Co-operative and Community Benefit Societies Act 2014 (Amendments to Audit Requirements) Order 2017

Lord Mawson Excerpts

Thursday 1st February 2018 Lords Chamber

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I have some brief comments in respect of the orders in front of us today. I declare that I am a member of the Co-operative Group and have been a member of the Co-op, as it were, for over 40 years, after starting off in the Royal Arsenal Co-operative Society. I am also a director of the London Mutual Credit Union, one of the biggest credit unions in London. These orders will affect us because its turnover is in excess of the uprated ones here.

The audit requirement is good news, and will certainly help many smaller credit unions in terms of the audit function burdens they have. The point the noble Baroness, Lady Kramer, made about ensuring that the organisations are properly accounted for is important as well. These sums of money are owned by members. They should be properly accounted for and any risks taken into account. Where there are problems, people should be alerted to them, and they should be dealt with properly.

I support the building society order, which enables them to join clearing houses. I see from the papers that the Government consulted the large building societies. That is fine, but did they also consult the Building Societies Association, which is the umbrella body for them? I cannot see that there are any views from it in the papers here.

It is a good move to put mutual societies in Northern Ireland under the umbrella of the FCA. The credit union sector in Northern Ireland is very big and much bigger than it is in the rest of the United Kingdom—in fact, the credit union sector is big in the whole island of Ireland. Giving it protection under the umbrella of the FAC is very welcome.

[Lord Mawson (CB)]

My Lords, I agree with the noble Lord, Lord Kennedy. Although I am not sighted on the detail of the co-operative and community benefit societies order, it feels like the right direction of travel. My point is really just a general one. I spend a lot of my life in SMEs and small charities, and at the moment many of them are becoming overwhelmed by the amount of bureaucracy, red tape and other things that are appearing on their desks. My question is really one that the Minister might take back to government. Someone needs to look carefully at what is happening to these small organisations, in terms of the amount of red tape and things that are appearing on their desks, and whether we can create this direction of travel for some of them. It is just a general point and a concern.

I was at a small charity last weekend, with one member of staff and two part-time people working in it, which is doing a great piece of work around education in the local community. The amount of treacle and stuff they were having to deal with was immense and extraordinary. You can feel many good people, who want to do good things in their community, wondering how much longer they can have a role in these kinds of things. They become very fearful of the 92-page document that appears on their desk. It is a general point, but one that needs to go back to government.

[Lord Young of Cookham]

My Lords, I am grateful to all noble Lords who have taken part in this brief debate and hope to address as many points as I can in response.

The noble Baroness, Lady Kramer, asked why the figures for the thresholds had been chosen. The reason is given at point 7.4 of the Explanatory Memorandum:

“These thresholds are out of step with both inflation over the last decade, and current company law. Over the same period, the thresholds for private limited companies of comparable size have been updated”.


We are aligning the thresholds in this order with those for companies. As we heard from the noble Lord, Lord Kennedy, this has by and large been welcomed. The noble Baroness made a different and wider point, which goes to the heart of the Co-operative movement— namely, how it takes decisions. Not just those on audit, but all decisions in co-operatives are nominally taken by the members. If she wants to press that issue, it goes to the heart of what the Co-operative movement is and how it is regulated. It is a much broader point than the specific one on audit. As I said, they would have to vote for this exemption. In addition, there is still an opportunity for the regulator to intervene if he is concerned, and there will still have to be an ordinary audit of the accounts.

A number of noble Lords, including the noble Baroness, Lady Kramer, and the noble Lord, Lord Tunnicliffe, asked about the exemption for building societies and were slightly concerned that it might go broader. But if one looks at new paragraph (d) in Article 2 of the SI, it is very narrowly drafted. The general exemption, which the noble Baroness referred to, is lifted in the very constrained circumstances of complying with,

“an obligation imposed by a recognised clearing house”.

So it does not open the building societies into the wider field of trading in derivatives and of speculation.

The noble Baroness asked a general question about cascades. When I introduced the order, it was in the specific context of a limited failure and the members having to bid for the interests of the defaulting member. On the broader question of what happens if the whole system collapses, the briefing I have here says, “I will write”. It is a good question about what happens if there is a systemic failure. As I say, I will write about that.

The noble Lord, Lord Kennedy, asked about consultation with the Building Societies Association. Yes, we consulted representatives of the BSA and they are supportive of the change. As I said a moment ago, the exemption is sufficiently narrowly drafted so that building societies will not be able to engage in speculation.

The noble Lord, Lord Tunnicliffe, asked about the delay in transferring the registration responsibilities from Northern Ireland over to the FCA. It was caused, first, by the transfer of the responsibilities of the FSA to the FCA and PRA, which were established in 2012. Secondly, time was needed to prepare for the transfer between the FCA and Department for the Economy officials. I do not think there is anything sinister behind it. Northern Ireland Ministers agreed with HM Treasury to transfer the function, and the Department for the Economy in Northern Ireland has indicated that it does not have the resource to continue providing this function. If it had kept on doing it, it would have had to increase the fees. As I said when I introduced the order, it is logical to have registration and regulatory oversight sitting with the same body.

The noble Lord, Lord Mawson, raised a more general point about regulation for charities. I will take that away, but we have recently made it easier for charities to reclaim the tax through Give As You Earn, by making it less bureaucratic to claim the extra tax. I think I remember taking through an SI, or indeed a Bill, on that a year ago. I will write to the noble Lord, because he raises a good, general point about the regulatory burden on charities, which we certainly want to lift.

I think I have covered all the points raised, apart from the systemic one about cascade failure. I beg to move.

Northern England: Opportunity and Productivity

Lord Mawson Excerpts

Thursday 12th January 2017 Lords Chamber

[Lord Mawson (CB)]

My Lords, as a northerner gone south I welcome this report and its focus and am thankful to the noble Baroness, Lady Massey, for introducing this important debate.

I have spent a great deal of my life trying to stimulate integrated local economies in what appear from the outside to be unpromising contexts. In doing so, one has learned quite a bit over the past 30-plus years about how the world can look from Whitehall and the desks of researchers who are overconfident about the value of the papers they read by other researchers, and talkers in the press who often live at 60,000 feet above all the action. I am interested in what the world looks like through the eyes of practitioners engaged in the detailed work on the ground of rebuilding local economies. What is valued by the research community, who are chasing grants and their next funding, and what counts on the ground in practice may be very different. This is a helpful report but, like many other similar reports, it is overconfident about the role of the public sector—its structures, frameworks, policies and the like—and does not pay enough attention to the details of the business and social entrepreneurs actually doing the job on the ground.

I have been involved in the Olympic project in east London for over 17 years, in thousands of practical details on the ground that are generating quite a legacy. I have discovered that today there is still one story at 60,000 feet in Whitehall—about how we have successfully used this event to regenerate the east London economy—and quite another story to be told, on the ground, about what made the fine words and statements deliver in practice.

I will repeat my well-worn mantra: the way into understanding macro changes—in this case in the northern economy—is in the micro and the local community. The economies of the north are made up of thousands of local economies that need to thrive. The question is, as always, about the practical detail: this is where the devil sits. Real economies, in the north and in east London, are built by entrepreneurial people who take problems and turn them into opportunities. They are not built by government structures, frameworks and all the other clutter that this report is in danger of relying on too much. The public sector has an important role, yes—not in swamping those of us who rebuild these local economies in politics and red tape, but in creating the conditions within which business and social entrepreneurs can thrive.

Reference is often made to the history of the northern economies. My own city of Bradford’s economy was built not by the public sector and government paraphernalia but by wool entrepreneurs such as Samuel Cunliffe Lister and Sir Titus Salt, among others. How much time have these researchers spent with northern entrepreneurs in our own day, looking at what the world looks like through the eyes of these practitioners? This is where the rich grain of gold is to be found—not in generalities but in detailed practicalities.

As I engage today in 10 towns and cities across the north, in areas with great social and economic challenges, I am coming across some fantastic opportunities to rebuild our economies in the north. However, to do this the traditional siloed thinking and overreliance on reports like this will have to go. We live in a digital age; everything has changed. The job of the state is to create the conditions within which entrepreneurs can thrive, not to research and measure them to death with little purpose other than to feed the beast which is government.

I shall illustrate briefly one such opportunity in one northern community, a place where I am working. I have worked in west Cumbria on and off over the last 15 years. Successive Governments have poured billions of pounds of taxpayers’ money into the nuclear industry there and into the local economy. We have been right to do so: the nuclear industry really matters. However, the way successive Governments have done this has created a profound dependency culture in local communities—what the local MP described at one recent meeting I attended as “basket-case government structures”. Have we learned any lessons from all this previous activity? No: I learned many years ago that government is not a learning organisation. It too easily repeats old formulas and past mistakes, despite all the millions we spend on research keeping our universities in business.

An opportunity to work with the people of west Cumbria—particularly the next generation of young people, who I am already engaging with—is emerging, an opportunity to innovate and do things differently as new investment makes its way up the M6. I am already working with key business leaders in the nuclear industry there, and local entrepreneurs, to explore what an entrepreneurial culture might look like for a new generation. My interests are in the register. Later this summer, on 28 September, Professor Brian Cox will join me and my colleagues as we replicate a very successful science summer school there which we have been pioneering together over the last five years in east London, exploring how Britain can become the best place to do science and engineering in the world. Cumbria desperately needs a new narrative that takes it out of 1970s and puts it and its important industry firmly on the global map as a place of nuclear excellence. Who better to explore that modern narrative than Professor Brian Cox?

The question for the Government in this important piece of the northern economy is whether they will allow my colleagues and me to innovate. Will they allow us to move beyond the traditional silos and create a truly entrepreneurial and—yes—safe and responsible community, or will a thousand little pieces of legislation and a lack of continuity and bold leadership miss the moment and leave the next generation wondering whether it has a future in the north? I hope it does. Look at the health data in Cumbria: the effects of a dependency culture are in plain sight.

Deregulation Bill

Lord Mawson Excerpts

Thursday 30th October 2014 Grand Committee

[Baroness Donaghy (Lab)]

My Lords, I thank the noble Lord, Lord Tope. I spoke on this issue at Second Reading and little did I know that I would be entering this twilight world of virtual hotels and absence of health and safety. It is a very new world and perhaps not one that I would welcome. I make no apology for speaking about a London issue. I am a Londoner by adoption. I have done my fair share of one-room bedsits and one-bedroom flats, so I think I have some knowledge of the standard of private sector renting. The big issue why it is special for London is the high proportion of flat-dwellers. We must emphasise that because it means that there is a whole new relationship with fellow homeowners, which does not necessarily exist in a street of houses.

I support what the noble Lord, Lord Tope, said. This is not a cosy, house-swapping issue. This is big business. We are talking about Airbnb valued at £10 billion and IHG valued at £8 billion and also about a crisis in housing supply in London. Can the Minister say how the Government reconcile that shortage and the fact that this is going to make accommodation even more short? How does that reconcile with the model tenancy agreement that the coalition Government are preparing? How can we be sure that there is going to be enough accommodation left for those who want to rent on a longer basis?

Noble Lords have already spoken about undermining the tourist industry. I will not go on about that, but I support everything that has been said about it. All the organisations that have approached other noble Lords have also approached me. I believe that the health and safety issue is important, because the Chief Fire Officers Association wrote in March to Airbnb saying the fire safety information given to people using its properties was wrong.

Finally, let me deal briefly, because others have covered the issues that I wanted to, with the libertarian issue. It is quite right that the homeowner ought to have the right to deploy their property in whatever way they choose. That has to be balanced by the right of the property owner not to have a major change in ambience of the place that they purchase. That is particularly true in blocks of flats. There is an expectation when someone buys a property within a block of flats that the ambience will not change, that it will be secure and settled and that it will not turn into the A&E department of the local private hospital, into a hotel, or into more unfortunate areas such as brothels and housing benefit fraudsters at the other extreme. The right of homeowners has to be balanced by the need for people to have some security in the property that they buy in London. If the noble Lord, Lord Tope, were to pursue this on Report, I would support the clause being deleted entirely, but as a reasonable compromise, I will support my noble friend Lord McKenzie.

[Lord Mawson (CB)]

My Lords, I am not an expert in this area, but following a discussion with an entrepreneur who is active in this field and behaving responsibly and who has developed a successful business in response to a real market, I thought it important that an alternative case be put. Over the years, I have often heard a strong case from the public sector as to why it would be unhelpful for a particular change to happen. I have heard attempts to hold the sea back before, but it has often proved impossible in the end. Change happens. As a social entrepreneur and innovator I have certainly been told by the public sector on numerous occasion that, “the sky will fall in” if such and such a change should happen. Having usually stayed the course, I noticed that, in reality, it never did and a new, often positive reality emerged.

The noble Lord, Lord Fowler, gave some excellent illustrations of this phenomenon, and attempts in the past to hold back business development, in his Second Reading speech. I shall articulate an alternative scenario to that painted by colleagues. I have heard considerable opposition to this change and concern over the unintended consequences that may arise as a result. However, I have yet to hear enough focus on the benefits of this reform, which in many people’s eyes is a sensible and forward-thinking piece of policymaking. It is these benefits that I shall focus on.

First, this reform will deliver a more optimal use of space and existing assets. With such well-documented pressure on our housing capacity, surely it makes sense to make better use of the residential property that we already have and to allow our properties not to lie empty for short periods when owners are away. I declare an interest as someone who lets out rooms in my London home. Secondly, a system which no longer makes people feel fearful of criminal sanction simply for renting out their residence when they are away will mean that families, many of whom are in need of additional income, will be free to tap into an additional revenue stream. Much of this revenue will be taxed and will ultimately boost revenue for the Exchequer to spend as it chooses.

Thirdly, it is evident that increasing the variety and stock of locations for tourists to stay will not only boost tourism in the capital, but will give a boost to local businesses that will benefit from this new mode of travel. This extra tourist footfall has the potential to reach parts of our economy that tourist dollars have previously never reached. Furthermore, when tourists decide to stay in people’s homes rather than in hotels, they tend to spend their money in local businesses, local restaurants and local museums. Finally, it should be pointed out that the costs for a family wanting to stay in a hotel in London are incredibly high and many people are simply priced out of a trip to our capital city. Short-term holiday lets provide travellers, especially families, with more choice and often more suitable properties in which to reside while on holiday.

We must be clear that the internet has fundamentally changed the way in which people live, work and travel. Either we decide to embrace this shift in our policy-making and our regulation or we will be left behind, as other cities embrace what is increasingly a preferred way to travel. The emergence of platforms such as Onefinestay, which has been mentioned and which enables people to rent out their residence safely and securely on a short-term basis when they are not at home, is something that we should embrace and not hinder.

Voluntary and Charitable Sectors

Lord Mawson Excerpts

Thursday 26th June 2014 Lords Chamber

[Lord Mawson (CB)]

My Lords, I thank the noble Baroness, Lady Scott, for introducing this important debate. It is good that we take a good hard look at what is happening to the voluntary and charitable sectors in this country. It is difficult to get a full measure of this diverse and complex sector of the economy, but in my travels around the country you get an impression at least of what is going on.

Times are hard for the third sector, and sometimes it can all feel so relentlessly utilitarian nowadays. It can all feel so heavy as charities are drawn into the relentless struggle to raise funds, apply for bids and, of course, go for contracts with the state. Those of us who have danced with the dinosaur-like structures of the state for too many years to count have witnessed its effect upon virtually everything it touches—turning virtually everything it engages with into a pale reflection of itself.

I was involved in the early days of the housing association movement when it was being developed by leaders in local communities. At that time, these local leaders had real aspiration about the quality of design and radical ideas about the kinds of houses they wanted to build and the kinds of communities they were in business for. This energy and enthusiasm of course attracted the interest of the state, and many well meaning people were seduced by the lure of the state and its promise of large-scale and much needed investment in the movement. Slowly, step by step, with one piece of necessary legislation or red tape upon another, this lean, dynamic voluntary group of organisations was dumbed down, straitjacketed into well meaning policies and frameworks, and somehow in the process lost the sense of life and fun and risk-taking that were at the heart of their business. Somehow, these crucial human factors were lost in the drive for order, fairness and equality. It sounds a bit like the NHS—a similar story, I suggest.

For housing associations now to take up really imaginative and radical schemes—and there are some—it is often despite, rather than because of, the funding and regulatory regime they find themselves caught up in, so much so that many associations, I fear, increasingly look and operate as pale reflections of their past. This bureaucratisation, caused by the state and not by business, so often leads to a loss of the human touch. Yes, they do community development and are often sentimental about their relationships with residents, but they have lost the driven, entrepreneurial flair that brought them into being in the first place.

I am reminded of this because I gave out the community impact awards last week at the National Housing Federation, and here I must declare an interest. At this event, I saw some fantastic people and projects, but they were at the edges of the operation of these giant organisations, not at their centre. Residents and local people are not some addendum; they should be the core business. The £300 million housing company, a charity, we built in east London is radical. We created a resident-owned business and used our capital investment over the past two decades to trigger social and economic activity in some of the most challenging housing estates in east London. Twenty years later, the evidence is there for all to see in a £1.7 billion regeneration programme. Just look at the quality of the gardens we have built—they would be quite at home in Kensington and Chelsea. A deliberate strategic decision we made in Poplar 20 years ago was to stay and focus in this one area on relationships with residents and quality development, and not to try to expand across the country here, there and everywhere. We chose, in the words of the song, not to be “everywhere and nowhere, baby”, a policy too favoured by successive Governments.

In this bureaucratic, contract-driven world, a game which I have played many times, I worry that the cultures we are now creating in this sector, far from being free, adventurous and radical, innovating and challenging the logic of the systems of government, are instead in danger of losing their spark—in danger of being a bit too responsible and a bit too dour, certainly too public sector, and with a need to have more fun.

But what does fun look like? Well, at a project I am chairing in Blackheath at the moment—I declare the interest—last Friday we opened a beach with sand, an amazing picture of a Victorian pier as a backdrop, deck chairs, drinks and fairground music, 100 miles from the sea. This week it has been packed with children playing in the sand and parents sunbathing and chewing the fat with their neighbours. The project was brought together in a matter of weeks and I have, to date, seen no sight of a health and safety policy—oops! I am sure we have one.

I remember some years ago in Bromley-by-Bow having a bad day when a particular planning decision had not gone well. Instead of bemoaning our fate, two of us got into my politically incorrect yellow MGB sports car and set off to try and buy a castle in Kent. My colleague had heard it was on the market and we wondered why we should not try to reconnect the East End with its long association with this county through hop picking. Actually, we nearly did the deal until someone with rather more money than us stepped in at the last minute. This experience was followed a few years later with the offer of a manor house in the Cotswolds by the then dean of Westminster Abbey, which at that time housed a charity that had got into considerable difficulty. We had learnt something from the castle experience. We took Stanton Guildhouse on, and today it is a self-sustaining social enterprise used by business leaders, families and thousands of inner-city residents from across this country—here, again, I must declare an interest.

If, with the best will in the world, we lose this spirit of fun, innovation and enterprise in the third sector, what is the point of it? What difference is it bringing to our communities? Yes, we have to live with the world as it is, but how we do it and how we live within it really matters. What sort of charitable and voluntary sector organisations are we creating? Are we bringing new life and innovation to communities across this land, and a spirit of fun and energy, or are they in danger of becoming a pale reflection of the state and of what already exists?

I encouraged residents at the housing association awards evening to take more control, to remember where their association had come from, to take centre stage and build entrepreneurial cultures and not play at the edges—to live dangerously or not live at all. If we are to renew the life of this country, how we do it really matters and the spirit with which we come to the task will make or break us. Can the Minister tell the House what the Government plan to do in practice to ensure that charities do not simply become clones of the state?

Public Services

Lord Mawson Excerpts

Wednesday 12th December 2012 Lords Chamber

[Lord Mawson]

My Lords, I thank the noble Lord, Lord Boateng, for this timely debate. I have spent the past 35 years demonstrating in practice how the voluntary sector can play a crucial role in innovation and in delivering public services in new ways that focus on the customer. How can it use its position, sitting between the often large bureaucracies of the public and private sectors, to bring much needed innovation in the delivery of public services?

The Health and Social Care Act eloquently mentions this. Integration, innovation, and enterprise are found in the legislation that encourages us to go local. These are important words, but words alone will not make this happen. New thinking and hard work are required. So how do we enable more voluntary sector organisations to win and deliver more public service contracts in a way that is a game changer?

First, you should start small and learn how to innovate and deliver public services well in one place before you exercise that overused phrase, “Roll it out”. The micro and the macro are connected. The Government should choose six projects located in specifically identified areas in the inner city, suburbia, the countryside and the north and south of England, and get it right in a few places and really understand what the blockages are, and not roll out a national programme before this has been done.

Steve Jobs obsessed about creating his first Apple store. He hid away for nine months in a warehouse and was fanatical about the small details. Apple is now one of the most valuable companies in the world. If the voluntary sector has a role, it must be in innovation, creating integrated customer-focused services and lifting the game. I worry that the Government have become very adept at talking and simply putting old men in new clothes.

My second point focuses on how best to get the voluntary sector to deliver. Simply encouraging it to play a role in delivering public services will achieve little. The rules, specifying to the nth degree how a contract is to be delivered rather than enabling the supplier to propose different solutions, possibly by integrating different services, constrict much needed flexibility and creativity. The VCS plays this bureaucratic game as well or badly as the public and business sectors. You are not good at delivery just because you are under the banner of “voluntary sector”. Flexibility is desperately needed, and I am pleased that the noble Lord, Lord Heseltine, makes this point in his important report.

If you want innovation, you need to create space for it to happen and reward it. It is amazing how the new academy infrastructure for schools, for example, is quickly starting to look exactly like local authority education departments by another name. This happened 30 years ago when the Government got hold of housing associations and dumbed down their entrepreneurial flair. The business community moving into the health sector is starting to look like a public sector response with a few more bells and whistles. Working relationships with social entrepreneurs are not cementing fast enough because the Government are not commissioning services to create new, lean, innovative relationships. Bureaucracy speaks to bureaucracy. It does not understand any other language. The procurement systems of this country are broken. I have tried to raise these concerns with the Government. The noble Lord, Lord Gardiner, and I have talked about this, but no one seems to follow through on the practical detail. We have tried, but I have received no practical response that is interested in getting hold of this detail.

Generally, the gap in expertise and imagination is in the statutory and public sectors. While there is a procurement college now for large contracts, will the Minister tell us where is the support for innovation in the £20,000 contracts and for the hundreds of thousands of statutory and quango staff? Real change in public service must involve senior leadership. Otherwise it will quickly be regressive. In relative terms, contracts to the VCS are small and so the senior staff—the CEOs—do not often get involved themselves. What would happen if the procurement processes encouraged this engagement?

The Prime Minister once talked about the big society but, like the third way, it seems to have lost its way. I am interested in small societies and those teams of local players who can make all the difference. In order to see results, we need to understand the practice of what people on the ground do, and we need to help them to grow and up their skills in an organic way. They must be encouraged by us to innovate and deliver more, but we must not put elephants on their backs. We should incentivise this joined-up leadership, encourage these relationships between business and social entrepreneurs and build them into the procurement contracts. This is how we will create social value and innovation and move it to scale. It is all about relationships.

Public Services (Social Value) Bill

Lord Mawson Excerpts

Friday 27th January 2012 Lords Chamber

[Lord Mawson]

My Lords, in speaking to the Bill I declare two interests: as a director of the social enterprises One Church, 100 Uses, a national regeneration agency, and of the Water City Festival CIC, which is based in east London.

I thank the noble Lord, Lord Newby, for introducing this Private Member’s Bill in the graveyard slot at this point on a Friday afternoon. It is in my view a most important Bill because it seeks to put its finger on a very important issue: public sector procurement and the culture that prevails within public service provision in this country.

We in Britain used to be known as a nation of shopkeepers. Today we need to become known as a nation of enterprising communities. A business is a community, as is a local school, a hospital, a village, a town, a London borough and even an Olympic Park. In a country that is nearly bankrupt, the real challenge that we face is how we now unlock the energy and enterprise within Britain's many and varied communities. How can we once again discover the entrepreneurial skills in our DNA—our inherent ability, which our Victorian ancestors were so adept at, of making something out of nothing? This is the key issue at the core of the Bill. If the next generation are both to survive the present harsh economic climate and to make something out of it for themselves and their children, then they have to become adept at creating something out of very little. Navigating the processes of public service delivery and procurement must help them and not get in the way. This is the big challenge of our day that underpins this legislation.

In the people of this country there is a sleeping giant waiting to be woken from its slumber. You can see this giant dozing in many of our communities. I see it daily in the dependency culture of some of our most challenging housing estates. I know this as a fact because I have spent a great deal of my life working in some of our most deprived communities and know what can happen when you wake the beast. The people who make a real difference in communities—the local chemist, the doctor, the head teacher, the social and business entrepreneur—are already there, but feel ground down in bureaucracy and the countless ideologies that we have built around our systems of government. For those practical people it is very difficult to find the energy to wake and engage with the outside world because moving the bedclothes has become so hard. Despite the rhetoric from a number of different Governments about removing red tape, in my experience it is getting worse, not better. Words are easy but actions are hard. We cannot afford bureaucracy any more: it is too wasteful.

I was with a successful small businessman recently whose family has created a flourishing shopping arcade that allows local people at small cost, in a very straightforward way, to open a small market shop and grow their own business. The culture is good and the relationships are healthy, but he tells me that every time the local authority officer appears with the keys jangling from his belt, he fears the worst—another set of requirements, forms to fill in and processes to go through that will increase his costs and, eventually, those of his traders. Social entrepreneurs experience exactly the same thing as this business entrepreneur, and it is stifling innovation and creativity.

I have just sat through the Health and Social Care Bill with its many amendments and listened to this Government, as I have listened to three previous Governments, telling me as a practitioner and entrepreneur how they are seeking to improve the health service. This Government, like the one before, are of course right to try and do so and their aspirations are correct, but the culture is not and neither is it changing. Just look at the number of people taking sick leave or retiring early in the NHS: good people who want to do a good day’s work. Already, despite the many amendments and words in your Lordships’ House, the experience of my colleagues on the ground, operating in the machine, tell me that it is business as usual in the NHS. They tell me that the same old faces, the same old ways of working and the same oppressive culture of the health service are bearing down upon them. There is a sense here and elsewhere that everything might seem to be changing, but the reality for practitioners is that they see little change—the culture is the same. There is a great difference between seeming and seeing.

The big issue that this Bill attempts to address is the culture of our public services in Britain. Its aim is, quite rightly, to create greater diversity in public service provision and to let loose these new emerging enterprising communities by creating flexibility, and that is exactly right. I was at a dinner recently with Sir David Varney, former CEO of Shell, chairman of O₂ and HMRC. He has run some very large institutions in his time, both in business and in government. He raised the question of why it was that Governments, regardless of which party is in power, with all their resources, often in reality seem to achieve so little, yet social entrepreneurs and local enterprises seem to achieve so much with just one man and a dog. How can we grab hold of the dog’s tail and shake it? This is the big question—the David and Goliath struggle. When you raise these issues, older and wiser heads than me predictably give weary smiles because they have heard it all before and know how difficult it is in reality to do. That might be so, but someone needs to throw the stone to create the ripples.

The big change that this small Bill must seek to make is that of culture. How do you create an efficient culture within public service delivery and procurement? How can we get more for less? How do we empower, energise and truly engage with communities through our systems of procurement?

I have read the cross-party debate in the other place between Chris White, Hazel Blears, Nick Hurd and others. I do not intend to repeat their points. They are all right, and while there may be minor differences between them, they are struggling with this very important issue, and we must encourage them to continue to do so. I support this Bill because there is ample evidence, which has already been given in the other place, of how broader and more imaginative procurement can pay dividends. I do not propose to add to that evidence in this speech. I am interested in the more practical matter of how we build on and grow the evidence.

While this legislation is important, it will change little by itself, as others have said. Large companies will soon learn how to jump through the additional hoops. For example, an employer can say that it will employ local people, but what does that mean if it is just a local address on an application form? It could easily end up a bit like much of corporate social responsibility, with lots of bright consultants writing reports. Indeed, it could in practice make life yet harder for small businesses that do not understand the game. It does not have to be like this. There are already living examples of imaginative broader procurement processes using current legislation. It is the culture and purpose of the procurement process that is different in these specific situations and we need to make this the rule rather than the exception. The change in legislation can be part of the process, but we are deluding ourselves if we think it is an end in itself.

The last years of my working life are focused on building and extending the work that my colleagues and I have spent nearly 30 years doing, which demonstrates in practice, on the ground, what this debate means, be it through the development of a local street, creating a music and arts festival or the redevelopment of church buildings. We need to identify and champion good examples that challenge the internal logic of government systems. It is in practical projects that we can really understand the issues that the Bill seeks to address. We learn by doing, not by talking.

Procurement tends to be done by staff who are solely tasked with procurement or other financial management tasks. If we want to change procurement processes, we need to change the way procurement works. Procurement staff and those managing them have to understand and buy into the broader goals of the wider vision. This is partly achieved through training, events, publications and having targets that are wider than just financial rewards. However, it is broader than that. It is fundamentally about cultural change in organisations. Procurement is not easy or straightforward, and staff are often running to stand still. They need support if they are seriously to embrace a more nuanced approach, to think a bit laterally and learn different skills. This will take significant investment from somewhere. We are asking staff to embrace not just the letter but the spirit of a new law, and willingly to make their working lives significantly more difficult. If errors are made while they are learning this new approach, will they be praised for clearly experimenting? Innovation means mistakes; you cannot get it all right. However, too often, we are good at the blame game. Those who experiment and challenge redundant processes are often penalised because of the errors they make and what they might cost. This applies equally to the legal teams of public bodies, both in-house and those contracted in. Unless a “yes, you can” attitude is encouraged, little will change in practice.

Passing the legislation is the easy bit. If Ministers are serious, they need to bring together a modest number of public bodies that are committed to this journey and use them as exemplars. In my neck of the woods, the London Borough of Newham, what Sir Robin Wales, the mayor, is doing through his programme of using procurement processes to reduce dependency and create local resilience is a good example. The procurement process that we have just gone through at the Olympic Park Legacy Company for managing the Olympic venues and the Olympic park—here I must declare an interest as a director—is another good example. Soon we will be responsible for building five new villages. What an opportunity for the London mayor, his officers, and central government to learn from the many years of experience that some of us have had of working with local communities around the park. This is a chance seriously to get a grip on what works in practice and build on it. From where I sit, I can confidently say that there is a real appetite for this journey, but it will involve both London and central government seeing this work as a piece of innovation and giving us the space to operate and innovate. There is a long way to go.

Speakers in the other place have given good examples of public sector innovation elsewhere in this country. All these positive examples demonstrate that this is not just about London or party politics but about what works in practice and liberates enterprising people within our communities. I believe that change comes from within. It is not about a top-down or a bottom-up approach; change happens from inside out. The change I describe will happen only if we take in hand the outdated machinery of government and bend it to our will. This is fundamentally a practical task for practitioners and the Government would do well to point to them and celebrate their work. This is a job for the Brunels of this generation—the engineers and entrepreneurs. It is not a task for the faint-hearted or those Guardian readers who, in my experience, are all too content to analyse the world to death and comment from the sidelines through newspaper articles and government reports. Gird your loins for this practical task; it is time that we celebrated practical people.

As this new culture develops, other public authorities can then join the process. I therefore question whether Clause 1(3)(a) should read “may” rather than “must”. I worry that forcing public bodies reluctantly down this path will be counterproductive and that the evidence will therefore be inconclusive at best. Perhaps the legislation could move from “may” to “must” when there is a critical mass of public bodies that have chosen to adopt this approach. This would also mean that we need not include all procurement; purchasing paperclips may not be improved by this process.

Governments of all hues have, in my humble opinion, too often imposed approaches without experimenting with them first. Initial flexibility might result long-term in a more sensible, graduated approach. Change is always easier and more focused with the willing than with 10 pressed men. Culture change depends upon a willingness to embrace change at all levels. However, as I have said, tinkering with the legislation is only part of the wider process of change. Fundamentally, I have learnt that there is a strong correlation between long-lasting change and human relationships. Legislation might oil the wheels of change but it is people who move the wheels forward. These relationships take time to build and public sector procurement needs to make allowance for this. Too often, the length of the contract, particularly for those involved in social change, is too short: many are limited to one year or less.

These relationships are crucial to both the short-term and long-term success of projects. As my colleagues and I began to engage with St Paul’s Way, a dysfunctional street in Tower Hamlets, following serious violence five years ago—here I must declare an interest—I was not surprised to find that basic conversations were not taking place between the housing provider, the local school and the health centre, despite the rhetoric about joined-up thinking at the time. Once these conversations were initiated at all levels of the public sector structures, and relationships cemented, this street was seen literally to transform. We are now about to open a new social enterprise in partnership with some large corporate businesses to explore how we now build on and extend this enterprise culture in a housing estate formerly defined by dependency. It was a privilege to show colleagues from the House some of this work last week.

St Paul’s Way Trust School, formerly a failing school, has just been described by Ofsted as one of the 50 most improving schools in the country. Professor Brian Cox recently became the school’s patron because it now specialises in science. When I described to Brian our organic approach to change, he immediately described how the CERN experiment developed 40 years ago through the relationship of a few scientists who dared to think the unthinkable and do it together. It was very similar. The CERN experiment may well change our thinking about relativity and how we understand our universe. Brian and I, with colleagues, are now exploring how we might bring something of this shared narrative together at a summer science school at St Paul’s Way in July. I would be honoured for colleagues from the House of Lords who are interested to join me at this novel community science school. As scientists, possibly including four Nobel laureates, share the details of their experiments we will share our narrative about a 30-year experiment in community regeneration which has produced clear results. Our shared narratives have an inside-out approach in common that has human relationships at its core. Brian is interested in teaching science in the schools that we work with because he knows that science education is fundamental to the growth of our economy. The inside of one of the UK’s most challenging housing estates is an interesting place to begin.

The set of dysfunctional circumstances I met in St Paul’s Way is not unique. It is the norm. I have seen this waste of public sector investment replicated across the UK in Bradford, Glasgow, Manchester and elsewhere. The sleeping giant is resident there, too, but, unlike St Paul’s Way, we are not awakening it there. We are putting it to sleep. Fundamentally, this is not about new money, but about using limited money in new ways. We need to work with practitioners, enablers and successful entrepreneurs. Go with the stones that roll: with practical people who want to build the change in an organic way, one step at a time. Let us stop thinking policy, strategy and framework, and focus upon people and relationships.

I have two final, practical, points. First, often, joint procurement of integrated services would potentially produce better results. Procurement based on outcomes rather than prescribing the process is often more appropriate. Community Action Network, which I helped to found, developed an approach to using small, local community organisations to deliver contracts called “smart intermediaries”. If there is a will, it is often surprising how a way can be found.

Secondly, in relation to the voluntary and community sector, recent years have given rise to the service level agreement replacing grants. These SLAs are, however, very one-sided. On the one hand, they are effectively a contract. If the contract is not delivered as specified, then payment is withheld, which is reasonable enough. However, unlike a contract, the issuing party—local authorities et cetera—can usually vary the terms, terminate at short notice and pay late, all without penalties. As a result, when financial times get difficult, contracts, which are expensive to cancel, remain, while SLAs get cancelled. A local community group would argue that having a decent contract was a contribution to the social and economic well being of an area, which the Bill seeks to promote. Whether the commissioning body sees it like this is a different matter.

Colleagues in the third sector will know that the Government are serious about these issues when they begin to see these small, practical steps that strengthen their hand. The financial problems we face as a country today are actually a fantastic opportunity. Let us take hold of them with both hands.

Social Enterprise

Lord Mawson Excerpts

Thursday 6th October 2011 Lords Chamber

[Lord Mawson]

My Lords, I join other noble Lords in thanking the noble Baroness, Lady Andrews, for securing this important debate. We are all conscious that we live in a world that is quickly changing around us. If you stand still, you can feel as though you are moving backwards. People are no longer willing to accept the same predictable services from the public sector but are demanding higher quality services, more choice and the personalisation of services. In reality, can governments deliver this choice?

The situation in Europe at present is just one example of political drama that makes people wary of trusting Governments. People are sceptical—often with good reason—of politicians who hide behind grand phrases, processes and hubris but take little care of the detail and fail to deliver positive, practical and sustainable action. In the social enterprise sector in Britain at present, I, along with many of my colleagues, welcomed the coalition Government’s pledges about social enterprise because they are exactly in the right direction of travel. Yet, worryingly, there is a growing sentiment in the sector that these promises are just not being delivered on and once again Governments cannot be trusted to turn rhetoric into reality.

The coalition Government agreement had two main pledges to support social enterprises in public service delivery. First, it said that they will support the creation and expansion of mutuals, co-operatives, charities and social enterprises, and enable these groups to have much greater involvement in the running of public services. Secondly, they will give public sector workers a new right to form employee-owned co-operatives and bid to take over the services they deliver. This will empower millions of public sector workers to become their own boss and help them deliver better services. Yet, as has been said, the Social Enterprise Coalition, which represents many in the sector, while standing in a slightly different place from me, cannot see at present much support for social enterprises delivering public services. What we all see, they say, is a lot of stagnation: the waters, instead of being clear, are increasingly muddy. The Mutual Support Programme which was announced by Francis Maude in November 2010 has yet to materialise. The national programme for third sector commissioning, a programme designed to support the commissioning of social enterprises and charities, has not emerged.

Without some intervention, there is a real danger that public service markets will be opened up and dominated by a small number of large private sector providers. The Social Enterprise Coalition says that it has seen this happen in a number of public service markets: welfare to work, waste and others where a small number of private companies dominate and the barriers to entry are too high for social enterprises and other small businesses to operate. There is some truth in this and I know from past experience how government departments love to talk to large bureaucracies because they are adept at using that language. Bureaucracies love to talk to bureaucracies. Talking to small and medium-sized social enterprises is quite a different matter because they speak a different language. We will need more than websites to address this issue.

Some of us have seen all this before and it requires focused leadership in government to break the impasse. I am a great believer in the power of the market but sometimes the Government have to intervene to make the market happen. The noble Baroness, Lady Thatcher, knew that.

There are three ways of governing: the centralised state solution, the market, or the present favoured choice referred to by our major parties as going local. While those of us who have operated at a local level for more than 30 years are tempted to welcome this attention, we worry that politicians on all sides do not actually comprehend a lot of the practical detail. The systems of government and the Civil Service can present themselves as something new but when you actually examine the details, old out-of-date processes and systems still prevail and are in danger of replicating themselves a thousandfold in local communities across the country. On my travels, I keep meeting old men in new clothes. There are real and very practical opportunities to grow the social enterprise sector in the process of going local, but it needs nurturing and it will not happen without the devil in the detail being understood within government.

If this does not happen, I fear that we will see yet another phase of a very expensive cycle. Vast sums of money are wasted every year by those politicians who do not take personal responsibility, get hold of the practical detail, and drive forward viable change. The public are tired of seeing very little change and know that the processes of government carry on very much as before, regardless of which party is in power.

There is a challenge here that has not been grasped because there are no particular easy brownie points to be gained by any Government if they grasp this particular nettle. Yet the long-term rewards will be worth the short-term difficulties.

I welcome both the localism and health Bills, but I ask the Minister what evidence is there that the Government are making life easier for those of us who are attempting to deliver these welcome changes on the ground? What evidence is there that there is a level playing field on which social enterprises can compete with large companies? What practical evidence is there that red tape is actually being removed? I can hear many fine words but outside your Lordships’ House, the jury seems to be out on these issues.

The world may be changing but the systems of government and the Civil Service seem to chug on regardless. Without very clear and focused leadership within government none of this will happen and, as with all recipes, the end result depends upon proper preparation, mixing and baking. No one likes an undercooked chicken.

This pretence at change will not do for the modern enterprise culture that our children are now growing up in—a culture where at the press of a button you can receive information from anywhere in the world about virtually anything; a culture where young people, through technology, are learning by doing. The public sector still thinks that the world is about process, system and strategy, but our children are growing up in an integrated world created by entrepreneurs like Steve Jobs, co-founder of Apple, who died today, based around people, relationships, practice and networks. These two worlds are fundamentally at odds and I see little attempt to address the issue from any of our political parties.

The big breakthrough will start to come where social enterprises and business work ever more closely together. My colleagues and I have created a regeneration business, which we have set up as a social enterprise, called One Church, 100 Uses—and I must declare an interest. We have recently moved our head office into the London offices of HLM architects, a business and a well respected firm of architects that operates nationally and internationally. This decision was taken because, as we grow the business, we recognise the potential synergies between us. The development of public buildings over the next decade may necessarily be more small scale with less money about. The churches in Britain own nearly 50,000 buildings across the country, many ripe for redevelopment in favour of the local community. Maybe there is synergy between this business and a small emerging social enterprise. We think there is, and are ready to discover opportunities together. We need to see more partnerships like this in the social enterprise sector.