Social Enterprise

Baroness Wheatcroft Excerpts

Thursday 6th October 2011 Lords Chamber

[Baroness Wheatcroft]

My Lords, I first congratulate the noble Baroness, Lady Andrews, on securing this debate on what is such an important issue which could be so beneficial to our country. I confess that, over the years, I have learnt a bit about entrepreneurs and enterprise, but “social enterprise” was a term with which I only relatively recently became acquainted. I have known many entrepreneurs. Only a few of them would claim to have been social entrepreneurs; some of them probably should not have been let out on civil society.

Social enterprise is now a growing phenomenon, and we should all be doing all we can to encourage it. Before going more deeply into that, I make a plea that we do not fall into the trap of thinking that if businesses are not social enterprises they are antisocial. From what I hear, someone was coming dangerously close to asserting in Liverpool last week that businesses that were not social were antisocial—not his words, mine. That is misguided. Business generally is a force for good. It creates jobs, produces wealth and provide for our pensions. We are in a terrible financial state at the moment. We need business to help us out. To categorise businesses as producers or predators is simplistic. To suggest that there should be differential tax rates for them is to risk turning Her Majesty's Revenue into an outpost of the Taliban, threatening physical floggings for those companies which flash a glimpse of predatory tendency.

All businesses should, in one way or another, see themselves as social enterprises benefiting the community not just through various charitable donations but through a wide range of their activities. Nevertheless, there is a special breed of organisation now emerging under the term “social enterprise”, and we need to help that sector to grow. The noble Baroness, Lady Andrews, detailed the obstacles that currently face many in that sector. There is no denying those obstacles but personally, given the straitened finances of the country, I do not think that it is such a bad thing if charities step in and invest in those enterprises rather than them having to depend on public sector handouts.

We also have the Government making serious moves to encourage social enterprise. We heard about the Big Society Bank. It is shaping up now and, through the big society investment fund, has made its first loan of £1 million. By 4 July, the closing date for the first applications, there have been 57 entries. Many of those will receive funding in the medium term from the Big Society Bank. It will have resources of £600 million. That will be leveraged because of the way that the money goes to investing institutions, which will then put that into the hands of the many smaller organisations that are going to do the good work that they can.

The Government are also making it easier for social enterprises to win public sector contracts. There is a new website, for instance, that speeds up the process. They do not have to go through the early stage application forms that larger contracts require. The Government are also cutting the red tape that is one of the real barriers to small firms generally and social enterprise, too.

My noble friend Lord Hodgson of Astley Abbots produced a report earlier this year entitled Unshackling Good Neighbours, which was an excellent read. It contended that enterprise and energy, particularly social enterprise, was being held back by a combination of red tape and a bureaucratic wish to cut back risk. In one telling example, he cited the snow code. Some noble Lords may be familiar with the Government’s snow code. I recommend it. It says that you will probably not be prosecuted if somebody falls down after you have cleared the ice. That is not the sort of satisfaction that people need. They need to be sure that if they have done their best they will not be dragged through the courts. The whole tenor of regulation at the moment is prohibitive. It does not encourage people to do things. The snow code is just one of the bureaucratic barriers to enterprise.

To be fair, the Government have put a moratorium on regulation for small firms—the smallest—and that will benefit some social enterprises. They have launched the red tape challenge in an attempt to scythe through all the regulations but the scythe is blunt. We need a stronger weedkiller to deal with this crop that keeps producing new barriers. There are too many regulations. Despite the barriers, community interests continue to generate thriving social enterprises. The registrar of community interest companies now has almost 5,000 companies on his books. They are businesses that are committed to social enterprise and to doing social good, but they can also pay a dividend—a dividend that is capped but nevertheless an incentive for people to invest in them. All sorts of businesses have subscribed to becoming community interest companies. Very few are turned down. One that was, I am told, was a sadomasochistic organisation that claimed that it produced public benefit because it disseminated information. That shows a lack of education in what social enterprise is all about. The Government could spread the word much more than they already do. Jobcentres, for instance, should really be making more of the opportunities that there are for people to launch social enterprises.

There are other positives that the Government could do without great cost. I refer noble Lords to Robert Ashton, who dubs himself “the barefoot entrepreneur”. He has been a social entrepreneur, has written books and comes up with ideas. I shall cite just two of them. He suggests that community interest tax relief should be at the same level at least as that for the enterprise investment scheme. That seems a reasonable suggestion. After all, if you are investing in businesses for the good of the community, why should you not get the same incentives as those who are investing in small risky businesses in the hope of making big profits? Even at a time of straitened finances, I suggest that the Government might want to look at that. His other proposal, which I fully endorse, is that unemployed graduates might be put to work in social enterprises. Before very long the subsidy that they would need would turn into a wage paid for by the social enterprises that they would help to grow. It seems to me that the big society intern programme would be no bad thing.