The Comprehensive Spending Review
The catastrophic global banking crisis of 2008 caused great uncertainty and hardship across society triggering recessions across the Western world. The Comprehensive Spending Review (CSR) delivered by George Osborne last Wednesday ended speculation and finally revealed the full impact this crisis will have on our communities. Social enterprises, as ever, will be at the sharp end of both the direct impact of the spending cuts themselves and the waves of change that will now be felt throughout our communities in the months and years ahead. The Institute for Fiscal Studies reports that the poorest 10% will be hit hardest by the cuts, so communities will need the acute attention of social enterprises in increasingly tough times. As Rob Greenland from The Social Business blog puts it “Lots of my work is done in areas where there is market failure. Sometimes even the most socially entrepreneurial group of people can’t do anything if the State retreats and takes its money with it.” This double whammy of market failure and public spending cuts will change things fundamentally.
There appear to be three main implications for social enterprises in this new era of austerity the Government is embarking on. Firstly, reduced funding to continue the good work in our communities, secondly, a massive restructuring of service delivery, and thirdly, social hardship in our communities resulting from the cuts creating ever more need for the type of services social enterprises excel in.
The scale of the challenge is stark. An average of 19% will be cut across all government departments, local government cut by a massive 28% and 490,000 public sector job losses, informs the BBC News Spending Review. There is no doubting the severe repercussions this will have on the North East. Early estimates from KMPG, the international accountancy firm, to mean 55,900 job losses in the North East and £82million ‘wiped from’ the third sector.
Hugh Morgan Williams, chair of the Northern Way, reiterates the particular difficulties we face, stating that “The North will be disproportionately hit by this because of the structure of our economy.” And the risks of this ‘restructuring’ experiment are being devolved to local councils, who are being asked to make the decisions on what to cut. Andy Sawford, chief executive of the Local Government Information Unit, says: “The cuts to local government budgets announced today are huge and unprecedented, they will fundamentally alter the way that councils work and the work that councils do.” (Regeneration & Renewal Blog).
We will also see councils sub-contracting out some core services. This will create genuine opportunities for some social enterprises, as will the extra £2bn of funding for social care, however a large concern in the industry is that, as Peter Holbrook from Social Enterprise Coalition believes, social enterprises may miss out on opportunities across the board as councils rush to make decisions to deal with the scale of the cuts, by opting instead for private sector providers.
Another worry across the sector is the specific threat for those social enterprises working in ‘periphery services’. John Copps of New Philanthropy Capital Foundation believes that anything that the government is not obliged to do, such as youth work and crime prevention projects, is under threat in the shake up. This will be dangerous for many smaller social enterprises, and, with this approach, there seems to be a complete lack of understanding that so-called ‘peripheral services’ intervene in a preventative fashion. If a short-term attitude is adopted towards these vital services, the repercussions may reverberate for years in our communities, and in the end cost us more.
There are some small glimpses of light however. In recognition of the ‘Big Society’, which George Osborne did mention once in his CSR speech, there was an inclusion of a £100 million transition fund to help Third Sector organisations deal with the changes (Stephen Bubb blog). Nevertheless, the sheer scale of the cuts and redundancies leaves this money unfortunately looking rather like giving someone a toothbrush to clean the Sage Music Centre in Gateshead. Tony Blume, chief executive of the Urban Forum, claims that “…given the scale of public spending cuts already taking place…and the increased role the government wants civil society to take, this amount will barely scratch the surface” (Regeneration and Renewal Blog).
Social enterprises have historically risen to the challenges presented to them. The sector is full of committed and innovative people making often unseen but unmatched social contributions to our society. It is clear that the need for social enterprises in our communities is required more than ever since the banking crisis. With less resources now available as a result, the innovation and commitment that the sector is famous for will certainly be needed. NESEP will continue to bring social enterprises together, enable planning for the future and support communities through some worrying times ahead.
Words by Neil Foster.