by John Hannen, Policy & Partnerships Manager, GMCVO

We’ve seen many in the sector welcome the introduction of the recent Social Value Act on the basis that this groundbreaking piece of legislation will open up new opportunities in public service delivery for smaller voluntary organisations. In this post I’ll look at the challenges we’ll face in actually realising this but also to place the social value delivered by public sector commissioning in context.

Firstly it might be useful to look at what the Social Value Act actually does. It has been described by many commentators as a “nudge” act. Public sector commissioners can already seek to purchase social value through commissioning but due to this Act, now they will all have to consider how their purchasing mechanisms might deliver social value. The act of consideration alone however will not be enough and there is always the possibility that a commissioner will still be able to take a limited “tick-box” approach to service commissioning. Bad commissioning will still be bad commissioning whatever the legislative framework. In order to make social value meaningful, it will be important to ensure that there is a strong leadership push to deliver social value within the public sector. In many ways the job is only half done and to really see through a change, we need to lobby and persuade councillors, GPs, PCCs to take a view on social value in their organisations and set a clear direction for commissioning. We have been presented with a framework to achieve social value but we still have a challenge to ensure commissioners see it as a high enough priority to properly deliver it.

However, even with strong political commitment locally there are still significant challenges. In his recent post on this blog, Mike Wild of MACC discussed the “Graph of Doom” and the future fiscal challenges local councils face. Demand on services is rapidly increasing, as the population ages whilst health inequalities grow, yet many public bodies face cuts for the next five years at least. By 2019, the LGA expect there to be a £16.5bn black hole in local government finances. This will present two significant challenges to the delivery of social value: firstly that services will be withdrawn from many areas of existing delivery, secondly that pressures on costs will become more of a priority.

As councils adjust to cuts in spending they may have to withdraw from some activities entirely. This can be seen already with Newcastle City Council cutting its entire arts budget and Derby Council making cuts of 83% in their supported housing budget. This will mean that large areas of provision, where the voluntary sector already plays a key role, will no longer see state delivery of services. Whilst the Social Value Act might give us a larger slice of the pie, that pie is rapidly shrinking.

Even where services continue to be delivered there are still further challenges. It’s not enough to deliver high value services to be competitive but it is vital to be affordable. As local authorities try to deliver more with less, out of necessity they will be looking to deliver services at scale and reduce costs wherever possible. The need to consider social value under this act won’t be accompanied by a requirement to fund services to a level where organisations delivering high levels of social value might be able to effectively compete. Larger prime contractors may be required to look to bring social value into their supply chains but if their own contract is priced in a way that makes the management of a complex supply chain unaffordable then no matter how good they are, there will be few opportunities for smaller providers. Add payment by results into the mix then, no matter the priority given to the delivery of social value, voluntary sector providers may not wish to take on the risks inherent in delivery contracts.

So, to gain the most of the Social Value Act we need commissioners to view social value as a priority, strong local political leadership, to address needs where public bodies maintain a statutory responsibility and to offer a competitive price. Even then we face further challenges as the private sector will not stand still. Businesses wishing to deliver public services in future will clearly be required to demonstrate that they can deliver social value but they won’t be limited to delivering this through sub-contracting relationships with voluntary organisations. Larger businesses may merge with or take over social enterprises in order to widen their offer, they may hire staff with the appropriate skills from voluntary organisations, they may institute local employment schemes and they may even offer small grants schemes for community organisations. In many ways the Social Value Act creates an incentive for businesses to become much more socially responsible and if that comes to pass it will be a wonderful thing and a singular achievement. However, such a change won’t necessarily lead to increased contracting opportunities for smaller voluntary organisations.

Ultimately, with the cost pressures on the public sector and the challenges statutory bodies face as they seek to address increasing demand, many organisations may find delivery of social value through public commissioning processes harder rather than easier in the future. We also need to question how useful a mechanism for delivering social value commissioning is in the first place. Jay Kennedy of the Directory of Social Change recently made a powerful challenge to the voluntary sector on issues of commissioning and independence. When we deliver public services through contract we deliver services we have not designed and are accountable to the commissioner of those services rather than our beneficiaries. With newer contracting processes we become accountable to large private sector primes. This isn’t an argument for withdrawing from commissioning but recognition of the challenges commissioning processes bring along with the opportunities. Organisations should still consider commissioning but do so with their eyes open and pay particular regard to exactly what proportion of their activities are funded through this method.

Research over recent years has suggested to us that, even after a decade of increased investment from the public sector into the voluntary sector, nearly 80% of our local sector receives no public funding yet is able to deliver significant levels of social value. Many of them deliver magnificently with low levels of resources pieced together from a range of sources. As organisations we can undertake a wide range of activities to deliver on our missions and through that social value. We can ask for donations, we can undertake fundraising activities, we can apply for grants, we can trade directly with the public, we can charge membership fees, we can recruit volunteers, we can mobilise our service users to participate in the delivery of the services that supports them and we are more effective at delivering in these ways than other sectors. We shouldn’t just be pursuing the options that bring in the highest levels of resources in order to self perpetuate but instead engage in the activities that deliver the most for our beneficiaries and make us most accountable to them.

The Social Value Act may well generate opportunities to deliver social value but the challenge we need to address is how our organisations might have to change in order to be competitive enough to win such contracts and whether we can actually do more good by focussing on the kinds of activities no one else can undertake. When delivering social value, commissioning is not the only route.