Public Services (Social Enterprise and Social Value) Bill

Fiona Bruce Excerpts

Friday 19th November 2010 Commons Chamber

[Fiona Bruce (Congleton) (Con)]

It gives me great pleasure to support my hon. Friend the Member for Warwick and Leamington (Chris White) and his Bill. One of the main features of the debate has been the contribution of social enterprises to our local communities. We must interpret as broadly as possible the organisations that can fall within the ambit of the Bill. My hon. Friend mentioned more socially responsible businesses, and in that regard my view runs counter to that of my hon. Friend the Member for Ipswich (Ben Gummer), who suggested that we should substitute “charity” for “social enterprise”. I suggest the opposite, because far more local businesses are contributing to our communities than has been recognised, certainly by the previous Administration. This is a wonderful opportunity for us to highlight the contribution that those businesses make.

As my hon. Friend the Member for Bedford (Richard Fuller) said, many people are in business not just to make a profit but to contribute to their local communities. Walking down our local high street, we would be hard pressed to find a retailer who was not contributing to the community in one way or another. For example, in my constituency, there is a traditional menswear outfitter called Davenport’s. Members might wonder how Davenport’s could make a social contribution, but it is Davenport’s that donates props and clothing to the Daneside community theatre, which in turn makes a wonderful contribution to community life in Congleton. During the school holidays, dozens if not hundreds of young people who might otherwise be at a loose end spend their time creating theatre shows for the town. That is an excellent example of one small business contributing to the community as a whole and making a positive difference.

It would be wonderful if our town council, with its small budget, had the freedom to place high on its agenda a recognition of the contribution made by businesses such as Davenport’s to our community well-being when it is awarding the relatively modest contracts that can nevertheless make a real difference to the welfare of small businesses, especially at a challenging time on the high street.

I understand the point about the concerns that the Federation of Small Businesses might have about the proposals. Speaking as someone who has run a small business for well over 20 years, I, too, was concerned when I initially looked at the Bill, because I knew that many small businesses operated on the margins—on tiny margins, as I experienced when I set up my business. I declare an interest as someone involved in running a socially responsible business. It took many years before my business made any real profit, but if I had been able to consider even small opportunities for contracts with our local authority, it might have made a difference.

[Mr Sam Gyimah (East Surrey) (Con)]

Given that the purpose is not to subsidise for-profit enterprises that are operating at the margins, but to encourage businesses or organisations that operate as a business—they may have a turnover and may have a surplus—surely the primary objective should be contribution to the community rather than to the shareholders.

[Fiona Bruce]

I believe that “community” comprises many different factors, one of which is having flourishing businesses. If the awarding of public contracts can make a difference to flourishing businesses, large or small, that should count as social or public value. It is not, as many people mistakenly claim, about offering public service on the cheap; rather, it is about adding value to our communities.

Like many of my colleagues, I will have knocked on thousands of doors on a political journey. One key theme that came across to me again and again, particularly when I campaigned in a large town during a previous general election campaign, was a yearning for community life. I am fortunate that I now represent a constituency comprising mainly smaller towns where such community life still continues. Government support to businesses that, in turn, contribute to the maintenance and, indeed, the strength of community life will be valuable.

[Steve Baker]

Does my hon. Friend agree that all enterprise is necessarily social because it seeks to create value for other people?

[Fiona Bruce]

I thank my hon. Friend for that intervention, as that is exactly what I am saying. I think that we will find very few organisations that do not merit consideration under the Bill when public contracts are awarded. We should therefore think carefully before narrowing the definition of the enterprises that we want to include.

I would like to highlight some clear examples of where a social enterprise in my constituency has been less well served than it could have been under the current criteria for awarding public contracts. I mention an enterprise called Visyon. It is an excellent organisation in my community; it provides counselling and support for young people who need social or emotional help. Visyon has given me two excellent examples of where it believes it might have benefited if the Bill had been in force. First, it bid for a contract against a private tenderer, but the criteria for the tendering process included such elements as credit checks, the evidence of significant surplus of funds and high net asset value. Visyon says:

“If criteria had… included… social outcomes and values, we may… have… scored more highly based on such criteria.”

It did not succeed in winning the contract. In another case, it bid for the provision of mental health advice and support in schools in the Cheshire region. It gave evidence that it could provide such advice at one third of the cost of its competitor for the tender, the educational psychology team, but it lost that one, too.

I am sorry that the right hon. Member for Salford and Eccles (Hazel Blears) is not in her place, because I wanted to pay tribute to the work that she and her local authority did in the north-west region. Salford council in particular worked closely with organisations such as B4Box. I met Aileen McDonnell and also pay tribute to her work. It is worth noting that through her organisation, people who have been unemployed for some time go into work and are sustainably employed. That is to her credit. I look forward to seeing B4Box’s work growing and flourishing across the wider region.

I would also like to highlight the work of the Message Trust. I know that the right hon. Member for Salford and Eccles spent some years supporting it, as has Salford council and the police. It is important to remember that when we talk about awarding public contracts, we are not talking only about local councils. The Salford local authority and the police have supported the work of the Message Trust over many years, and it has proved extremely beneficial. I would like to spend a few moments to describe it to hon. Members.

The Eden project, which is run by the Message Trust, organises groups of 10 young people, perhaps in their 20s or 30s, who commit for a period of five years to living in a deprived area and to giving 25 hours a week of their time—most of these people are also working—on the streets, getting alongside young people who are suffering through fractured families, drug problems, lack of self-worth, joblessness and so forth. That helps such people to understand how to engage positively within their communities, perhaps initially through voluntary groups, and subsequently helps them into training and work. It has proved enormously successful over many years.

I endeavoured to engage with another local authority regarding this scheme. I took representatives from the Eden project to meet council officials and I had several meetings and obtained support from local volunteers. I was aware that a recent local authority report had expressed the concern that its youth work was not hitting the mark. Frustratingly, however, it was impossible for that local authority to commit to an Eden project of its own, despite the fact that providing 10 youth workers on the streets cost only about £40,000 a year. That is not much more than the salary of one youth worker—plus add-on costs, overhead and supervisory costs—employed by a local council.

Although some local authorities are connecting well with organisations such as the Eden project, others are still reluctant to alter their mindset and change from an approach that allows them greater control towards one involving more trust, albeit perhaps with an element of risk. The trust might have to associate with organisations with which it has not connected previously or not worked with previously. As I say, it might not have the same degree of control. None the less, if we do not move in this way, we might miss the opportunity to change so many of our particularly deprived communities or those with real need. I believe that the Bill will provide a greatly needed catalyst for a change in the mindset of the many authorities that need to start looking outward rather than inward in deciding how they will provide, contract and procure local services.

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[Fiona Bruce]

May I invite the Minister to meet representatives of the Eden project and the Message Trust? I believe that they have much to offer local communities: indeed, they aspire to engage with up to 60 local communities across the nation.

[Mr Hurd]

I should be happy to do that. I have written to all Members of Parliament offering them the opportunity to bring in representatives of voluntary community sector organisations in their constituencies. I understand that there is tremendous enthusiasm out there, and that organisations are anxious to understand the big society agenda better and what it could mean for them. The invitation is open to all Members on both sides of the House.

We consider social enterprises to be valuable in terms of making a social impact and our determination to promote enterprise and private-sector growth. We are making it easier to run a social enterprise by establishing a taskforce to reduce bureaucracy and red tape for social enterprises; reducing the small-profits rate of corporation tax to 20% from April 2011; offering a one-year temporary increase in the level of small business rate relief from October 2011; and taking a different approach to regulation by introducing the one-in, one-out rule, whereby we will not introduce any new regulation without abolishing existing regulations with a net cost to business.

Secondly, we are ensuring the resilience of the social enterprise sector by developing a big society bank to help grow the new market of social investment that is seeking to blend financial return with social impact. It is a real market, but also an embryonic one and we want to accelerate its growth. We think the big society bank can be a catalyst for that, such as by making it easier for social enterprises to access the capital they need. That will come on stream in quarter two or quarter three of next year.

As has been said, we have—at a time when there is very little money around—set up a £100 million transition fund to support voluntary community organisations and social enterprises delivering front-line services that stand to be affected in the short term by reductions in spending. We have also included social enterprises in the offer to access a £1.4 billion regional growth fund to invest in projects and programmes with significant potential for growth and employment.

Finally, we are making it easier to do business with the state by opening up markets for social enterprises, as I have discussed. There will be a fundamental reform of public services with an explicit commitment to try to create more space for social enterprises, charities and voluntary organisations to help us deliver better public services.

With the two conditions of our resistance to legislating for strategies both at national and local authority level, we support the Bill’s objectives. We think it is consistent with the big society agenda and our public service reform aims, and with our intention to make it easier for charities, voluntary sector organisations and social enterprises to deliver public services. We think it will help us maximise value for the taxpayer and improve the process of consultation with communities in the shaping of public services. It will support social enterprise, which in itself is a worthy aim. It simply proposes a duty to consider, where relevant and proportionate. It does not compromise autonomy or add additional burdens. It is about trying to turn best practice into standard practice and to deliver the best possible value to taxpayers, and it is on that basis that we are prepared to support the Bill.

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[Mr Chope]

My hon. Friend makes a good point. He is right to emphasise the riskier approach, because sometimes there is a risk. For example, in my constituency, the local council decided to let the contract for the running of the local leisure centre to a charitable trust based in Poole. It became apparent that the trust was not delivering on what was set out in the contract, and after several years the contract had to be taken back in-house. Subsequently, a couple of other projects that the trust was running were found to be financially unsustainable, and that was the end of that, I think. We must not get into a frame of mind in which we think that anything that calls itself a social enterprise is, by definition, a good thing. Such bodies have to be run along business lines.

To take another example, people in Verwood—a town that is no longer in my constituency, sadly, but was until the time of the last general election—have set up a community enterprise called the Verwood Hub, which is a community centre. Unfortunately, it is becoming clear that they have not been applying business principles to the running of that centre, so they are having to go back to the local authority and say, “Please give us some more money.” The local authority is making it clear that it can go only so far in doing that, because there is a limit to how much it can be expected to use local taxpayers’ money to make up for the deficiencies in the business plan of what might otherwise be described as a laudable community enterprise.

[Fiona Bruce]

We must not let the example of one or two less successful projects restrict the opportunity for the public sector to enter into entrepreneurial projects with local groups. The spirit of enterprise does, of necessity, involve risk. We have seen that spirit in this nation over many decades, if not centuries, and it is the seed of the fruit of phenomenally successful community and commercial organisations. We can look back in the history of this nation at some tremendous businesses that have done social good, so it would be dangerous for us almost to sanitise public procurement, as we have done to a large extent,. It can never be risk-free. Without an element of risk, we will reduce the opportunity for those great potential benefits that have flourished in this nation in years gone by.

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[Mr Chope]

Absolutely, and that is very much the theme behind the submission from the Federation of Small Businesses on the Bill, which a number of hon. Members will have received. It makes the point:

“The Bill describes social enterprises as businesses ‘carried on primarily for a purpose that promotes or improves social or environmental well-being’. While such organisations are undeniably valuable, micro businesses also serve such a function. What sets them apart from social enterprises however is that their primary purpose will be to make a profit and remain in business.”

That is the important part—remaining in business. They cannot do that unless they make a profit, as they are often unable to raise capital. That was the problem with the charitable trust that I mentioned earlier. It was not able to reinvest in the leisure centre, which as a result became rather dowdy and did not meet the needs of the customers.

[Fiona Bruce]

Staying in business may be the immediate aim of a micro-business, but there is often a greater end to that. The aspiration is that in time, it will be able to become an established small business and make a difference to its community and environment. We have to support and nurture micro-businesses in order for them to make that difference.

[Mr Chope]

My hon. Friend is absolutely right, and we all have examples from our constituencies of businesses that started very small and have become quite large. One such business in my constituency makes organic baby food, and now supplies it to major national retailers. It was based on the idea of an entrepreneur who asked, “Why are we not ensuring that people can guarantee that their children are being fed wholesome baby food at the most nutritionally important time of their life?” That enterprise struck a chord with the consumer, hence its great success. There are a lot of other examples that I will not trouble the House with at the moment.

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[Mr Chope]

My hon. Friend is absolutely right. Given time, I am sure that he would develop his argument in relation to north Somerset, as he has so ably on previous Fridays.

Localism is of great importance. When we talk about its importance, we should not be too fussed about whether we are talking about a local small business, a local social enterprise or a local charity. We must not create artificial distinctions.

[Fiona Bruce]

We must also not differentiate between a business being local and being big. It would be dangerous if we equated local with small. As a member of the all-party group on small business, I was a guest yesterday evening at an event at which one of the “Dragons”, Theo Paphitis, spoke powerfully about the impact of his chain of shops, Ryman. He took the group on when there were about 80 shops, and there are now about 260. He encourages local staff at each store to raise money for local community projects and he then matches it. Does my hon. Friend agree that it would be dangerous if we started defining too narrowly the scope of even the businesses with which we want to engage? Local does not necessarily mean small, although as someone who has run a small local business, I fully emphasise the importance of what small businesses bring to local community life.

[Mr Chope]

I agree absolutely. There are so many examples. The local community may be dependent on the local post office, but the Post Office is a national organisation with a national network. None the less, it is ever so important that the local branch of that national network in a particular village is maintained and viable. The same is true of the local pub. It does not have to be owned as a freehold by somebody local; it may be part of a national pub chain. That makes no difference to the important role that it will play in helping to maintain the local community. We could go on with lots of other examples.

I turn now to the “residue” of the Bill, and I should tell my hon. Friend the Member for Warwick and Leamington that I do not mean that disparagingly—perhaps “a distillation of the Bill” would be a better expression. When we get to clause 3, we are left with a duty on local authorities not to do anything, but to consider something. My hon. Friend said that that does not offend against the principles of localism and that it is legitimate for the Government to require local authorities, and thereby councillors, to consider particular things.