Social Economy

Debate between Chi Onwurah and Hazel Blears

Tuesday 2nd September 2014 Westminster Hall

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Havard—particularly in this debate. I congratulate and thank my right hon. Friend the Member for Salford and Eccles (Hazel Blears) who secured this important debate and has worked hard to push the agenda forward so constructively.

The debate has indeed been constructive so far, and there have been passionate speeches on both sides, from the former Minister, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), the hon. Member for Warwick and Leamington (Chris White), my hon. Friend the Member for Huddersfield (Mr Sheerman) and my right hon. Friend the Member for Salford and Eccles. I shall try to maintain that constructive manner, but I do not guarantee that I shall succeed as well as my right hon. Friend did.

We recently witnessed one of the biggest crises of capitalism that the world has seen. Many ordinary people are still coping with its consequences, particularly for the cost of living. Yet with any crisis comes an opportunity, and in this case it is the opportunity to rebuild the economy into one that is more focused on long-termism and value creation, with social enterprise and social value at its heart. Some in the Government may be keen to get back to a business-as-usual approach to the economy, but the Labour party wants social enterprise and a social economy to be at the heart of things. Social enterprises help to build and sustain communities, and their hearts beat to the same pulse as that of the Labour movement’s founders—namely voluntarism and collective action, as my hon. Friend the Member for Huddersfield eloquently described.

We in the Labour party believe that genuine social enterprises can offer examples and incentives to both the private and public sectors. They can offer improvements in the delivery of some public services. Unlike some large contractors such as Serco and G4S, social enterprises are embedded in the heart of their communities, and as small organisations they can pilot and test small-scale incremental innovations in service delivery while developing new skills in the communities where they are based. By being strongly rooted in communities, enterprising and properly regulated, social enterprises can identify new and more socially effective ways of delivering public services, thus providing an example to Government. Indeed, they can be the innovative front line of the public sector.

The leader of the Labour party, my right hon. Friend the Member for Doncaster North (Edward Miliband), was, in government, the Third Sector Minister. He championed the transformative potential of social enterprises and began putting in place the infrastructure to enable them to thrive. That included the legislation for the foundation of Big Society Capital. I am pleased that the present Government have carried some of that work forward, although not surprisingly they are not doing so with the same scope and ambition that I would hope for.

Building and supporting the social economy is not something we can do overnight. It takes hard work. I thank all the organisations that have been involved in generating ideas and pushing them forward to Parliament and the public. We all know how much work that takes, including talking to different people and groups—the social economy is a broad church—to develop positive and constructive ideas. Indeed, we are going through that process now, and I welcome the input being given.

Despite the time at my disposal, I cannot respond in detail to every point made by my right hon. Friend the Member for Salford and Eccles; many ideas are currently being considered as part of our policy review. However, I shall touch on as many as I can. My right hon. Friend spoke of establishing a social sector with a clear corporate identity. I share that aim. One of the things that has surprised me about the sector is the way it has been able to defy definition for so long. If we want to promote the role of social enterprises—and that will be a key aim of the next Labour Government—we need to understand what they are, and ensure that they have the skills to take up their role in a new economy, which they champion.

For example, we must not allow what I would call para-third sector organisations to brand themselves as social enterprises to win more contracts or qualify for incentives. It is unfortunate that the Government have so far been seen to load the procurement playing field very much against genuine social enterprises in favour of private sector companies that often parade as social enterprises.

We have heard about social value in procurement, reporting and standards, and the Public Services (Social Value) Act 2012. I echo the tribute paid by my right hon. Friend the Member for Salford and Eccles to the hon. Member for Warwick and Leamington for his work on that important measure. The 2012 Act builds on many achievements of the previous Government and, in fairness, earlier Administrations. It is a real and symbolic step forward, and an important one, despite the fact that many worthy provisions were removed from it. We would have gone further with it; we tabled amendments to improve it. Both the former Minister, the hon. Member for Ruislip, Northwood and Pinner, and the hon. Member for Warwick and Leamington have spoken about the compromises necessary to get a private Member’s Bill passed. We would look to build on and extend the Act.

At £86.8 billion a year, the public sector’s overall procurement spending power rivals its legislative power. The Labour party recognises the power of Government spending and procurement in creating and sustaining social value. We have already announced that we will require suppliers to offer apprenticeship opportunities on all public contracts of more than £1 million. We have also said that private companies that win public sector contracts will have to be more transparent.

[Hazel Blears]

I am hanging on my hon. Friend’s every word; no doubt many social organisations want to know where we will be going with our manifestos, as that is the period we are in. She has talked about extending the 2012 Act, and that is welcome. I want to ask about extending it to infrastructure and goods. There are now many housing organisations—such as City West in Salford—that are renewing their whole housing stock and want to put social clauses into their infrastructure expenditure. City West has created social enterprises such as Gardening Guerrillas and Pirate Painters and a handyman service, and it is running sweat equity programmes. It is incredibly innovative, and housing associations throughout the country are doing similar things. Is my hon. Friend saying that we will extend the Act to goods and infrastructure as well as services?

[Chi Onwurah]

I thank my right hon. Friend for that intervention and the examples of the many ways in which social enterprises can contribute to their communities. I will have to disappoint her as I am not in a position to give manifesto commitments in this debate, but we are looking closely at the measures taken out of the Public Services (Social Value) Act 2012, as it made its way through Parliament, for ways to ensure that social enterprises can contribute to local communities more extensively than is currently allowed. I am afraid that she will have to be content with that limited answer.

Across central and local government, contracts are often offered on a scale that squeezes out social enterprises and charity providers, which means that, effectively, only established, vested interests can bid. That may drive down costs in the short term, but, in the long term, the number of providers dwindles, as value is extracted from communities and new burdens on the taxpayer are created elsewhere.

Government needs to be working as a whole towards delivering social good through public services and not simply shifting burdens around by cost-cutting in one area while creating new needs in another. Successive Governments have sought to support social enterprise in public service delivery, yet public procurement remains a significant and growing concern. At the round tables and meetings I have held throughout the country on social enterprise, access to public procurement has remained the No. 1 concern.

Many public service sectors are now dominated by what I would call private sector oligopolies: often large multinational corporations that are well versed in winning public sector contracts. They have become so large and complex that, like the big banks before them, the Government cannot afford to let them fail. In my city of Newcastle, the council is supporting local businesses and small and medium-sized enterprises by awarding contracts tendered below a certain threshold to local businesses. In nearby Sunderland—our arch-rivals in some respects, but here we are working to the same aim—the council has a similar system and, as a result, north-east businesses account for 68% of such third party spend overall.

We want to draw on the benefits and innovation of social enterprises in public services, which is why last month I announced that a Labour Government in 2015 will enable Departments and local authorities to offer some contracts exclusively to social enterprises and organisations with a public service mission. The social enterprises will have to demonstrate how they can add value and display the management skills in innovation that we expect from the private sector, so, to that end, we will explore the establishment of a centre of excellence to support social enterprises as contractors. The infrastructure necessary to support social enterprises is probably the second biggest issue I come across in my conversations with social enterprises: skills, governance, back-office, computing and IT all need further support.

I turn briefly to social investment. My hon. Friend the Member for Huddersfield set out eloquently the potential for crowd sourcing as well as the importance of the social investment sector and how the UK leads the world in social innovation. We are looking at ways in which we can further support social investment. We want to see a comprehensive change in the social enterprise landscape, with services being less transactional, more focused on individuals and delivered at the most local level possible. We are looking to social enterprises to support that aim.

Social enterprise has the potential to be the innovative front line of both market competition and public service delivery, delivering social value and adapting to a world in which there is more emphasis on social value creation and retention. We look forward to working with social enterprises to enable that and, as part of that, I look forward to the first Social Saturday.