Social enterprises, big corporations and the NHS

The devil is in the details.

The government has repeatedly stated its commitment to promote social enterprises to deliver public services. But in reality, its commitment is pure lip-service. A failure to recognise the systemic imbalances of a competitive tendering system and existing and emerging regulation means that current conditions are in favour of large corporations, putting social enterprises at a disadvantage. The NHS reforms are an example of where this can be observed in real time – if you look closely. Away from the spotlight that the Health and Social Care Bill was under during its passage into law, the Department of Health (DH) is drawing up guidance and regulation documents necessary to implement the reforms. Hidden away in these technical documents are examples of how the NHS reforms are creating a system that gives big corporations the edge over competitors. This contradicts the stated intention of the Act to support the delivery of health services by locally formed social enterprises – in line with Andrew Lansley's vision that locals know best what types of health services are needed. As the NHS sees the introduction of competitive tendering on a large scale, big players such as Serco and Virgin Care are picking up sizeable contracts, as this (slightly alarmist) map shows.

Why? Two reasons:

Firstly, there is a systemic problem in competitive tendering for NHS contracts: the Act it is pitting small or start-up companies with a social mission against large, profit-oriented existing corporations who have been playing the field for decades. Their experience and their deep pockets allow them to dedicate sufficient resources to participate in often lengthy and complex tendering processes. In addition, they can spend quite a lot of money on lobbying – something that is happening in all sectors of industry, and doctors and commissioners will not be exempt. Supporters of the Act who believe that local commissioners will prefer local enterprises should look towards the delivery of the workfare programme. Despite assurances by government (pdf) that most contracts would go to charities, social enterprises and other third sector organisations, a few big companies have largely outbid smaller competitors. A4E and Working Links for example won several lots – both companies now accused of failing to meet contractual targets and of committing fraud, putting paid to the belief that they would be better at delivering. If the government does not begin to actively favour smaller players, a similar fate will befall the NHS.

Secondly, the government's also fails to express its support for social enterprises in emerging regulation and guidance. In fact, the DH seems to be reversing previous supporting measures. One way the DH used to demonstrate support is through the NHS organisational framework, an annual key document that gives commissioners of health services binding guidance on how to implement the DH's priorities. The framework for 2011/12 (see p19) explicitly encouraged commissioners to "use the introduction of Any Willing Provider to enable greater participation by social enterprises (...) starting with community services."* Compare this to the current framework for 2012/13 which does not even mention social enterprises. Furthermore, it only allows 12 month contracts between commissioners and providers. Previously, social enterprises and voluntary sector organisations were allowed three years' contracts. The longer contract periods helped organisations stabilise long-term income flows, enabling them to focus on service delivery. Reducing standard contract lengths gives large companies an advantage, as they have diversified income streams to cross-subsidies businesses, and greater administrative capacity to snap up contracts as they become available.

Another area of concern is the licensing regime that is currently drawn up by the regulatory body Monitor. Any provider of health services will have to comply with Monitor's rules to ensure delivery of stable and high quality services. Part of these criteria focus on financial stability of a company – a prudent measure. However, Monitor plans to use commercial credit rating agencies such as Standard and Poor's to assess a provider's financial standing. Leaving aside the fact that these agencies have an inherent conflict of interest (they are paid by the companies they are rating), their use will again only give advantages to big companies. Rating agencies have no experience with social enterprises, and it is likely that their structure and finance streams won't fit the criteria established for for-profit companies – so they will fail the rating without being financially unstable.

The examples above expose the fundamental lack of understanding of the social enterprise sector by government, and its failure to recognise the systemic imbalances that occur if there are no clear supportive policies in place to develop a sector with the potential to deliver locally tailored and accountable services. The believe that in a free market, all players have the same starting point, still dominates the thinking. In reality, the market is skewed against small players, and the competition is far from fair. If government really wants so see social enterprise thrive in the NHS, it needs to do far more than to give a bit of cash. It needs to actively engineer regulation and guidance to give social enterprise the edge. However, as the government thinks the playing field is already even, big corporates will continue to be the winners.

*Not that the earlier commitment showed results - in September 2011, one of the first tenders for community services went to Virgin Care rather than the social enterprise Central Surrey Health. Observers speculate that one of the reasons for this decision was the requirement for bidders to post a £10m security bond – a sum that Virgin Care could raise easily, but that most social enterprises struggle with.

In reality, the market is skewed against smaller players. Photograph: Getty Images

Veronika Thiel is a researcher and writer in the field of social economics and health policy. She tweets from @veronikathiel.

Photo: Getty
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How the row over Jackie Walker triggered a full-blown war in Momentum

Jon Lansman, the organisation's founder, is coming under attack. 

The battle for control within Momentum, which has been brewing for some time, has begun in earnest.

In a sign of the growing unrest within the organisation – established as the continuation of Jeremy Corbyn’s first successful leadership bid, and instrumental in delivering in his re-election -  a critical pamphlet by the Alliance for Workers’ Liberty (AWL), a Trotskyite grouping, has made its way into the pages of the Times, with the “unelected” chiefs of Momentum slated for turning the organisation into a “bland blur”.

The issue of contention: between those who see Momentum as an organisation to engage new members of the Labour party, who have been motivated by Jeremy Corbyn but are not yet Corbynites.

One trade unionist from that tendency described what they see the problem as like this: “you have people who have joined to vote for Jeremy, they’re going to meetings, but they’re voting for the Progress candidates in selections, they’re voting for Eddie Izzard [who stood as an independent but Corbynsceptic candidate] in the NEC”.  

On the other are those who see a fightback by Labour’s right and centre as inevitable, and who are trying to actively create a party within a party for what they see as an inevitable purge. One activist of that opinion wryly described Momentum as “Noah’s Ark”.

For both sides, Momentum, now financially stable thanks to its membership, which now stands at over 20,000, is a great prize. And in the firing line for those who want to turn Momentum into a parallel line is Jon Lansman, the organisation’s founder.

Lansman, who came into politics as an aide to Tony Benn, is a figure of suspicion on parts of the broad left due to his decades-long commitment to the Labour party. His major opposition within Momentum and on its ruling executive comes from the AWL.

The removal of Jackie Walker as a vice-chair of Momentum after she said that Holocaust Memorial Day belittled victims of other genocides has boosted the AWL, although the AWL's Jill Mountford, who sits on Momentum's ruling executive, voted to remove Walker as vice-chair. (Walker remains on the NEC, as she has been elected by members). But despite that, the AWL, who have been critical of the process whereby Walker lost her post, have felt the benefit across the country.

Why? Because that battle has triggered a series of serious splits, not only in Momentum’s executive but its grassroots. A raft of local groups have thrown out the local leadership, mostly veterans of Corbyn’s campaign for the leadership, for what the friend of one defeated representative described as “people who believe the Canary [a pro-Corbyn politics website that is regularly accused of indulging and promoting conspiracy theories]”.

In a further series of reverses for the Lansmanite caucus, the North West, a Momentum stronghold since the organisation was founded just under a year ago, is slipping away from old allies of Lansman and towards the “new” left. As one insider put it, the transition is from longstanding members towards people who had been kicked out in the late 1980s and early 1990s by Neil Kinnock. The constituency party of Wallasey in particular is giving senior figures in Momentum headaches just as it is their opponents on the right of the party, with one lamenting that they have “lost control” of the group.

It now means that planned changes to Momentum’s structure, which the leadership had hoped to be rubberstamped by members, now face a fraught path to passage.

Adding to the organisation’s difficulties is the expected capture of James Schneider by the leader’s office. Schneider, who appears widely on television and radio as the public face of Momentum and is well-liked by journalists, has an offer on the table to join Jeremy Corbyn’s team at Westminster as a junior to Seumas Milne.

The move, while a coup for Corbyn, is one that Momentum – and some of Corbyn’s allies in the trade union movement – are keen to resist. Taking a job in the leader’s office would reduce still further the numbers of TV-friendly loyalists who can go on the airwaves and defend the leadership. There is frustration among the leader’s office that as well as Diane Abbott and John McDonnell, who are both considered to be both polished media performers and loyalists, TV bookers turn to Ken Livingstone, who is retired and unreliable, and Paul Mason, about whom opinions are divided within Momentum. Some regard Mason as a box office performer who needs a bigger role, others as a liability.

But all are agreed that Schneider’s expected departure will weaken the media presence of Corbyn loyalists and also damage Momentum. Schneider has spent much of his time not wrangling journalists but mediating in local branches and is regarded as instrumental in the places “where Momentum is working well” in the words of one trade unionist. (Cornwall is regarded as a particular example of what the organisation should be aiming towards)

It comes at a time when Momentum’s leadership is keen to focus both on its external campaigns but the struggle for control in the Labour party. Although Corbyn has never been stronger within the party, no Corbynite candidate has yet prevailed in a by-election, with the lack of available candidates at a council level regarded as part of the problem. Councilors face mandatory reselection as a matter of course, and the hope is that a bumper crop of pro-Corbyn local politicians will go on to form the bulk of the talent pool for vacant seats in future by-elections and in marginal seats at the general election.

But at present, a draining internal battle is sapping Momentum of much of its vitality. But Lansman retains two trump cards. The first is that as well as being the founder of the organisation, he is its de facto owner: the data from Jeremy Corbyn’s leadership campaigns, without which much of the organisation could not properly run, is owned by a limited company of which he is sole director. But “rolling it up and starting again” is very much the nuclear option, that would further delay the left’s hopes of consolidating its power base in the party.

The second trump card, however, is the tribalism of many of the key players at a local level, who will resist infiltration by groups to Labour’s left just as fiercely as many on the right. As one veteran of both Corbyn’s campaigns reflected: “If those who have spent 20 years attacking our party think they have waiting allies in the left of Labour, they are woefully mistaken”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.