The Chartered Society of Physiotherapy The Chartered Society of Physiotherapy


View your shopping cart.

The 3rd Way

Another player is entering the healthcare provider arena.

Matthew Limb analyses what third sector provision may mean new contender is emerging in health and  social care, occupying the territory between  the state and private provision. In the so- called third sector, organisations like those  found in the community and voluntary  fields are set to play a bigger role in the delivery of public services.

The stakes are high, but the situation is not black and white. Ministers say alternative providers such as charities and not-for-profit social enterprises may in some cases be best placed to meet healthcare needs. However, unions fear patients will ultimately lose out as a ‘wasteful’ new provider market causes the NHS to fragment and allows big private operators to seize the spoils.

Third sector organisations already carry out some public services funded or part-funded by the taxpayer, such as hospice care for terminally ill patients. But the government sees scope for so much more. Earlier this year it launched a new Office of the Third Sector, putting minister Ed Miliband in charge of a major policy review on its role in social and economic regeneration.

Ministers say the strengths of the third sector are its independence, both from government and private shareholders; its passion to do social good, and its capacity for innovation. When the government’s third sector commissioning taskforce reported in July, health secretary Patricia Hewitt said it sent a clear message that health commissioners must start involving third sector providers as ‘mainstream partners in local health communities’.

As primary care trusts around the country look to divest their provider role, opportunities are emerging for organisations such as social enterprises to come to the fore (see box, Central Surrey Health). Social enterprises are businesses driven primarily by social objectives rather than the need to maximise profits for shareholders and owners. They reinvest any surpluses back into the business or the community and are also subject to restrictions on the use and disposal of assets.

The Social Enterprise Coalition estimates there are as many as 55,000 social enterprises in the UK working for social and environmental change across a range of sectors, and with a combined turnover of around £27 billion a year. Using a variety of legal structures, such as development trusts, well-known social enterprises include The Big Issue, the Co-operative Group and the Eden Project.

Alongside non-NHS social enterprise organisations already delivering primary and community care, ministers say they see ‘enormous potential’ for groups of NHS and social care staff to ‘come together’ and create thriving new models. This could happen around certain care pathways, such as stroke care, with the aim of promoting greater service innovation and user involvement.

A social enterprise unit has been set up within the Department of Health to support new ventures and a special fund will help with set-up costs from April next year. Ms Hewitt says the unit will be a ‘hub of ideas’, working closely with clinicians, managers and other staff to ‘remove any practical obstacles to change, such as pensions and insurance issues’.

Social enterprises would continue Labour’s long tradition of ‘mutualism’, say ministers, being accountable and responsive to service users, staff and local communities, and subject to independent regulation. But leading health unions say a distinction should be drawn between those social enterprises, charities and voluntary organisations that emerge organically, providing extra resources overall for the public benefit, and those that are being ‘engineered’ for the purposes of creating a market in health and social care.

They have warned ‘revolutionary’ reforms are being rushed through at a bewildering pace without proper analysis, consultation, testing or proof of benefits. In a briefing for MPs in July, the TUC pointed out the third sector commissioning taskforce included no mainstream health unions or professional bodies, but organisations with an interest in the establishment of a new market.

Warren Glover, CSP research and policy officer in employment relations and union services, says: ‘The NHS has a vast wealth of resources and human capital and should be given the opportunity to shape itself and improve itself before services are hived off to new models of service delivery, when there is no evidence these will work or provide value for money.’ He says the government is ‘gambling with precious resources’ at a time when NHS services and staff are suffering damaging cuts.

Mr Glover acknowledges some CSP members see ‘opportunities for development’ in the social enterprise model and recognises the value of work done by physio staff in the private and voluntary sectors. But he notes: ‘There will obviously be implications for CSP members in terms of possible TUPE transfer, terms and conditions, standards of human resources and employment practices and professional accountability.’ [TUPE is the transfer of undertakings (protection of employment) regulations 1981 and 2006].

Health unions have also warned increased competition will lead to under-cutting to win contracts, long-term instability in service provision and uncertainty for staff, all threatening the quality of patient care. Mr Glover adds: ‘Staff who don’t want to move to a social enterprise really don’t have an option. What happens to staff if a contract finishes and the NHS is moving away from being
a provider of services?’

According to a paper by health consultants Newchurch, the government may find ways for social enterprises to be ‘deemed to be part of the NHS family’, such as ensuring they share terms, condition and pensions. But, writes chief executive Kingsley Manning: ‘Becoming a social enterprise in any format is not a fail-safe recipe for success or even for survival. Job security will depend on business success, and winning and retaining services in the face of diverse and increasingly effective competition.’

It is argued social enterprises may compete well in the market by having staff prepared to work more flexibily in an organisation in which they are stakeholders. But equally, says Mr Manning, additional regulatory and governance costs could weigh them down in the market place and undermine their competitiveness.

Mr Glover questions whether managers of new social enterprises now emerging from the NHS will have the business acumen to deliver on their commitments. ‘As trade unions, we are not against change, but it’s about having a sensible change programme introduced at a managable pace which gives staff the ability to test different models and reflect.’

A recent King’s Fund paper urged the government to provide more active support to promote its goals of mutuality to make a success of the policy. It warned that for-profit providers were ready to ‘sweep into primary and community care unchallenged’, adding: ‘If too much time passes before staff-led and patient-led organisations take shape, when they finally do enter the marketplace there will be little left for them.’

Mr Glover says: ‘Ministers always say this is not about privatisation, it’s about breaking down the monolith of the NHS, devolving power and giving people choice. But there’s no real debate about what that choice really is.’ FL


The CSP’s Social Enterprise Companies: a checklist is available at

Social Enterprise Coalition

Office of the Third Sector

Social enterprise unit

What is the third sector?
The third sector describes the range of institutions that occupy the space between the state and the private sector. These include small local community and voluntary groups, registered charities, foundations, trusts, faith groups, social enterprises and cooperatives.

Third sector organisations share common characteristics in the social, environmental or cultural objectives they pursue; their independence from government, and in the reinvestment of surpluses for those same objectives.

Source: National Audit Office report, (HC 75, 2005-06) Home Office: Working with the third sector, June 2005.

The implications of using the third sector to deliver NHS services have not been thoroughly thought through and this should be rectified through full public and parliamentary consultation, piloting, assessment and review. The NHS has an established resource of highly skilled and experienced staff and we should use their expertise so that NHS services can be improved from within rather than simply outsourced. Where the third sector is used, there should be a clear, demonstrable case for their involvement, and their role should continue to be to enhance NHS capacity and not replace NHS services.

Central Surrey Health
At the start of October, around 650 therapy and nursing staff at East Elmbridge and Mid Surrey primary care trust split from the PCT to form a new, not-for-profit social enterprise. As co-owners of Central Surrey Health, they will start delivering contracts to the NHS worth around £20 million. Here we present two views on the situation

Mike D’Arcy, the CSP’s trade union representative for the South East, says the transfer was rushed through without staff and unions being properly consulted. He said he had repeatedly asked for information to test CSH’s viability, but despite several meetings, this had not been forthcoming.

‘We still have not received promised copies of the full commercial contracts and service delivery specifications, and we are very concerned that the figures won’t add up,’ he said. ‘However, as the transfer of staff to CSH has
now taken place, there is little we
can do.’

The transfer appeared to have been rushed through in order to be up and running before the new Surrey-wide
PCT came into existence, he said, and the PCT’s policy might be to pilot initiatives like CSH in the NHS first.

‘There are other outstanding TUPE issues, apart from the financial aspects,’ Mr D’Arcy continued. ‘For example, we have not been able to persuade CSH to negotiate a form of words that will guarantee employees will benefit from future improvements
in AfC/NHS national agreements.

We do know that CSH staff may lose continuity of service if they return to the NHS.

‘The trades unions have consistently taken a pragmatic approach to CSH as a social enterprise, not-for-profit company, but we have become increasingly concerned about the withholding of key information and the gung-ho commercial culture that CSH management is fostering. Of all the issues that our members have raised, the most important is the potential loss of the NHS ethos of service to patients.

‘Our members are concerned that social enterprise organisations like CSH are only a staging post to for-profit privatisation, in the way that the not-for-profit NHS Logistics, although successful, lost its contract to the German multinational corporation, DHL.

‘The trades unions continue to have deep concerns about CSH, but we hope
for the sake of staff and patients that these are not borne out. We believe
strong pressure from us has resulted in some improvements that will help the viability of CSH and, whatever happens, we shall continue to provide our members with all the support that we can.’

CSH will operate as a private limited company, with all staff owning a single share in the company. Joint managing director Tricia McGregor tells Frontline: ‘We’re not a public limited company so other companies or outsiders can’t buy up shares and take us over.’ She says the model puts staff in charge of major decisions and will ‘empower’ them to thrive professionally in a more entrepreneurial culture.

Ms McGregor defends CSH robustly as ‘part of the NHS family’ committed to the public interest. Therapists and nurses will provide services to local PCTs, hospitals and education authorities, via the same specialist medical services contracts route as GPs. ‘One of the things that attracted us to this option is it gives us some of the freedom and empowerment we want while remaining with some of the benefits of the NHS family.’ She adds: ‘CSH will offer NHS terms and conditions of employment, including AfC/NHS national agreements, to all staff.’

CSH says it will seek to retain a highly skilled and motivated staff, enabling them to contribute to decision-making and benefit from incentives, where appropriate. Ms McGregor says: ‘We could for example pay a bonus to staff or we could do some other kind of investment in the organisation that staff felt they benefited from.’

She responded to comments that the transfer was rushed through without proper consultation saying: ‘The CSH model has been carefully developed by staff over a 20-month period and was piloted within the PCT for three months to check its viability before going live on 1 October. This lengthy and detailed process involved innumerable productive meetings with the trade unions, including the CSP.’

Ms McGregor continued: ‘Exploring new and better ways of doing things meant that we weren’t always able to supply union representatives with facts and figures on the spot but we’ve worked extremely hard on their behalf to get as much information as possible for them from the NHS and the DoH… We fully intend to continue what has been a cooperative and useful dialogue with the CSP.’ She also said copies of the full commercial contracts and service delivery specifications ‘should be arriving imminently’.

Ms McGregor says she did not recognise the description of CSH having ‘a gung ho commercial culture’. She commented: ‘Certainly we are keen to encourage a can-do culture which empowers clinically trained staff but we all remain fully committed to the values and principles of the NHS.’


Comments are visible to CSP members only.

Please Login to read comments and to add your own or register if you have not yet done so.

Back to top