The government is encouraging more social enterprises in health and social care with the promise of start-up cash. Caroline White looks at some that have taken the plunge

Government estimates suggest there are around 55,000 social enterprises in the UK, with an annual turnover of£27bn between them. How many have sprung up in health and social care is unknown, because there is no centrally collected data. But the government thinks there are not enough.

It sees social enterprise as an important means of providing more locally responsive, inclusive and equitable health and social care services, especially in areas of deprivation.

By giving frontline staff the option to create their own service delivery organisations while still retaining their NHS pension rights, in line with Lord Darzi's recent recommendations, it hopes to kick-start a major expansion of the model in the NHS.

The origins of social enterprise date back over a century. But the term has come to mean a business with explicit social aims, whose profits are predominantly ploughed back into the venture for the good of the community it serves, instead of shareholders' pockets.

Investment fund

The government has set up a dedicated social enterprise investment fund to provide advice as well as seed funding for start-ups and development loans for established businesses.

Applicants who submitted a bid for funding by the end of this month - the next funding round is in 2009 - stand to claim a share of this year's pot, worth£17m. Funded organisations include charities, community interest groups and companies limited by guarantee.

Projects range from research and development costs, through payment of salaries, to the purchase of equipment and buildings.

GP Sam Everington is one of relatively few healthcare professionals who have taken the plunge. His practice in the Bromley by Bow health centre in east London is a partnership of 100 different projects and social enterprises under one roof, which aims to provide holistic care and bolster the job prospects of the local population.

"Social enterprise brings together the best of both worlds. It provides a business discipline with the great values seen in the NHS," he says. "Lots of GPs are entrepreneurial and all this is doing is opening up other opportunities to expose that." But there are some hurdles.

"The procurement rules tend to favour big business. And bids are far too focused on price," he argues.

"It would be much better for a primary care trust to say 'here's the practice population and here's the money; what can you do with it?' rather than turn it into a bidding war."

The Department of Health has acknowledged this in new national contracts for community and mental health services and in the commissioning framework for health and well-being. And all services contracted and funded by PCTs will also be subject to a new competition and co-operation panel to level the playing field and ensure that patients benefit.

Business risk

But commissioning social enterprise also means taking a bit of a risk, contends Dr Everington. "We need to help managers [do this]. There's great risk aversion out there," he says. "Sometimes you make a mistake and things don't work. But that happens all the time in business."

He accepts measuring outcomes can be problematic. "We've had 20 ministers visit the centre. They say this just makes sense. But [measurement] is a really difficult one. In traditional general practice you've got the quality and outcomes framework and it's easy to see."

The charity Disability Stockport was given funding to buy new premises to bring together all its existing support services and offer new ones in a single venue. Its director, Kieran McMahon, agrees with Dr Everington.

"We could fill our day centre three times over. People say it keeps them and their families going. But they have very complex needs. And it's very difficult to use empirical measures," he says.

An initial outlay to buy in the skills and/or information to submit a properly thought out business plan for the fund application is often necessary, he warns. "It's a bit of a gamble. But it's worth it," he declares. "You can skill yourself up in the process."

But Ceri Jones, senior policy adviser for the Social Enterprise Coalition, says the beauty of the funding scheme is that it is willing to shoulder a much higher level of risk than a bank would.

"Because it's not profit motivated, a lot of banks don't understand social enterprise," she says. "The social enterprise investment fund will back a project with a contract pending, so the money is there to become operational. And collateral is not required."

"Projects don't have to be radical or never done before, but the fund is interested in innovation," explains Tess Pendle, who heads the social enterprise investment fund.

Successful applications have a clear purpose, method and timescale and a thorough understanding of the market for the product or service and of long-term sustainability, she adds.

Another successful applicant is the Bristol Clubhouse project, which is based on a recognised model of helping people with severe mental illness get back into socialising and the workplace. It was suggested by service users themselves.

The money was used to set up a cafŽ, which will generate revenue for the enterprise as well as providing work experience for service users, many of whom have never before had a job.

"This project would never have succeeded if we had been in the competitive market and had gone to a bank for a loan," says Jim Conley, head of mental health services at the provider, the charity Aspects and Milestones Trust. "But you do have to be well prepared to get through the application process, which is rigorous," he says.

"But it's a good thing to do. It focuses your mind on exactly what you are doing and makes you ask questions. And it's much more meaningful, because you are not just relying on hand-outs," he adds.

The fund also enabled Magpas, an emergency medical charity, to buy two training simulators. "At first the terminology all looks a bit soft and fuzzy and very PC," confesses chief executive Ian Brooke. "It can be a bit off-putting. But once you get into the process, it's a different kettle of fish altogether."

For more information on applying to the fund, visit www.dh.gov.uk or email socialenterprise@dh.gsi.gov.uk

The closing date for applications is 31 July. The next funding round is in 2009.