This paper explores an emerging and largely unresearched sector of the school education market, the transfer of local authority support services to external social enterprises. It locates these new social enterprises as a consequence of government strategies to reduce public spending, shrink local government and create competitive markets in public service provision. Non-profit social enterprises create and occupy a sector of a differentiated market in school support services which is not sufficiently commercially attractive to for-profit companies. The government discourse of these social enterprises as employee-led mutuals is contradicted by their user-led ownership and governance regimes. The analysis offered by this paper is substantiated by a case study, based on interviews and policy documents, of the transfer of the Birmingham local authority's Music and Health Education Services to a social enterprise independent from the city council.