Hannover A6 public services
Hannover policy forum background paper
Workshop A6: ENTERPRISING SOLUTIONS FOR PUBLIC SERVICE REFORM
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- To clarify the issues that governments and public authorities face in delivering public services, and the ways that working with inclusive and social enterprises can improve service quality.
- To examine some cases where entrepreneurial approaches have been successful.
What is the challenge?
Public service provision is under being squeezed by a number of factors. First, demand is rising, as advances in medical technology mean that people are living longer, and are spending a longer time in retirement. They require old age care for a longer period, and have high expectations, yet are not earning an income. Their pensions may be inadequate. At the same time, globalisation has created a liberal environment in which it is not feasible to pay for services through increased taxation. This creates a need for more efficient ways of providing care services, based on an entrepreneurial approach.
Social enterprises, because of their base in mutuality, can achieve efficiencies by addressing multiple problems simultaneously. Their local rootedness and values of solidarity and participation mean that they are close to the user, have short feedback loops, and can innovate quickly to meet changing needs. They can create jobs for disadvantaged people while providing services that cannot be provided using traditional public or private sector methods.
Entrepreneurial approaches can bring benefits across a wide range of public services. Social enterprises have a very successful track record in industries including public transport (ordinary service buses as well as specialist services for disabled people), leisure (from swimming pools and sport centres, youth hostels and zoos to stately homes and heritage steam railways), environmental services (cleansing and recycling), housing and even utilities such as water. But their greatest competitive advantage may be thought to lie in those sectors where customer satisfaction depends on the quality of personal relationships between provider and user, such as in health and care. Across the world, the ‘third sector’ – including voluntary associations, mutuals, co-operatives and non-profit companies – has a well-established role in providing the gamut of care services including acute medical care, mental health, child and elderly care. In some countries the funding for health services is organised via membership of mutual insurers, whereas in others it is financed through general taxation.
What kind of solutions are being tested?
Public authorities are increasingly working with social enterprises to improve service quality, unleash innovation and reduce costs to the general public by tapping other sources of revenue. Some cases use conventional tendering procedures, while others rely on partnerships that retain public ownership of assets while combining employee management with user consultation.
The leisure sector is a major example of how empowering employees can unleash innovation and improved service quality. Over the last 15 years in the UK, around 100 ‘leisure trusts’ have been set up to manage assets such as sports centres and swimming pools in a more entrepreneurial way. Together, they have a turnover of some €330m. They benefit from charitable tax and rates (local tax) relief, and are generally controlled by their employees but with membership representation from users and the local authority. They have enabled local authorities to avoid closing their facilities – and on the contrast have expanded to offer the public new services. The leading example is Greenwich Leisure Ltd, which was founded in 1993. It now works with 16 authorities and manages 60 facilities. It employs 3,000 people and has 250,000 user members.
In the waste and recycling sector, significant savings can be made where a social enterprise generates multiple benefits from the way it provides a single service. The FRC Group in Liverpool creates four benefits from salvaging unwanted furniture: a reliable collection service for bulky items for residents, less waste going to landfill, higher standards of living for poor people; and the labour market inclusion and skills acquisition of the workers. A linked firm, Create, rehabilitates and sells 3,500 items of ‘white goods’ furniture a year, 85% of which go to benefit claimants.
Despite initial scepticism from the council staff, today FRC consistently outperforms its specifications: it processes 200,000 pieces of furniture a year, reuses or recycles 42% of the items it collects, employs 25 disadvantaged trainees, and successfully places 94% of them in permanent jobs.
In Italy, since 1984, contracts between local authorities and social co-operatives have contained ‘social clauses’ which specify the integration of disadvantaged workers such as disabled people, drug addicts and ex-offenders. The town of Brescia pioneered the use of contracts with social co-operatives, in such areas as parking enforcement and social services. A contract for green space maintenance, for example, will typically be a three-cornered arrangement, among the city’s social services department, its parks department and the social co-operative. The province of Brescia, with a population of about a million, has 140 social co-operatives employing 4,500 people and with about 1,000 volunteers, which together turn over €500m a year. The co-operatives contribute not only an improved quality of life but also a financial saving – it is calculated that each person successfully integrated saves the public purse between €15,000 and €20,000 a year.
In many countries, including Sweden and France, nurseries have been set up as co-operatives and associations involving parents and carers. In France, a partnership between ACEPP, the national network of approximately 1,000 parents’ associations, and the 400 Boutiques de Gestion has created a high-quality professional support service for community-based nurseries.
Founded in 1994, Sunderland Home Care Associates (SHCA) was founded in 1994 and is now the biggest home care provider in Sunderland, employing around 180 people, mainly women, who serve 500 clients. It has been able to win local authority contracts on the basis of the high quality of the service it provides. Its employees are owners of the company, and can vote to distribute an allocation of shares to themselves each year, depending on its financial results. The shares are tax-free if held for five years. The commitment this creates means that employee motivation is high and turnover is low (3.5% a year).
SHCA has set up a franchising company called CASA (Care & Share Associates) to spread this successful model, and it has now been replicated in four other boroughs in northern England, creating 400 jobs. CASA will keep a 10% shareholding in each new care enterprise it spins off. Each federated company will also hold shares in CASA, thus ensuring the coherence of the group.
Questions for discussion
- What are the underlying drivers of change? What are the things about public services that need reforming?
- What are the benefits of involving inclusive and social enterprises in public service delivery?
- What crucial processes need to go on inside the public authorities to do this? Is decentralisation key?
- What governance structures are needed to achieving both accountability and efficiency? To what extent is it permissible or advisable to turn over control of public services to stakeholders such workers and users?
- How real are threats to conditions of employment and universal access to services?
- How important are legal and fiscal frameworks, such as tax relief for charities or employee shareholdings?
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