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Employee-owned public services should be asset-locked, says social enterprise chief

Finance | Tania Mason | 16 May 2011

Social Enterprise Coalition chief executive Peter Holbrook has called on the government to ensure that social enterprises and mutuals that take over the running of public services introduce asset locks to prevent them being acquired by commercial organisations in the future.

While the government’s desire for public services to be transferred out of public ownership and into employee-owned mutuals or social enterprises is welcome, Holbrook said, there is a risk that their value to the community could be lost if they are simply bought out by private companies as they become more successful.

To prevent this, he told civilsociety.co.uk, the government should “promote, recommend, encourage and even ensure" that the new organisations being created by public sector staff setting up businesses to run public services, are using asset-locked models such as charitable trusts or Community Interest Companies.

This should not prevent such organisations paying their new owners good salaries or providing incentives such as performance-related bonuses, Holbrook said. But it would stop them “selling out to Capita or Serco five years down the line and retiring to Barbados”.

“We do not want a situation where social enterprises and mutuals are swept up by private profiteers – that would be a disaster for our communities,” he said.

“That is not to say they can’t be entrepreneurial, can’t innovate, can’t find new ways to deliver services, and be part rewarded for that. But the primary purpose should be the quality of the service, rather than maximising their own return or position.

“There are a variety of different legal models that protect the public integrity of the business."

Holbrook said most of the public sector staff that were keen to go down this route weren’t interested in maximising their own financial return anyway, so the idea of an asset lock shouldn’t attract much opposition.

“Our position and our members’ position is that if you are going to set up an organisation like this you need to make that commitment from the outset, that you will always be trading for public benefit and that the value of the company, as it grows, will always be enshrined for public benefit.”

Holbrook did not think an asset lock was necessary for all types of social enterprise, however. “If you are just setting up in business as a self-starting social entrepreneur, I am a bit more agnostic about it. 

"But when you are taking assets, knowledge, experience that has been paid for by the taxpayer, that investment needs to be safeguarded for public benefit in the future and there are a variety of models out there that protect public benefit.”

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