 and the Social Enterprise Coalition from July 2002 as policy entrepreneurs.                      

Conservatives Continue New Labour Policies

In 2008 New Labour introduced its Dormant Bank Accounts Act. In a December 2009 Pre-Budget Report, the Treasury spelled out its intention clearly: “£75m of the funds expected to be released through the Dormant Accounts Scheme in England… for the establishment of a Social Investment Wholesale Bank”. This was rapidly followed in 2010 by the new Coalition Government’s Modernising Commissioning: Increasing the Role of Charities, Social Enterprises, Mutuals and Cooperatives in Public Service Delivery and Growing the Social Investment Market: A Vision and Strategy and in July 2011 by the Open Public Services White Paper with its presumption of open commissioning, to include the third sector. This political direction was not challenged by national third sector organisations. Their Welfare to Work Reform: The Third Sector’s Role Taskforce in 2009 had advocated support for a social investment wholesale bank to enable their engagement in public service delivery. Big Society Capital was set up as a social investment wholesale bank by the Coalition Government in April 2012.

But Big Society Capital has had only limited success. The third sector took up around £730m of social investment in the year ending 2017, compared with £22bn in grants and donations in the same period. This represents a take-up by less than 1% of third sector organisations annually. Reports since then show little access by most third sector organisations.

There are continuing difficulties for third sector organisations in borrowing money for contracts to deliver public services. In 2014 a Convention of Scottish Local Authorities’ Report for the National Community Planning Group Report showed “59% with either no experience yet in contracting or feel that contracting is irrelevant to them.”

National third sector organisations remain champions of borrowing for public service delivery. For the author, though writing in 1994, Rhodes summarises the current situation “(I)t is about redesigning governments to cope with scarcity and devising complex solutions to problems which defeat the simple-minded nostrums of both free markets and national plans.”

Leslie Huckfield lectures at Glasgow Caledonian University and is a Director of the Sheffield Cooperative Development Group.

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