Social Enterprise

Baroness Randerson Excerpts

Thursday 6th October 2011 Lords Chamber

[Baroness Randerson]

My Lords, as the noble Lord has just said, social enterprise is a very broad umbrella term and we could spend the whole of this debate just defining it. We could mean charities that do some trading or we could be talking about large commercial enterprises that redistribute their surpluses to their employees. Taking the generally accepted definitions, however, social enterprises contribute greatly to our economy. They contribute an estimated £24 billion annually and a consistent 1.5 per cent of our GDP, employing about 800,000 people. That is significant, but it could be much more significant still, so I thank the noble Baroness, Lady Andrews, for initiating this important debate.

As many noble Lords will know, I come from Wales, and I want to bring to your Lordships’ attention one notable example of a social enterprise that flies in the face of the general trend that my noble friend Lord Newby referred to earlier: for social enterprises to be, on the whole, small scale. That pattern is indeed the same in Wales as in the rest of the UK, but we have one notable exception in Wales. That is Glas Cymru, better known to its customers as Dwr Cymru, or Welsh Water.

Glas Cymru is the only one of the privatised water and sewerage companies in England and Wales to adopt a social enterprise model and is a single-purpose company formed to own, finance and manage Welsh water. It provides services for some 3 million people throughout Wales and in the borderlands with England. It is a company limited by guarantee under the Companies Act and was established in 2001, when it was bought from Hyder plc, a traditional for-profit company. As a company limited by guarantee, of course, it has no shareholders, and its assets and capital investment are financed by bonds and retained surpluses. It is run by a board of members who have no financial interest in the company and receive no dividend. The customers do not own Glas Cymru; it is not a mutual. In other respects it has the same framework as other water companies, but customers receive a rebate on their water bills in times of surplus—and I declare an interest as a Glas Cymru customer. Customers get a good deal with lower bills, and profits are reinvested in capital development for the company.

When the company gave evidence to the enterprise committee of the Welsh Assembly, it stressed that in its view the model could be replicated elsewhere, and that is my point in raising this today. In its view, the energy market was a prime area for that model; its not-for-profit status has greater legitimacy and greater community involvement than a normal for-profit company. Glas Cymru believes that it is better equipped to make the long-term decisions and investments that are needed in the energy sector than a normal shareholder-owned short-term competitive company. I urge the Government to look at this model with an eye to the energy market as a whole and the renewable energy market in particular.

It is worth pointing out here that the political support of the Welsh Assembly Government was crucial when Glas Cymru was set up. It could not have been done without that support. The UK Government need to provide that political support if that model is to be replicated.

That is an example of a large-scale social enterprise, and there are of course others. However, as has been said, the general problem with social enterprises in the UK is the lack of suitable financial models to allow them to grow. There are a number of potential solutions to this problem, and several noble Lords have referred to that. The important thing is that the Government have a crucial role in developing the levers to ensure that suitable finance options are much more broadly available to allow social enterprises to grow and develop. The signs are good and a number of useful options were flagged in the government report on growing the social investment market, which was produced in February this year.

I shall touch briefly on an interesting option included in that paper: the idea of piloting a social stock exchange or providing incentives for existing stock exchanges to develop an exchange of stocks in social ventures. I believe that there is a largely untapped wealth of interest in investment in social enterprises. Many people would prefer to have a stake in their local community-based business. They are not necessarily interested only in getting the maximum possible profit and, despite being in very hard times now, many people would be prepared to give some of their money to invest in that kind of enterprise, with at least part of their investments going in that direction. I have long had an interest in local stock exchanges generally, and the model suggested in this Cabinet Office report is worthy of further investigation. I urge the Government to pursue it.

It is important that we move on from supportive rhetoric. We had such rhetoric from the Labour Government prior to the current coalition and it is important that the new Government, who have provided so much leadership on this, now provide some concrete support in the months to come.