Tony Blair ushered in a new era for social enterprise in the UK.[1]  Blair embraced a robust third sector that would provide more innovative and effective public services. He specifically increased support for businesses led by social entrepreneurs with primarily social objectives, seeing them as chief drivers in creating a more community-focused public sector.[2]  At the same time, Charles Leadbeater published his book The Rise of the Social Entrepreneur; leading entrepreneur Michael Young founded the first School for Social Entrepreneurs; and Geoff Mulgan, now heading the Michael Young Foundation, joined the Blair government as a chief adviser on social policy.

By the end of 2005, the UK’s third sector had become critically important in the government’s public service delivery strategy. As the government worked to open space, innovative providers responded. Public service in the UK evolved as earned income—largely from government—increased from under 25 percent to over 50 percent of total third-sector revenues from 2001 to 2006.[3]  These providers have grown from small, scattered grant recipients into significant partners with the government who have a greater role in policy decisions.

The UK experience demonstrates how catalytic capital investments and policy changes can create the space for innovation for third-sector organizations—and distinctly social enterprises.

Of course, this deepening relationship between the sectors was not without tensions—some of which continue today. One challenge has been ensuring that multiple voices from the sector, not just those of the national advocacy groups, are represented in negotiations and policy decisions with government. Additional concerns include whether the third sector’s growing dependence on public dollars will impede its ability to voice concerns and whether eventually it will possess the capacity to handle an increasing number of contracts for public services.

The UK government eventually created an Office of the Third Sector (OTS) in 2006, with a mandate to “support the environment for a thriving third sector (voluntary and community groups, social enterprises, charities, cooperatives and mutuals), enabling the sector to campaign for change, deliver public services, promote social enterprise, and strengthen communities.”[4]

The OTS is led by the Cabinet Minister, who works closely with central and local governments and with representatives from the sector. Third-sector and government policy leaders now participate in discussions on such issues as charity laws, regulations, and funding; community action; volunteering; and reducing barriers to involvement. OTS also supports and leads research efforts on critical issues in the field.

About the UK’s support of social enterprise, Mulgan has written that he advised Blair not to go with a “grand plan” or to pump too much into the field too soon, but, rather, to take an evolutionary approach: “The key, instead, was to remove as many barriers to social entrepreneurship as possible, and to provide some of the enablers where they were absent: finance, networks, support, and development so that the other invisible hand could do its work.”[5]

Excerpted from "The Power of Social Innovation: How Civic Entrepreneurs Ignite Community Networks for Good" by Stephen Goldsmith

[1] Many thanks to Andrea McGrath, director of The Center for Applied Philanthropy, for her contributions to this section.

[2] Geoff Mulgan. “Cultivating the Other Invisible Hand of Social Entrepreneurship: Comparative Advantage, Public Policy, and Future Research Priorities.” In Alex Nicholls (Ed.), Social Entrepreneurship: New Models of Sustainable Social Change. New York: Oxford University Press, 2006.

[3] See Jenny Clark. UK Voluntary Sector Workforce Almanac 2007. National Council for Voluntary Organizations and Workforce Hub, October 2007.

[4] See www.cabinetoffi

[5] Geoff Mulgan. “ Cultivating the Other Invisible Hand of Social Entrepreneurship: Comparative Advantage, Public Policy, and Future Research Priorities. ” In Alex Nicholls (Ed.), Social Entrepreneurship: New Models of Sustainable Social Change . New York: Oxford University Press, 2006, p. 82.