Social Economy

Barry Sheerman Excerpts

Tuesday 2nd September 2014 Westminster Hall

[Hazel Blears]

Very good.

At one point I would not have thought that we would be having a debate on the social economy, because it is a fairly new idea that has emerged from some quite longstanding ideas. The idea of the social economy is beginning to develop as a way of bringing together sections of the existing economy—it is an exciting development—and about working out what a new economy might look like. One of the main drivers for me has been the financial crisis—the crash—and the resulting lack of trust in a range of organisations, including, unfortunately, some in our financial sector and some big businesses, which has led to the emergence of ideas about what a more responsible capitalism would look like. Although a lot of speeches have been made, there has been too little detail mentioned, and too little thought and analysis, about real, practical measures we could take to make capitalism more responsible and to have more of a social mission, and for us to feel that—as well as making money and creating jobs, which are really important in our economy—businesses can embrace a social dimension that allows them not just to do good in the community, but to be more successful.

One of the exciting things about a responsible capitalism is that it is not simply about altruism or philanthropy, but about saying that a business that recognises, at its heart and in its mission, the impact it can make in communities is likely to be a much more longstanding, successful and competitive business in the marketplace. Bringing those two things together is an exciting concept.

I came to this issue originally 20 or 30 years ago, supporting social enterprise, so it is not new in those terms. When I was a Minister I did the first cross-Government social enterprise strategy, to see how the whole of Government could help make social enterprise flourish, become more mainstream and move out of its niche position and into providing mainstream services. We have seen a step change, partly because of the financial crash and the move to responsible capitalism, and partly because of a recognition in the social sector that it needs to have confidence and big ideas—to move, perhaps, from the margins to the centre of our economy. I am seeing in many social enterprises now a new-found dynamism and confidence, which is moving them to the centre.

All the players on the board were at one time playing separately and individually, in their own small area, but I now see the private, public and voluntary sectors, including co-ops, mutuals and social enterprises, in a massive burgeoning of many different organisations playing a part in the mainstream economy in Europe and indeed globally. If that is not an exciting idea, I do not know what is, so I am pleased that we have secured this debate.

I want to talk about social enterprise, social value and social investment, which I see as the three building blocks of a social economy. I will start with social enterprise, because it has been around for a long time. As I said, many of us have supported the growth of social enterprise for 20, 30 or 40 years. I am delighted that there are now some 75,000 social enterprises in this country that employ more than 1 million people. They make a huge contribution to our GDP and include some of the most innovative, creative and far-sighted individuals and organisations that I have ever had the pleasure of meeting. That is partly because they sit slightly outside the mainstream, so they have the space and flexibility to come up with solutions to some of the most pressing social problems that we face.

Social enterprise increasingly offers a range of solutions to some of our most pressing social problems. Certainly, the Government have begun to explore some of these areas, such as the rehabilitation of offenders, getting long-term unemployed people back to work and health and social care issues. There are programmes to tackle the most troubled families in our communities, including a programme that started seven or eight years ago, when I was in the Home Office, that this Government have taken forward. Increasingly, social enterprises rather than conventional organisations are able to provide innovative solutions to some of our most pressing problems because they have the freedom to think differently and the ability to do so.

It is interesting that the recruitment organisation of choice for many teachers now is Teach First, which has a fabulous reputation and is not a conventional organisation. It takes the brightest and the best to work in some of our most difficult and challenged schools, to give our youngsters the chance of a decent education.

Place2Be is a social enterprise that works in Salford in my constituency and nationally. It works with children whose families are some of the most troubled—with drug and alcohol or mental health problems—and operates six primary schools in Salford. Against all the odds, with the support of Place2Be and through counselling and support in their schools, children of the most troubled parents are progressing at the same rate as children who are progressing at the average rate in the rest of the school. That, for me, is almost a miracle. That social enterprise, which is now being funded by social investment as well, is making a massive difference on the ground. I know that all colleagues will have examples of similar organisations operating in their own areas.

Bounce Back is a social enterprise that trains people who are ex-offenders. It costs some £95,000 to keep someone in prison, but about £3,000 to go through the Bounce Back programme, get ready for work and take up an opportunity in the future. Bounce Back and Blue Sky, which are similar organisations, say, “The only qualification you need to come and work with us is that you must have been to jail.” It would be quite interesting to see that in a job advert; I do not see many such adverts.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Is this in the financial services sector?

[Hazel Blears]

Not yet. They tend to do grounds maintenance or logistics, but who knows?

That work is refreshing. In conventional job recruitment, it is difficult if someone has been to prison and has a criminal record. It can be so hard for them to get a job, but all the evidence is that the one thing that can keep someone out of jail is if they have a job, a home and some relationships with their family.

Emerging organisations, such as Bounce Back and Blue Sky, are doing an absolutely fabulous job. We also have SMaRT garages, which operate in four or five different places across the country, including in my constituency. They provide help to people with serious mental health problems, but they do not do it through social workers and psychiatrists; they do it by getting people hands on, servicing cars, doing MOTs and doing practical work. The only way someone is judged in that organisation is on whether they turn up, whether they do a good job and whether they are polite. They are learning social skills, as well as practical skills, which will stand them in good stead. I went to the SMaRT garage in Salford, and they let me—I am not sure I did the whole thing—help service a Volvo. I did worry about the man or woman who would drive it afterwards, but they kept a close eye on me.

[Mr Sheerman]

May I say what a relief it is to some of us who have a long-term interest in transport safety, and road safety in particular, to hear my right hon. Friend talk about a safe vehicle, rather than the motorbikes she is usually associated with?

[Hazel Blears]

Everyone has to have a bit of fun now and again. I am sure they kept a close eye on me when I helped to service the Volvo. I did not realise until afterwards that the young man who helped me had very serious mental health problems. He had been detained at Broadmoor for a significant period of time, yet that organisation, because it was prepared to take risks and believe in people, was able to do something that virtually no other organisation could. Ronnie Wilson, who runs that organisation, does a fabulous job.

Having said all that—those organisations are brilliant—there is much more that the Government can do to bring social enterprises to the mainstream. On each of my three issues, I will go through a couple of specific points, for the Minister and for my Front Bench team, with whom I have had the opportunity to discuss some of this. At the next election, the manifestos of all political parties need to have some specific and concrete offers to social enterprise, social value and social investment, if we are to build the social economy we want to see.

On social enterprises, I want to see the social sector established with a clear corporate identity. I want it to have respect and to be seen as the place to go to for creative, innovative solutions. That is the first point. The Government say, “There are lots of problems that we cannot solve. We need you to come into this space and begin to help us do that.” That is starting to happen, and it needs to happen more clearly.

--- Later in debate ---

[Mr Nick Hurd (Ruislip, Northwood and Pinner) (Con)]

As I speak, phones will be ringing in garages across Salford with anxious Volvo drivers seeking reassurance that their cars were not serviced by the right hon. Member for Salford and Eccles (Hazel Blears). I do not know how good a mechanic she is, but she is a brilliant politician. I congratulate her on securing a debate on a subject about which we are both passionate, on her track record of supporting social enterprise for many years, on keeping my feet to the fire when I was a Minister and on sending a strong signal to the builders of the social economy that there was strong cross-party support and interest in sustaining the work.

For me, the debate is about two important things. First, how do we find better solutions to the social challenges that undermine this country and carry unacceptable costs—both financial and, more importantly, human? Secondly, as the right hon. Lady herself asked, how do we help British business to sharpen its competitive edge in the modern world, to build trust—a crucial but fragile ingredient of value creation—and to generate social value? Those two opportunities come together within the social economy.

I want to make three brief points to complement what the right hon. Lady said. First, there is a substantial global movement here. We must seize the moment. We spend a lot of time in this place observing the waves on the surface of the ocean, which means that we sometimes miss or are slow to pick up on some of the substantial shifts in the current beneath the surface. What we are discussing today is such a shift in terms of how we think about the economy and its future. I see stars realigning across the three pillars of our society in a way that I have not seen in my lifetime, which suggests that people are now prepared to think and work in different ways—above all, critically, in government.

Government has to change. Across the world, Governments in developed nations face the same challenges of economic recovery—not only getting economies going, but ensuring the fairness of the recovery and its sustainability. There are also the issues of how we shape the competitive future of our countries and, as the right hon. Lady mentioned, how on earth we meet the public’s demand for better public services when we have substantially less public money. We are only halfway through the cuts, whoever wins the next election—let us be clear about that.

As John Micklethwait and Adrian Wooldridge said in their excellent latest book “The Fourth Revolution”, countries in the developed world face the same challenges in the global race to redesign government. The greatest political challenge over the next decade is fixing government. In this country, government has to work in different ways; gradually, that penny is beginning to drop, at the central Government level and at the local authority level, but it is hard, because we operate in a risk-averse environment. Doors and minds are open to doing things in different ways, however, and that has simply not been the case for the previous 25 years.

Furthermore, as the right hon. Lady said so powerfully, social attitudes to business are changing at the same time. In a transparently connected world, values matter much more to business. How businesses behave matters much more, and that will arguably be a source of competitive advantage in future. More and more of us are choosy as consumers about who we do business with; more and more of us, as savers and investors, are choosy about whom we invest in.

To correct the right hon. Lady, I should say that there are social ISAs at the moment, in response to that trend, and the socially responsible investment market is worth trillions of dollars now that savers are becoming more discerning. Employees in a tight labour market are clearly much more discerning, too, and want to feel prouder of where they work. We hope that commissioners, people spending public money, will also be sending strong signals to the market about the competitive advantage potential of being able to demonstrate social value.

No more powerful sign of social change is evident than in the surveys of young people and the generation coming through at the moment. Survey after survey tells us the same thing: coming through now is one of the most socially responsible, entrepreneurial generations that this country has ever seen, with different attitudes to the workplace, to businesses and to what their place in society is. The young generation will underpin the social economy.

The right hon. Lady talked about one in three start-ups in Europe being social; in this country, 15% of SMEs are social enterprises—15% and growing. There is not only change in government and in social attitudes to businesses, to which business is responding, but the social sector is having to change its attitudes as it is buffeted by change on all sides, which carries both risk and opportunity. Now, minds are much more open to working in partnership with different types of organisation and to seeking different funding models, such as social investment.

I see the stars realigning in a way that gives a fantastic engine to the move towards a more social economy and more collaborative models, which must be part of the future.

[Mr Sheerman]

The hon. Gentleman is making an excellent speech and I am absolutely rapt. As he was speaking, it came back to me that we are sometimes a little precious—not him personally, but those in the social economy. A lot of entrepreneurs have come to life through social enterprise. They may stay with social enterprise, but they get their training and become successful private entrepreneurs. There is a big move between the two.

[Mr Hurd]

The hon. Gentleman anticipates exactly my next point. What is so exciting is the signal that we can send about supporting social entrepreneurship across the sectors. He mentioned the private sector, but one of the things that excited me most in office was the evidence of the entrepreneurship within the public sector, unlocked by the opportunity to spin out and run mutuals inside the public sector. There are fantastic examples in the constituency of the right hon. Member for Salford and Eccles. It is amazing what happens when we give people the freedom to pursue their dreams as what I define as social entrepreneurs—people who run their own businesses spun out of the public sector. Those values and instincts and that creativity exist across all the sectors of society and need to be nourished.

This is a big idea whose time has come, with the opportunity for collaboration to unlock the spirit of innovation and social entrepreneurship in the country. This country is built on our success in innovating in the process of wealth creation and in the building of our cultural heritage. That is less evident in the area of social innovation, but this is the time to unlock that potential.

Secondly, to reinforce the point made by the right hon. Lady, we lead the world in this area. One of the things that struck me most in office was how many visits I got from representatives from a bizarre range of countries, from Canada to the country that I still call Burma, who said, “We notice what you are doing. We are interested in social enterprise and social investment, and for us the place to come and learn is Britain.” We must not surrender that lead, because if we are right about the movement, it will be a source of competitive advantage for this country as we think about how we shape the future.

My third and final point is to reinforce the right hon. Lady’s message to our Front Benchers—both individuals have earned a great deal of respect and admiration. Let us seize the moment and not lose momentum. I am conscious that for the two gentlemen who aspire to be the next Prime Minister of this country the agenda is full and cluttered, which is daunting, but let those of us who believe in this continue to make noise, saying, “This matters. We have something very valuable and important growing in this country. We must nourish it.”

The right hon. Lady is quite right. We had to compromise to take the Public Services (Social Value) Act 2012 through Parliament. Respectable voices inside Government were saying, “Be careful here, because we are trying to make the procurement process leaner and more efficient, so what are we doing cluttering it up?”, so we compromised. No voices in the procurement business now say that the Act gets in the way.

Now is the time to look seriously at whether we extend the scope. Such a review needs to happen, but in parallel with a fundamental approach to raise the quality of commissioning throughout the public sector and a modest investment in the kind of learning networks that bring people together and make them ask, “How can we make best use of this?” That is how the system can be helpful. Things such as the Commissioning Academy, which is low cost and high value, are very important.

I also support the right hon. Lady’s comments about the pursuit of other dormant assets. So much time was spent in setting up Big Society Capital and making the system work with the reclaim fund, that we did not have the time to start conversations about pursuing other assets, in particular in the insurance industry. However, they are there, so let us go for them. Let us start those conversations now, because that is money sitting on the table.

I make a plea for cross-party support for the important public sector mutual movement. We must continue to send signals and say, “It is okay, we will support you in this process.”

On social impact bonds, let us be clear that we are at the bottom of the S-curve of the development of that instrument, which is so important because it creates space for social innovation in a system that is risk-averse. They are clunky, take too long and are too expensive to set up, and we have to change all that, but let us be clear that we have only just started and are at the bottom of the S-curve. We now need to find a different gear of ambition to make many more of those things in the marketplace, so that we can test whether the instrument is as valuable an influence as we think it is.

My appeal is fundamental: let us keep the level of ambition, because through that agenda we have the potential to improve so many more lives and to find better solutions to problems that impose unacceptable cost—both financial and human—on this country.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Havard.

The debate has reminded me that I became a social entrepreneur a long time ago in Wales, where I set up the first co-operative development agency when I was a young academic at Swansea university. That was a long time ago. If I confess all, Mrs Thatcher made me a social entrepreneur. I spent 18 years in opposition, with 11 years as a shadow Minister, always disagreeing with what the Government were doing. There had to be more to life, so I developed something that I was passionately interested in. I started setting up co-operatives —working ones, rather than retail ones—and I have been at it ever since. I am told that I am on about my 48th social enterprise, which is quite a number. Most of them have survived. Some fulfilled their goal and then we wound them up nicely or merged them with somebody else’s enterprise.

As I said in an intervention, social enterprise is enterprise—it is entrepreneurial. People have to be good at it. Social enterprises need to have people in their trusts and on their boards who know about numbers and finances because they have to pay wages, watch their cash flow and do all the things that any other enterprise does. They also need people with vision, who can say, “This is the trend. This is what is happening.”

I agree with everything my right hon. Friend the Member for Salford and Eccles (Hazel Blears) said. I do not want to stroke her feathers too much today because we learnt yesterday that she is the Prime Minister’s favourite parliamentarian. I cannot add to that, but the fact is that she is a great champion of the social economy. We come from slightly different sides, only in the sense that I have got much more in to a particular way of raising money than her. I learn from her all the time and I think she learns a little from me, as we have different kinds of specialism.

I agree with the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd) that we are at an interesting point, with real lift-off. I was looking at some figures this morning. This year, 250,000 new businesses have been set up using crowdfunding. I am an unashamed champion of crowdfunding. I found that it became really difficult to use the conventional ways of raising money for social enterprise after the financial collapse of 2008. I am told that I am a very good fundraiser, and I raised a lot of money for different things, including around £2.5 million to £3 million for the John Clare Trust, when things were rather better, but most of the sources for social enterprises suddenly dried up. Let us be honest: a lot of good social enterprises have gone to the wall. Certainly a large number in the environmental sector did so simply because there were no longer sources of funding. That is a cause for concern and it would be worth conducting an analysis of what happened in the environmental sector.

The fact is, however, that a new opportunity came around. I started reading e-mails and tweets about crowdfunding. I said to the wonderful Library here, “Could you brief me on crowdfunding?” and, for the first time, the response came back, “We do not know what that is about, Mr Sheerman, so we cannot brief you.” I confess that I tweeted to ask who could teach me about crowdfunding, and suddenly my room in Portcullis House was full of really exciting, interesting people saying, “We are doing crowdfunding. We think it is important and it is the future. We want a forum for it.” A group of us therefore formed the Westminster forum on crowdfunding, which now has more than 150 regular participants.

It is impressive that there are so many bright young people in this area. They are not all in social enterprises: as we know, crowdfunding runs across a number of areas, one of which is simply starting a business. We had a long conversation with the former Business, Innovation and Skills Minister, the right hon. Member for Sevenoaks (Michael Fallon), who has just changed job, in which he said, “I go up and down the country and people tell me that the big banks do not lend to start-up businesses. When I come back to London and interview the big banks, they say they do, but I believe the people who tell me that the banks are not lending.”

There is a real problem with start-up finance in all sectors, but the social enterprise sector rewards crowdfunding—there are rewards for investment. People do not get the investment back but they see a good project take off and succeed. Some of the organisations mentioned by my right hon. Friend the Member for Salford and Eccles started in that way. There is also straight crowdfunding: justgiving.com has raised nearly £3 billion and has just started a new organisation. I am jealous, because it has been called Yimby—yes in my back yard. There is also CrowdPatch, as well as other grass-roots social enterprises that are starting little businesses, opening a local shop or clearing up the local pond. Those enterprises then get bigger, more exciting and more adventurous. Some are very big players indeed.

In a few months—certainly in the past 18 months—Britain has become the crowdfunding centre of the world, and London is now the crowdfunding hub of the world. That has tremendously exciting potential for the social economy. In the past, when people wanted to start something they struggled to find the seed finance, but I have to give some credit to the Government, including the former Minister, the hon. Member for Ruislip, Northwood and Pinner, and the current Minister—I get along well with him and am sure he will do a very good job. The Prime Minister was nice to my right hon. Friend the Member for Salford and Eccles yesterday and I am going to be nice about the Chancellor of the Exchequer. We have had a good conversation with the Treasury and with the Secretary of State for Business, Innovation and Skills, and they have been positive about crowdfunding and the social sector.

I would never have believed that in my lifetime I would see the seed enterprise investment scheme and the social investment tax relief scheme. That is amazing. I hear that there are rumbles of discontent—[Interruption.] The Minister is right to claim some kudos for this. We now have a system that I understand has caused real discontent in silicon valley and places around the world where people set up enterprises because we have an almost unfair advantage, as our tax system is so good for start-up businesses. No doubt that is true.

In the previous Budget, that advantage was expanded to the social sector, which is very good news. Quite honestly, if someone is going to invest in something, and somebody comes along and says, “You are going to get a 30% tax break and will probably get your money back if you invest wisely”—wow! To extend that to the social investment sector—wow, wow, wow! We will not be content, of course—we are Members of Parliament—and will be talking to the Treasury about expanding the scheme a little more. As the Minister knows, the tax relief for social investment is not quite as big as that for the private sector, so we will want to get it slightly closer. I am not going to ask today for a full step towards parity, but getting a little nearer would be very good indeed.

There are three aspects to this cultural change. Strangely, it is also an historical change—we are going back. Two hundred years ago, in my constituency of Huddersfield, people created a social economy. They created their own little co-ops, burial societies and holiday clubs; and they invented housing associations to buy decent homes. They created a whole world supporting ordinary working people in doing what they had to do. They did all of that, creating a culture and a real alternative social structure.

Funnily enough, social media will enable us to rebuild that, through the crowd element and being able to talk to a crowd of people with a similar view. That may be local and quite parochial, or regional, but it could be worldwide. I am involved in a crowdfunding enterprise that is planning something that will involve every supporter of rugby league in the world. Perhaps that will not appeal to you, Mr Havard, as a rugby union man, but just imagine 7 million crazy—I say that in the nicest sense, meaning, “crazily passionate”—rugby league fans all contributing to something wonderful for the game of rugby league.

Crowdfunding can be global or local. I am more interested in what it can do in this country, both for social enterprise and to change the culture of our economy. Although not everything about it is good, there are some wonderful companies. We have the social impact investment taskforce, across the G8, chaired by Sir Ronnie Cohen. That is the way for the future. The intersection between social impact investment, social enterprise and crowdfunding is the future. It is exciting and we can change the whole landscape of what happens in our communities and our society. We have the tools: let’s go for it.

--- Later in debate ---

[Chris White]

I thank my hon. Friend for his intervention. Days such as Social Saturday will create great momentum. It is something we should consider having yearly. I still maintain that we have work to do. As suggested, one piece of work is to put these issues strongly and firmly in our manifestos, so that these organisations can feel confident that they will continue to have the support and investment they need, whoever forms the next Government.

[Mr Sheerman]

We must of course ensure all the major parties get this in their manifestos. However, there is one small danger with accessibility: we create our own language in the social economy. It can sometimes be a bit cosy. People outside do not understand things and have to fight to get in. The reason I like the word “crowd” is that it is a new way of expressing an old idea: that the crowd is empowered. I ask the hon. Gentleman to use “crowd” with “social” when he talks about accessibility.

[Chris White]

The hon. Gentleman always talks great sense.

I am grateful to my hon. Friend the Member for Ruislip, Northwood and Pinner, the former Minister, for his support with respect to the direction of travel that social value has taken. I look forward to the comments of the new Minister, who has picked up his responsibility with alacrity. I look forward to a commitment from him to growth in the area we are considering; an increase in its momentum and an extension of its scope; and attention to reviews, which would be helpful and appreciated.