Social Enterprise

Lord Haskel Excerpts

Thursday 6th October 2011 Lords Chamber

[Lord Haskel]

My Lords, many years ago, I was responsible for installing the first computers in our business in Leeds. They were a novelty. Everybody wanted to have a go and so we opened the office in the evening to staff and their families. Before long we had a little computer training co-operative going, which helped local people, particularly staff members’ families, to get better jobs and do better at school. It certainly raised the morale, commitment and loyalty that the noble Lord, Lord Newby, spoke about.

Was it a social enterprise or a social venture as the noble Lord, Lord Wei, put it? In those days, we socialists—that is what we called ourselves in those days—spoke about common ownership. To most people, such as my noble friend Lady Andrews, social enterprise was a contradiction in terms. A few of us were influenced by Michael Young, the social entrepreneur, who convinced us that business was as much about society as profit, as the noble Baroness, Lady Randerson, said. In truth, the name scarcely matters. What matters is that it was right for the time, it was right for the place and it was right for the people. Our little enterprise met the social need for people to become more computer literate: a local and specific social need which we did not even know existed when we started.

That is the secret of successful social enterprise, and why they are generally small and local. Otherwise they become ordinary businesses and lose their distinctiveness and that special aspect which sometimes enables them to succeed when ordinary business fails. As the noble Lord, Lord Mawson, explained, this is why in practice most big contracts in public services go to large private firms which, in turn, subcontract to local enterprises. This is in spite of the rhetoric from the Government, about which the noble Lord spoke.

It is easy to be cynical about social enterprises. It is easy to talk about them having mixed objectives and achieving neither. It is easy to talk about them being soft and therefore being crushed in the tough world of business. However, somehow, the idea of social enterprise keeps going. It just reinvents itself and adapts to the changing times. Indeed, its ability to deliver social benefits as well as commercial benefits may be another intangible asset that we have only just rediscovered about modern business.

The Government are making every effort to promote social enterprise, but they have got some of their thinking the wrong way around. Making 1 million public servants redundant and then trying to persuade them to sell their services back in the form of a social enterprise is getting things the wrong way around. Why? Because nobody is sure what need is being satisfied. Is it cutting public expenditure? Is it encouraging the private sector to provide public services? Or is it social engineering: trying to get people to improve themselves? Perhaps the Minister can clarify this, because until it is clarified it is not going to work properly.

There is clarity over what the Co-operative and Community Finance organisation is about. It calls itself the “lender for social purpose” and has been doing this for nearly 40 years. It raises money by public share issue and I declare an interest as a long-standing investor. Its prospectus says that it lends money for social purposes and collective benefit. But it is small, not because it has no money but because most social enterprises—apart from perhaps housing, mentioned by my noble friend Lady Andrews, or even water—also have a limited capacity to absorb and justify major loans and equity. Social enterprises have to perform. Their leverage is limited. Yes, we may do business with them initially because we support their social aims, but to get the repeat business they have to deliver quality, service, value, efficiency and profits like everybody else. So they have to be careful with debt.

Indeed, the big society and other fundraising ideas may not be all that relevant unless the terms on which loans are made are eased, and the need for more formal management is changed. Social investment bonds may be an idea whose time has come—the social investment market is expanding—but these are early days. We will have to see whether they survive the innovation of the City without the social innovation that the noble Lord, Lord Bhattacharyya, spoke about.

Traditionally, most social enterprises work in towns and cities: housing maintenance and refurbishment, collective living, training, health and welfare, especially for the benefit of those who are failed by the usual system and have particular needs. Interestingly community ownership is moving to the countryside where community-owned shops are replacing some of the many village shops which close each year.

An article in Tuesday's Financial Times told us that there are 60,000 social enterprises in the country, employing 800,000 people and turning over £24 billion a year. I suspect that figure depends on what you mean by social enterprise, but obviously this is a growing sector—growing in terms of numbers and public acceptability. The concept is being promoted by the Government; it has its own advocacy body, business schools are teaching it and institutions are appointing social entrepreneurs in residence.

As the noble Baroness, Lady Wheatcroft, suggested, jobcentres could also play an important role. All this is to the good and, like other noble Lords, I hope this is the way business is going. I wish it every success. I also hope it does not allow itself to be taken over by—or become part of—the existing business establishment. It would then lose its distinctive, special and attractive features and that would be a loss.

I am most grateful to my noble friend Lady Andrews for moving this Motion. It gives us an opportunity to debate some of the better business practices—not social business practices as the noble Baroness, Lady Wheatcroft, suggested—about which my party leader spoke last week.