Definitions again… legal this time

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It appears that before the Christmas period, there was a move by the Government to define what is meant by the term social enterprise (albeit limited to the health context in England). See
http://www.legislation.gov.uk/uksi/2012/3094/part/6/made

Any move to clarify things should be welcomed in my book and I would say that we are broadly in agreement with the spirit of it. However, the danger lies behind in the lack of specifics, which does leave it open to interpretation and possible hijacking. There are a couple of areas that cause the most concern, from our experience.

Firstly, the lack of a requirement for independence. This means that any company or organisation could potentially set up a social enterprise under this definition and they could still remain in control of it (sometimes known as the Golden Share) albeit with limited profit distribution and a lock on residual assets (if the company closes). This allows for ‘sham’ social enterprises – being used as a front for potential bidding for health contracts and will further blur the lines with regards to the privatisation of the NHS. We have seen this in other externalisations such as leisure trusts where a local authority has overall control of the company; of course these Trusts would not achieve the Social Enterprise Mark.

Secondly the wording is vague around social purpose. The Mark specifically requires that a social enterprise has stated social/environmental purpose(s) in its constitution whereas this definition states that the body must ‘contain a statement or condition that the body is carrying on its activities for the benefit of the community in England.’ This might be linked to the way that Community Interest Companies operate, but it does not prescribe how this this will be tested and interpreted.

Which brings me to the third concern which is how this definition will be regulated and how new social enterprises can be supported to ensure they meet the criteria in a robust way (see my last blog about the need for independent certification). The Social Enterprise Mark is a short-cut to demonstrating social enterprise criteria are real and dig into the true motivations for setting up as a social enterprise. The ultimate sanction is the removal of the Social Enterprise Mark business changes its way of operating.

I will be writing to Jeremy Hunt to tell him this!

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One response to “Definitions again… legal this time

  1. Pingback: Tax relief and social investment – the golden egg? | Lucy Findlay

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