House of Lords: Membership

Lord Newby Excerpts

Monday 21st May 2018 Lords Chamber

[Lord Young of Cookham]

So far as reducing the size of the House is concerned, if one puts on one side the appointments which the Prime Minister inherited from David Cameron and the hereditary Peers by-election, there have been 59 departures and 21 appointments since she became Prime Minister. That is well within the two-out, one-in ratio recommended by the noble Lord, Lord Burns. So far as representation is concerned, my party got 42% of the votes and we have 31% of the membership of your Lordships’ House. Compared with some other parties, I maintain that my party is still underrepresented in your Lordships’ House.

[Lord Newby (LD)]

My Lords, if the Burns report is to be implemented, it is crucial that the Prime Minister follows its proposals when making appointments. The letter from the Prime Minister to which the noble Lord referred simply says that she will operate with restraint and allocate peerages fairly. Could he encourage her to give a firmer commitment to the Burns principle if he wishes other parties to support it going forward with the same degree of enthusiasm as we have in the past?

[Lord Young of Cookham]

With respect, my right honourable friend the Prime Minister has exercised restraint. I note that in the 2010 Dissolution Honours List, Nick Clegg insisted on 11 former Lib Dems becoming Peers, so there was not much restraint then. So far as going forward is concerned, the Prime Minister has made it absolutely clear that there will be no more automatic peerages. As I have said, if your Lordships look at the number of Peers appointed since she became Prime Minister, the House is now smaller than it was then so she is on track to deliver that commitment. What we are still waiting for is some retirements from the Liberal Democrats.

Higher Education and Research Bill

Lord Newby Excerpts

Report: 3rd sitting (Hansard): House of Lords
Monday 13th March 2017 Lords Chamber

[Baroness Thomas of Winchester (LD)]

My Lords, I was speaking to a Muslim friend this morning who has six young children. She and her husband take education extremely seriously; the children go to extra tuition. Families such as that will find it very difficult if a scheme is not put in place soon as far as choices are concerned for the children’s education. She was very excited to see such an amendment on the Marshalled List today. I hope it will be supported this afternoon.

[Lord Newby (LD)]

My Lords, briefly, I support this amendment. I declare my interest as a vice-chair of the All-Party Parliamentary Group on Islamic Finance. I want simply to ask the Minister to reflect on what his colleague, the noble Baroness, Lady Goldie, said in Committee as to why the Government could not give a timescale for this. She said:

“This careful, sensitive and important work cannot be rushed towards a deadline that is simply chosen and written into legislation. Our timeframes must be grounded in the realities of the work necessary to deliver a workable system”.—[Official Report, 25/1/17; col. 171.]


What are these realities which mean that not only is there inordinate delay but we do not even know how long the delay is likely to be? As we have heard, this is a relatively modest proposal. There is a lot of expertise which would enable it to take place. Can the Minister assure us that the real reason for the delay is not simply that there is such a shortage of staff in the relevant departments and so many other priorities, not least with Brexit, that the Government are not prepared to put Civil Service resources into getting this scheme off the ground?

If you were in a Muslim community it would be very easy to believe that the Government were not taking their commitments seriously in this respect because there is so little action to show. If the Minister is not prepared today to give a firm date for when the Government expect the scheme to be introduced, will he at least give his support to my noble friend Lord Sharkey’s amendment, which would bring some degree of limited certainty into the process?

[Lord Gordon of Strathblane (Lab)]

My Lords, I too will speak very briefly in favour of the amendment. It seems that there is no ideological objection to the proposal from the Government. What has happened is that it has lost priority. That loss of priority may be for perfectly innocent reasons but surely everyone recognises that it is capable of being misinterpreted adversely from the point of view of good relations in the United Kingdom. I simply urge the Government to restore it to the priority it had when it was first announced.

Housing and Planning Bill

Lord Newby Excerpts

Wednesday 23rd March 2016 Lords Chamber

[Lord Newby (LD)]

My Lords, I have been a cause of trouble on the Bill, in that I was very keen that we finished exactly at 7 pm. That seems to me now to be ridiculous. Everybody wants to finish at 7 pm. In the last hour we have wasted a quarter of an hour arguing about whether we finish at 7 pm or 7.15 pm. My very strong view is that we should now continue to the end of the Bill, which we will do very shortly.

[Lord Harris of Haringey]

My Lords, I think I have moved that the House do now resume. Can I just clarify before I decide whether to press that to a vote whether we have now heard the Chief Whip’s Statement or whether he intends to make his Statement at the conclusion of the next group? Have we now got a procedure for going forward or has he now amended it?

House of Lords (Expulsion and Suspension) Bill [HL]

Lord Newby Excerpts

Friday 24th October 2014 Lords Chamber

[Baroness Hayman]

That the Bill be read a second time.

[Lord Newby (LD)]

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the House of Lords (Expulsion and Suspension) Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

[Baroness Hayman (CB)]

My Lords, I express my gratitude to all noble Lords who are to speak in our debate today. Their commitment reflects the seriousness with which this House views the issues raised in the Bill. It is a brief and straightforward measure and I shall try to be brief and straightforward in what I say. But brevity does not mean that it is insignificant in its content.

I have brought the Bill before the House because I believe that by enacting its provisions we could complete the series of reforms that have been made to the House’s conduct, investigative and disciplinary systems since the events of 2008-09, and fill two important lacunae in the sanctions available to your Lordships’ House.

Noble Lords who were Members of the House at the time of the expenses and cash-for-questions scandals will remember all too well the public opprobrium heaped upon us—upon the House, its financial support systems, those who misuse those systems, often those who simply use those systems, and on the House’s enforcement and disciplinary processes. Some will also remember the conflict and confusion with which the House was faced over the existence or extent of powers to take action in the case of wrongdoing.

I am delighted to see the noble and learned Lord, Lord Mackay of Clashfern, in his place today; the whole House owes him a debt of gratitude for his crucial role at that time in clarifying that the House does indeed have powers to suspend Members found to be in breach of the Code of Conduct in particular circumstances, albeit for a limited period, and obviously it is that limited period with which the Bill deals.

Since those dark days, we have in fact made progress in a number of areas. The system of financial allowances has been radically overhauled and made simpler and more transparent. The Code of Conduct has been amended to make clearer the high standards of behaviour expected of Members. We have appointed an independent Commissioner for Standards to investigate cases of alleged wrongdoing. The role of the Committee for Privileges and Conduct has been clarified, and I am delighted that the chair of the Sub-Committee on Lords’ Conduct, the noble and learned Lord, Lord Brown of Eaton-under-Heywood, is to speak in today’s debate. Lastly, the House of Lords Reform Act 2014 has itself made provision for the expulsion of Members who fail to attend the House for a Session or more, or who are convicted of a serious offence entailing a prison sentence of at least 12 months.

My Bill seeks to do two things that would, I contend, complete this raft of reforms. One relates to the issue of suspension. The limitation on the length of a suspension to the remainder of the Parliament in which it is in force is set out in the 2009 report of the Committee of Privileges. As I said, it was based very much on the advice of the noble and learned Lord, Lord Mackay of Clashfern. However, although it has proved helpful that that power exists, there remain problems. The basic problem is that a completely different range of sanctions are open to the House to impose at different stages of the parliamentary calendar. Were a Member to be found to have transgressed at the beginning of a Parliament they could in effect be suspended for four years or more. Were the same Member to commit the same transgression at this stage of this Parliament the possible sanction would be limited to four months or less. That is not logical, I contend, nor is it satisfactory for either the House or the person involved.

My Bill would empower the House to make Standing Orders to enable a suspension to be imposed that would run beyond the end of a Parliament and during that time the right to receive a Writ of Summons would be suspended. The House would also be given the power to enact in Standing Orders the ability to expel a Member in circumstances other than the narrow ones set out in the House of Lords Reform Act 2014—non-attendance or being subject to a prison sentence of more than a year.

Expulsion is obviously a hugely weighty and serious step. I profoundly hope that with this Bill on the statute book and the Standing Orders in place this provision would simply lie unused and there would never be conduct that would provoke the possibility of the House being asked to agree to expel a Member. However, it would be irresponsible not to have such a provision in place when all of us can envisage circumstances—it might be repeat offences against the Code or Conduct or sentences for criminal offences that were less than nine months or were suspended—where the House would wish at least to have the opportunity to consider expulsion and to decide whether it would be the right course of action. In such circumstances, I believe that not having that opportunity would provoke significant public disquiet and criticism of the House. That is not just a belief but based on experience. All noble Lords know that the House has come into disrepute and been criticised for that lack of ability. For us simply to throw our hands in the air and say that there was no option of expulsion open to us would not be satisfactory. We have, in this Bill, at this time, the chance—if I can put it that way—to shut the stable door before the horse has bolted; not to be scrabbling around in the midst of a crisis to see what we could do that was appropriate. I hope very much that the House will take that opportunity.

My Bill is enabling, not prescriptive. It does not lay down in detail the circumstances in which these sanctions would be appropriate or specify the processes the House should adopt in its disciplinary proceedings.

We are lucky in this House to have Members with significant and judicial experience to guide the House in the painstaking task of drawing up the appropriate Standing Orders. That in one sense is a lock: getting the Standing Orders right and those being approved by the House, and making sure that we deal fairly and appropriately with the regime. The second lock is the fact that the whole House would again have to agree to a recommendation from the disciplinary committees of the House that such an expulsion should take place.

This is not a new idea. Provisions similar to those in my Bill were included in the Constitutional Reform and Governance Bill of 2010 but lost in the wash-up and therefore not included in that Act, and in the Government’s own House of Lords Reform Bill of 2012, from which the provisions of my Bill are taken word for word. Equally, and as another guarantee of draftsmanship, the consequences of expulsion laid out in the Bill are taken from the 2014 Bill that was brought in by Mr Dan Byles in another place.

The view was rightly taken that these processes are for the House to lay down after careful consideration. I have no doubt that the House would behave with its customary sense of justice, its care and responsibility, both in drawing up the relevant Standing Orders and in considering any recommendation for expulsion or suspension brought before it under those orders, as it has in the past with recommendations for suspension.

I return to my original words. This is a brief Bill. It could, with good will and a little support from the Government, become law, even within the short time available in this Session. I hope that the Minister will indicate that support today, because this Bill could contribute a small piece of the jigsaw in the painful work of rebuilding trust in Parliament and its institutions.

I end with the words spoken by the noble Lord, Lord Hill of Oareford, last December when bringing in his own reforms to the Code of Conduct. He said that,

“ultimately, the reputation of this House rests in all our hands, which is why I believe that noble Lords will want to support steps to strengthen the sanctions available to us”.—[Official Report, 17/12/13; col. 1143.]

I am introducing this Bill as such a step and I commend it to the House. I beg to move.

Universal Declaration of Human Rights

Lord Newby Excerpts

Thursday 24th July 2014 Lords Chamber

[Lord Alton of Liverpool]

My Lords, although I had the privilege of entering your Lordships’ House in 1997 as an independent Cross-Bencher, the noble Lord, Lord Wallace of Saltaire, and I first met—in what seems a far-off age—when I was president of the National League of Young Liberals. I immediately recognised that I had encountered someone who had an extraordinary breadth of knowledge of world affairs. But as befits a former cathedral chorister, as he has pointed out, he also has a great knowledge of the relationship between faith and politics. Although he is not the noble Baroness, Lady Warsi, to whom we have all paid tribute for the extraordinary work that she does in this area, we are all indebted to him for his reply today, and we look forward to the correspondence that will come from the detailed questions that have been raised.

I thank all noble Lords who have made such rich, eloquent and knowledgeable contributions to this debate. None of us could have known how topical and timely this balloted Motion would prove to be. Many have spoken from first-hand experience. The noble Lord, Lord Patten, set us off with a metaphor about the unleashing of a tiger, and the noble Lord, Lord Elton, used a similar metaphor when he talked about the prairie fire that can spread. Many noble Lords referred to that fire, including the noble Baroness, Lady Nicholson.

The Minister actually took only 15 of his allotted 20 minutes, and with one speaker struck off the list—

[Lord Newby (LD)]

My Lords, I inform the noble Lord that the reason that the noble Lord, Lord Wallace, took less than his time was because he did not have any more time than that to take.

[Lord Alton of Liverpool]

I am sorry, my Lords, but people stuck to their time limits and one noble Lord removed his name from the list, so there was some extra time. The courtesy of the House is all that I am trying to observe in thanking all those who have participated in this important debate.

Article 18 demands an end to suppression, persecution and gross injustice. It should be at the heart of our concerns, not an orphaned right.

Public Services (Social Value) Bill

Lord Newby Excerpts

Friday 27th January 2012 Lords Chamber

Moved By

[Lord Newby]

That the Bill be read a second time.

[Lord Newby]

My Lords, it is a privilege and pleasure to introduce this Second Reading debate. In doing so, I declare an interest as chair of Live Sport, a community interest company which has contracts with public sector bodies.

The background to the Bill is that it was introduced in the Commons in November 2010 by Chris White, MP for Warwick. As a new MP, he was fortunate enough to come very high in the ballot for Private Members’ Bills and decided to adopt a measure which would have real impact. He steered the Bill through the Commons with determination and conviction. The fact we are debating this measure today owes a huge amount to him.

I am also grateful for the support that the measure received and continues to receive from the Opposition and, of course, from the Government. Without the enthusiastic support of Nick Hurd MP, the Minister responsible for this measure in the Cabinet Office, the Bill would have failed because, in order to gain overall government support, it was necessary to gain formal support from across the whole of Whitehall. Not surprisingly, that took a great deal of effort.

The Bill before us today is mercifully short but has the potential to transform the way in which public bodies procure services. It requires them, for the first time explicitly, to consider how what is proposed to be procured might improve the economic, social and environmental well-being of the area to be covered by the contract—that is, the social value of it. By public bodies is meant all those English and some Welsh bodies covered by the Public Contracts Regulations 2006, which includes local authorities, government departments, NHS trusts and a plethora of other bodies including your Lordships’ House. In effect, the Bill applies to the whole of the public sector.

Why is the Bill necessary and what benefits will it bring? The truth is that the Bill should not be necessary. The regulations just mentioned allow a public body to choose a supplier whose tender is the most “economically advantageous” and then defines economically advantageous to include factors such as environmental characteristics and quality as well as price. There is therefore nothing in theory to prevent a public body assessing the social value of competing tenders as part of the procurement process. Some local authorities already do this—for example, Camden, Durham and Wakefield—but they are a small minority. There is a strong tendency among public sector procurers to be risk-averse and conservative in their choice of suppliers. The old adage that nobody ever got sacked for buying IBM applies in modified form with large, traditional suppliers being the default option. This Bill seeks to challenge that mentality by requiring procurers to look beyond price—while obviously still paying due regard to it—and ask what social value particular suppliers could bring to the community.

What do we mean by social value and why is it important? Social value is really the added value you can get when a supplier, as part of fulfilling a contract, also contributes to the public good in ways that go beyond simply meeting the basic contract terms. The best way to think about social value is to look at some examples of what it means in practice. Typical examples might be a mental health service which employs people with a history of mental health problems to deliver the service, a transport company that tenders to run bus services and offers to provide added value through the delivery of a dial-a-ride service, or a housing management company which wins a contract to undertake property maintenance work and provides social value by committing to employ local apprentices.

It therefore surely makes sense for the public sector to seek such added value at any time and in all circumstances, but in the current economic environment this clearly assumes greater than ever importance. For by adding social value, a provider also contributes to broader public policy aims, whether in the sorts of ways set out above or by having a more holistic approach to public sector provision in an area as a whole—an issue that I am sure will be touched on by the noble Lord, Lord Mawson, later in today’s debate. In doing so, providers provide the state with overall greater value for money than under a more narrow, commercial approach.

There are a number of reasons why social enterprises are likely to provide this added value. They tend to have a stronger focus on users than other providers. They are often extremely innovative and flexible. They reach parts of the community that traditional providers sometimes cannot reach. And very importantly, they have high levels of public trust. At a time when some major public sector procurers, particularly in local government, appear to be making cuts that disproportionately hit the charitable and social enterprise sector, I hope that this Bill will go some way to cause them to reconsider whether the approach they are now adopting really results in best value for the taxpayer.

It might be useful to illustrate both what is possible when a social enterprise is given the chance to run significant programmes and also what constraints currently exist to the sector expanding. I should like to do so by reference to the leisure and sports sector. Local authorities’ leisure services have often been a Cinderella service and the ones most likely to be cut in times of economic downturn. They have not always been run in the most efficient way. However, in many areas the situation has been transformed by the contracting out of these services to local social enterprises. Just about the first and now most prominent of these is GLL, Greenwich Leisure, which, having started running the leisure facilities of Greenwich Council, now operates across London and beyond. GLL was recently in the news for winning the contract to manage two of the principal legacy venues of the Olympic Games—a clear demonstration of its track record and capabilities. GLL has succeeded like any good business by having a clear focus on quality provision but it has done so in ways that maximise the social value of what it does, particularly in the training and employment of local people—often young people with relatively few qualifications. Its example has been followed up and down the country, from Cornwall to Inverness, by local sports trusts, which have undoubtedly improved leisure facilities for the whole community in circumstances where any other business or organisational model would probably have failed.

The sector now provides some 30 per cent of public leisure centres in the UK and it is growing. But it feels that it could do more. A number of things constrain growth, including access to finance and management capabilities. One of the most pervasive problems is the process of bidding for and winning contracts. This is often an extremely frustrating, time-consuming and expensive business. A number of initiatives of government are trying to simplify the procurement process and help reach the target of 25 per cent of public sector contracts going to SMEs—a target that I believe is some way from being met. This Bill will play its part in weaning many procurement departments off a procurement process which can be blinkered and short-sighted. What applies in the leisure sector applies across public sector procurement.

In its initial version, the Bill related specifically to social enterprises because mutuals, co-ops, charities and community interest companies are by definition likely to be best able to provide this added social value. However, in discussion it became clear that many local companies—not least family-run businesses—also add social value and that it would be a mistake to exclude them from the scope of the Bill. The original version of the Bill also required the production of national and local social enterprise strategies. This idea did not find favour with the Government and was dropped in the interests of getting the Bill through the Commons and on to the statute book. The Bill now contains no explicit reference to social enterprise even though that is the sector to which it is principally aimed. I hope and believe that the single biggest beneficiary will be the social enterprise sector, simply because, as I have already said, organisations in this sector as a matter of routine deliver wider social value.

That is why the Bill is so strongly supported across the sector. In the run-up to Third Reading in the Commons, Social Enterprise UK, which has played a major role in supporting the Bill through its parliamentary progress and to which I pay tribute, co-ordinated a letter of support from the CEOs of 14 voluntary and social enterprise umbrella bodies. It said:

“We firmly believe that transforming procurement and commissioning is the best way to deliver effective and efficient public services, and if passed into legislation, the Bill will play a key role in enabling social enterprises and small businesses”,

to compete for public sector contracts.

Signatories to that letter included the CEOs of ACEVO, NCVO, Co-operatives UK, the Race Equality Foundation and Children England.

The Bill itself is easily described. Clause 1, which takes up 80 per cent of the Bill, states that, as part of the procurement process, which it defines, a public authority must consider how what is proposed to be procured might improve the social, economic and environmental well-being of the relevant area and how the procurement process itself might be undertaken so as to secure that improvement. It requires the authority to consider whether any specific public consultation should be undertaken. It excludes Scottish and Northern Irish authorities and those Welsh authorities whose functions are wholly or mainly Welsh devolved functions. I hope, incidentally, that the Governments of Scotland, Wales and Northern Ireland will adopt a similar measure in due course. The clause also explains that the authorities covered by the Bill are those covered by the Public Contracts Regulations 2006, the principal guidelines for public procurement in England and Wales. The remaining clauses are technical.

No single measure is going to transform the way in which public bodies procure services. Habits are deeply ingrained and innovation is routinely spurned. But as a country we must set our sights higher to ensure that public services really serve local communities by delivering social as well as financial value. This Bill will be a powerful step in that direction. I beg to move.

--- Later in debate ---

[Lord Wallace of Saltaire]

My Lords, I am delighted to speak on behalf of the Government to support this small but significant Bill. We support it because it contributes to the ambitions of the coalition Government—which, after all, are not fundamentally different from those of our predecessor Government—to reform public services by ensuring that they achieve optimum value and promote economic growth, as well as strengthen relationships with communities.

The Bill requires relevant authorities to consider how to improve the social, environmental and economic impact of public service contracts at the pre-procurement stage. As noble Lords have noted, it requires commissioners to consider consulting on public services, thereby empowering communities to play a more active role in shaping them. It ensures that commissioners consider the full impact of services on the people they serve, and it will enable them to maximise the social, environmental and economic impact of public money. It does not change procurement law but sits within the existing procurement process. It does not undermine the requirement to award the contract to the most economically advantageous tender, nor is it at odds with the Government's value-for-money agenda and efficiency reforms, and by considering the full impact of a service it reinforces obtaining value for money in procurement and should help to improve the quality and efficiency of public services.

Several noble Lords noted that we are really talking about a long-term culture change and that we still face considerable obstacles in changing that culture. As I sit in the House listening to noble Lords talking about their commitment to localism but insisting that ring-fencing should be maintained on one subject or another—that the Secretary of State should retain full responsibility for the provision of public services and that Whitehall should intervene—I am conscious that we have not ourselves entirely gone through that culture change. As the noble Lord, Lord Wei, remarked, the Bill provides a nudge in that direction. Perhaps we need to recognise that some of us still need to be nudged. The noble Lord, Lord Mawson, remarked that regulation and form-filling still stifle innovation in this area. Centralisation is part of that, as we all know. All noble Lords will be familiar with Unshackling Good Neighbours, the report last year of the noble Lord, Lord Hodgson of Astley Abbotts, which attempted to tackle that in a number of ways, but we all recognise that we need a major culture change in this area.

After all, many of the public services with which government in any shape is concerned can succeed only if they are embedded in the local community. Bringing vulnerable people back within the links of a strong community is a necessary part of effective delivery. In probation and rehabilitation, for example, one group I have been involved with recently in Yorkshire is Together Women, with which the noble Baroness, Lady Thornton, may well be familiar. It is concerned with preventing young women being caught up in reoffending. It can and does save the public purse an enormous amount of money. It demonstrates that keeping people from being caught up in the prison process again is proving to be a considerable saving. That has not been easy to demonstrate. Indeed, I have been lobbying on their behalf to make sure that the Government fully understand the extent to which these unavoidably local bodies—they have to work with local people—provide help.

Mental health support and recovery, as a number of others have mentioned, is a similar activity. I was at the Bradford mental health re-employment awards lunch last Friday. The noble Baroness will be familiar with the Cellar project and a number of the other bodies that are working in that area. There are social enterprises raising money from their activities to fund what they do in partnership with local authorities. Similarly, many groups are already operating in care for the elderly. One needs to ensure when the government outsources activities that the vulnerable people are involved in their local communities. One of the examples pointed out to me is that if meals on wheels are provided by the elderly being brought into a local community centre to be fed, they can mix with each other, it is much easier to work with them and they are back to being involved in the community. That can contribute considerably to their continuing health. There is therefore the integration of service provision at the local level.

Close co-operation among different service providers on the ground can also improve effectiveness. My noble friend Lady Scott and I were extremely happy to be shown round the Bromley by Bow Centre by the noble Lord, Lord Mawson, last week in which the health and housing advice centres have a common counter. People who go to talk about particular health concerns may often be concerned about bad housing, which can be dealt with at the same time. The noble Baroness, Lady Stedman-Scott, also underlined the advantage of linking up across the different deliveries of local public services. I know very well from some of the issues that we have in Saltaire, which is not a problem village, that sometimes you have to deal with one bit of bureaucracy that says that something cannot be done and another bit of bureaucracy that says it has to be done. One has to lobby hard against that.

The Bill is a first step. It is part of a long-term process in an attempt to change the way in which government manages public services and co-operates with the not-for-profit or not-for-dividend sector. Where might we move on from here? The Government are now concerned with simplifying the procurement landscape and building the capability of commissioners and those concerned with procurement. We are considering ways in which larger contracts can be broken up into smaller lots where appropriate, and we are also planning a commissioning and procurement academy as a way of equipping commissioners and procurement authorities with the right skills and raising capacity. We are also hoping—this point was raised by the noble Baroness, Lady Stedman-Scott—to accelerate the measurement of impact. There are a number of ways in which we are concerned to improve the way in which to measure and collect data. We need to increase access to measurement tools and systems and the data that people need.

The legislation does not explicitly favour the involvement of social enterprises or any other particular form of provider in public service delivery. However, its focus on maximising social, environmental and economic value will inevitably ensure that the full contribution of organisations with a social or environmental purpose is recognised. Social enterprises are the prime example of such organisations. The current pressure on all parts of government to make spending cuts is particularly important to ensure that the full value of organisations is recognised. Consultation may clarify social and environmental aspects of the service, which will then be reflected in the specification. Effective consultation can also lead to fewer bureaucratic procurement processes—which is much to be hoped for—and a greater range of suppliers responding, which in turn will drive value for money.

On behalf of the Government, I welcome the Bill. I know that the House agrees that it is a useful and important step in the long-term process of transforming procurement in the public sector and enhancing our work to build what the coalition Government call the big society, what Liberal Democrats call the responsible society and what others call community engagement, active citizenship or local self-government. Whatever we call it, I hope that all parties share the same objective, and I hope that the Bill will help to push us further in that direction.

[Lord Newby]

My Lords, I thank all noble Lords who spoke in the debate. I am extremely pleased to get such support from all sides of the House. The debate demonstrated the degree of experience and expertise on the subject in your Lordships' House, and a deep, common-sense approach to difficult issues. Rather than looking at principles, we look at how things work on the ground. There is widespread acceptance that the Bill will not transform the world, but will play a part in doing so. As the noble Baroness, Lady Thornton, said, it is a step on the journey. As the noble Lord, Lord Wallace, said, it is a long-term process. As the noble Lord, Lord Mawson, among others, said, we are trying to effect a culture change, which one piece of legislation can only partially do.

It is one of the attractions of your Lordships' House that one normally leaves a debate with one or two new ideas or phrases ringing in one's mind. I will take away two from today. The first is the idea of the noble Baroness, Lady Stedman-Scott, that we are talking not about not-for-profit enterprises but about not-for-dividend ones. We want social enterprises, and they have to be profitable. If they are not, they are not enterprises and they will not be around for very long. The phrase “not for dividend” is not used often enough to segregate this sector from the rest of the entrepreneurial environment. My quotation of the day is from the noble Lord, Lord Mawson, who asked us all to become the Brunels of this generation. I had never thought of myself or my colleagues in those terms, but it is a comparison to which we should all now aspire. With that, I request that the House give the Bill a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.

Social Enterprise

Lord Newby Excerpts

Thursday 6th October 2011 Lords Chamber

[Lord Newby]

My Lords, I, too, thank the noble Baroness, Lady Andrews, for introducing this timely debate. I begin with a declaration of interest as the chair of Live Sport Community Interest Company, which provides education programmes to disadvantaged children via the medium of sport, and as chair of the All-Party Social Enterprise Group.

Previous speakers have already mentioned a number of advantages that social enterprises bring and I should like to refer to three of them. The first has to do with the ethos. The commitment of those who work for many social enterprises is often exceptionally high. The consequence of that is that the productivity of those enterprises is correspondingly high. An example which I have given previously in your Lordships’ House is that of Sandwell Community Healthcare Services, which was able to take over services provided by the local authority and to do it for literally half the price. One of the main contributions towards that saving was that the number of days of sick leave fell from 30 to three. It was all to do with the motivation of people who in their previous local authority guise had not been valued or motivated.

Secondly, social enterprises tend to be extremely flexible, partly because they are small and partly because they tend to have a very flat management structure but they do have the flexibility that one associates with the small business sector more generally. Thirdly, the sector appeals to a new sort of entrepreneur. Many people, particularly young people, want to be exactly the kind of social innovator to which the noble Lord, Lord Bhattacharyya, referred. But they do not want to do it via the medium of a straightforward private sector company or through a public body. They want to have a go themselves. They have an idea and they are just like other entrepreneurs, except that their motivation is towards producing a social good rather than a straightforward commercial good.

However, the sector now faces a number of problems, to which, to a certain extent, reference has already been made. The first is the problem of scaling up. Most social enterprises are small for a number of reasons. One is that they are typically overreliant on a charismatic founder. I see a charismatic founder in the shape of the noble Lord, Lord Mawson—sparing his blushes. The challenge is how, as it were, to clone these charismatic individuals who start an enterprise and get it to a certain size, but then find it very difficult to get beyond that size because there are not the support structures that there are around straightforward private sector activity.

The second general constraint around scaling up relates to finance. There is limited scope for investing in community interest companies bar in a straightforward way because of the asset lock and the limit of dividends. There is an unwillingness in the banks to invest in the sector because it is slightly outside the ordinary. Even in good times, banks find that challenging. At the moment, they find it impossible. So there is an over reliance on high net worth individuals and charities to fund the sector.

The good news is that the sector has grown significantly and there is more recognition that value is to be had in investing in it. It will be very interesting to see how big society capital uses its resources and £600 million is quite a nice start. We hope that it will act quickly and that the big banks which have contributed a third of that will be so inspired by what they see that they might get the habit and either use big society capital through which to invest more of their own funds or put money into social enterprises directly.

There is also quite a lot of activity around more traditional forms of funding. The report commissioned by the City of London Corporation from ClearlySo on investor perspectives on social enterprise showed that there was plenty of scope for progress there. The report produced by my noble friend Lord Hodgson, to which the noble Baroness, Lady Wheatcroft, referred, had the sensible idea of creating a social investor, equivalent to the established concept of an experienced investor, which would make it easier for people to invest in charities and social enterprises. I hope that the Minister will say that the Government support that proposal.

The other big issue that has been referred to relates to winning contracts, given that a large proportion of social enterprises look to the public sector for contracts. The starting point in terms of problems is that the cost is typically twice as much for public sector contracts as for private sector ones. There is a terrific inertia in many parts of the public sector in terms of providers. The sector has a comfort zone of whom it likes to give contracts to and is very wary of going outside that, particularly in the risk-averse environment in which we now find ourselves. As the noble Baroness mentioned, large private sector operators have the ability to undercut smaller social enterprises. They have huge resources with which to do the whole bidding process.

Finally, there are ridiculous delays—I see them myself—between the point at which a public sector body says that in principle it is prepared to let a contract go to a social entrepreneur and then actually signs it and makes the first payment. From my own experience, that sometimes takes well over six months. The social enterprise does not very often have six months of cash flow to cope with that kind of delay.

What is to be done? First, some social enterprises go on the back of successful private sector contractors for the work programme and other big public sector programmes. They become subcontractors, which is a way forward but not ideal. Secondly, on my point about the timeliness of decision-making, the Government ought to see whether there could be a presumption in terms of making a decision and finishing a contract with a social enterprise—and more generally SMEs—within a certain timeframe. This dragging on, which is now almost an art form in parts of the public sector, is very worrying. Thirdly, I commend the Public Services (Social Enterprise and Social Value) Bill which Chris White introduced in another place last November. It has government support and would nudge local authorities and other public sector providers into supporting social enterprises. Social enterprises do much good work already but they have much greater potential.