Localism Bill

Baroness Thornton Excerpts

Tuesday 5th July 2011 Lords Chamber

[Baroness Thornton]

My Lords, perhaps I may ask a question. I have a great deal of sympathy for the noble Lords’ amendments. I am not sure what my Front Bench is going to say, but this sounds like a very useful discussion to have about how to extend local rights. My question, because I am a champion of social enterprises and the voluntary sector, is whether they, too, will be able to challenge for those national services that might appropriately be delivered at a local level. That would seem appropriate.

[Lord Jenkin of Roding]

Immediately, exactly the same bodies and people, including local charities and voluntary bodies, should be able to challenge these national services, in the same way as the Bill provides for them to challenge local services.

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Amendments 130ZA to 130ZE not moved.

[Baroness Thornton]

I am standing up to give the noble Lord, Lord Greaves, time to move his amendment, which comes before mine in this group.

[Lord Greaves]

My Lords, if the House is willing to be tolerant, I will admit that I was asleep.

Moved by

[Baroness Thornton]

130A: Clause 68, page 58, line 7, after “authority” insert “who have formed an organisation for charitable purposes or a community interest company or industrial and provident society”

[Baroness Thornton]

In that case, I will speak to my amendments and give the noble Lord, Lord Greaves, a chance to catch up on his amendments in this group. Before I do so, I declare an interest as an ambassador for Sporta, the trade group of social enterprises which deals with local sports and leisure services, and as the founding chair of the Social Enterprise Coalition. I shall speak to Amendments 130A and 131A, and comment on some other amendments in this group, although I may leave that until they have been spoken to. My noble friend Lord Patel is right to say that Clause 68 is important. I have always believed that socially owned businesses, founded and run in this case by local people, have an important and valuable role to play in the provision of public services.

Amendment 130A seeks to put beyond doubt the kind of enterprise which can challenge and be considered appropriate to contract for the services under consideration. I seek clarification from the Minister about this because, as it stands, it seems that the expression of interest could be used by local authority employees setting up a private company. I believe that that might be a loophole that would need to be closed. Amendment 130A states that,

“after ‘authority’ insert ‘who have formed an organisation for charitable purposes or a community interest company or industrial and provident society’”.

That covers basically all the organisations that are not private enterprises.

Amendment 131A again seeks to make completely clear an issue which is, in a way, about the size of the organisation. I believe that there should be a requirement that the expression of interest can be initiated by a local organisation or in collaboration with a local organisation. Many national charities already provide and contract for services at a local level—for example, Barnardo’s and Action for Children, which I know about through a long association with them. I believe that those national charities, along with any national social enterprise—indeed, there are those that are contracting which are building social businesses providing social care—would want to contract for those services at a local level. But they have to prove that they are working collaboratively with local agencies to provide locally integrated solutions.

This would still allow national organisations, which have great skills and experience in delivering these services, to bid but would ensure that the Bill meets its main objective of devolving power and giving a voice to local communities. The involvement of a national social enterprise or a national charity may be the difference between a local body being able to challenge and contract for local services and it not having the capacity to do so. It is important that large and small, and local and national, collaborative working is part of this Bill and is put beyond doubt. That is what these two amendments are about. I beg to move.

[Lord Greaves]

My Lords, I apologise for falling asleep; it is these Zs all over the place which are doing it. I am not speaking to Amendment 130ZD, which I missed. However, Amendment 133ZN has exactly the same meaning. I was going to apologise for putting down the same amendment twice in the group but it seems that that was providential. I certainly have a great deal of sympathy and support for what the noble Baroness, Lady Thornton, has just said.

We put down amendments to take out the reference to employees not because we do not think that in appropriate circumstances it is a good idea for employees to take over running the services for which they are employed, but because we are not at all convinced that this Bill is the best place to legislate for employee buy-outs, employee buy-ins, employee takeovers or whatever. They do not quite fit with the concept of the community—however the community or somebody in the community is defined—making a challenge and saying, “We can run this service. Can we have a go please?”. Employees are very different in that sense as they represent the producer side of the service rather than the consumer side and, clearly, if consumers or citizens or residents take over a service, they become producers as well. Equally, employees can make the same journey in the other direction.

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[Baroness Thornton]

Perhaps I may help the Minister with this because the point about my noble friend’s Amendment 131AA is that where a voluntary body generates a surplus, it can be legitimately used for several purposes. It can be used to undertake further activities consistent with the social aims, as set out in its governing document, which could include but not be restricted to local community benefits. It could be used to invest in strengthening the organisation itself, so that it becomes more resilient and can expand its work, and it can be used to repay loans and other investment. It might, for example, include a payment of dividends to shareholders following a community share issue within the limits established by the incorporation of the community interest company or the IPS. Those are safeguards against excessive private gain. I do not think this is the right amendment but the point is that it seeks to clarify whether points two and three are permitted within the Bill. We might need to discuss this further.

[Lord Shutt of Greetland]

I am even more confused but I will endeavour to look at that in due course. As I was saying, the Bill already states that a voluntary body’s activities should not be carried on for profit. The purpose of a voluntary body’s activities should surely be to benefit the particular community it represents. As for what the noble Baroness has said, we are in Committee and we can clearly look at this again, but I saw this in simple terms. I cannot get it out of my head, quite frankly, that you may get a community association bidding which, in its building, has a kitchen where it will do its meals on wheels. It might make a bit of a profit from the meals on wheels service in that community. It seems to me that if it makes a small profit from that exercise, it can use that for the benefit of the rest of the association that it is carrying on in that building. That is as I see it in simple terms.

Amendment 130A would require employees of a relevant authority to set up a charity, community interest company or industrial and provident society in order to submit an expression of interest. Requiring employees to form a specified organisation in order to submit an expression of interest and get a fair hearing for their idea would create an unnecessary and bureaucratic burden. It risks putting employees off exercising the right altogether. The Government are committed to giving public sector workers the right to bid to take over services that they deliver, and the community right to challenge implements this commitment for relevant authority employees.

[Baroness Thornton]

I am sorry for interrupting the Minister again but this is a very important point. I can cite two examples. Sunderland Home Care was set up by home care workers as a co-operative and, quite rightly, the employees of that local authority in Sunderland provided much better terms and conditions to contract with Sunderland Council. Greenwich Leisure started the whole movement of leisure trusts because Greenwich Council was going to close down its swimming pools— this was 10 or 12 years ago—due to something called rate-capping, which some of your Lordships may remember, and it was the employees who initiated the move to contract with the local authority to take over all the leisure services.

Those examples both make a surplus—and quite right too—because that is how they reinvest back into their local communities, so that the charges in Greenwich for leisure services are now much lower proportionately than they were. They are also both able to support contracting in other areas, so that Sunderland Home Care now provides training for home care workers across the north-east. The point about this amendment is that by defining the legal form that community groups, or any group of employees, use to do the challenging, we actually safeguard the social purpose against private profit being made which then does not get put back into the community.

[Lord Shutt of Greetland]

My Lords, I understand what the noble Baroness is saying, but there is a concern about being overprescriptive. It is important that we do not do anything to put employees off. We can return to this; there is no reason why not; but we know what the intention is. It is to free up the opportunity for employees to take part in a right to challenge. I am far from certain that we should be prescribing that there are these various routes and it is outside the theology if they take the fifth route and not routes one to four. We need to be a bit careful about that.

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[Lord Shutt of Greetland]

I am quite clear that, if there are two employees, we are back to the whole business about looking at who is backing this and whether the people who will ultimately benefit from this service think that it is a good idea. It is unlikely that the local authority would say, “Off you go; you look a great pair”. It is very doubtful that that would be the case. That is the route to putting a stop to that. It may well be that our friend, regulations, will come into this as to the power of stoppage that there would be in these circumstances.

Amendment 133ZN would prevent the Secretary of State providing advice and assistance in using the right to a body that is formed of, or includes, any employees or ex-employees. That would introduce a disparity. It would mean that advice and assistance could not be provided to a voluntary and community body formed of employees and ex-employees, but could be provided to other voluntary and community bodies that did not contain such individuals. No decisions have been made on the form of any advice and assistance in using the right, but we expect to focus on those that need it most. This is likely to mean smaller, newer voluntary bodies, but it is sensible that we have the powers to provide assistance to any relevant body that might need it. I understand that an impact assessment has been done on this and the suggestion is that, across the country, £20 million will be required. It is not yet in any budget, but that is the suggestion in the impact assessment.

Clause 73(4) ensures that this includes employees who have formed a body to take on the delivery of a service, including where they have left the employment of the authority. This supports the Government’s commitment to give public sector workers the right to bid to take over the running of the service that they deliver. I trust that these comments will mean that these amendments are not pressed at the present time.

[Baroness Thornton]

I rather expected that the noble Lord, Lord Greaves, would be doing the heavy lifting at this point in the debate. I thank the Minister. We need to have further discussions about this to make sure that we are safeguarding things. I say to the noble Lord, Lord Newton, that definitions are not a problem here, because we are seeking to create a variety of different ways for local organisations and groups to set up social businesses which will be able to contract for services. The way that they will define themselves is by choosing a legal framework which fulfils the purpose as outlined in the Bill. There are only a few things that they could choose: a company with charitable purposes; a community interest company or an IPS, a co-operative of a different sort. There is a limited number. They define themselves, in a way. It looks complex, because there are lots of different ways of doing this and, in fact, the Government’s role in providing information support at local level will be very important. With that, I beg leave to withdraw the amendment.

Amendment 130A withdrawn.

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[Baroness Thornton]

I do not understand, then, why Clause 73(1)(b) talks about,

“participation in a procurement exercise”.

[Lord Shutt of Greetland]

That would be the exercise that is carried out by the local authority. It does not say how the authority should procure, it simply acknowledges that there will be a procurement exercise. I understand that these are wide-ranging powers, and I understand the noble Lord expressing his view on that. I think, however, that there are two quick responses—and the noble Baroness, Lady Thornton, will no doubt warm to this theme. It could well be that if employees are expressing an interest, under these clauses, provision could be made—and that may indeed be via a local authority rather than the Secretary of State—to give them help and assistance in forming a community interest company. That sort of advice and assistance, and seed-corn money, might enable such groups of employees to enter into expressions of interest. If they did not have that, they would be unable to.

[Baroness Thornton]

The noble Lord invites me to comment on this. My comment is that it is not the Secretary of State’s job to provide this advice and assistance. It is the local authority’s job, or else that of some association which is under its control. It is the Government’s job to provide the resources for them to do it. This gives too much power to the Secretary of State.

[Lord Shutt of Greetland]

The noble Baroness takes words out of my mouth. I did indeed say that that is exactly what could happen. I hope that, in the circumstances, these amendments will not be pressed, and that the clause will be able to stay. As I indicated right at the start, regulations are with us, and we will all need to see that we are happy with them. The noble Lord, Lord Greaves, said that he wanted convincing before the Bill leaves this House. It will be a while yet before it leaves.