Social Enterprise: Wider UK Economy

Jo Swinson Excerpts

Tuesday 3rd September 2013 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

I am grateful to my hon. Friend the Member for Warwick and Leamington (Chris White) for securing this debate on the important issue of social enterprise. I start by paying tribute to the work that my hon. Friend has done and will continue to do on the matter, in his role as social value ambassador and as chair of the all-party group on social enterprise. He raised several important issues in his speech, which I look forward to debating. As a Minister with a keen interest in social enterprise, I look forward to working with him in future, because we must drive progress and help social enterprises not only to become successful in themselves but to develop into an attractive model for other organisations to adopt.

My hon. Friend described the numerous advantages that flow from social enterprise as a business model, including resilience in tough times, increased turnover and improved diversity in comparison with more traditional business models. He focused, importantly, on the fact that social enterprise is a new model of business, which offers an exciting opportunity. The financial crisis of 2008 was a huge shock to our economy. We all want our economy to grow, to recover and to get back on to a sure footing, but simply to return to business as usual in exactly the same way as we did before the downturn would be a mistake and a wasted opportunity. We have an obvious opportunity to consider new ways of doing business that might better serve not only our economy but our communities and our society. Business is inextricably linked with the communities and societies in which it operates, because its customers and staff are based in that society. Many more enlightened businesses recognise the need to hold on to that.

It was also right to highlight that growth should help to lead to higher profits, which can increase wealth and improve living standards. However, it is also important to ensure that, as businesses grow, they can, as my hon. Friend said, reinvest in the community in which they operate. Many MPs on both sides of the House are interested in supporting local businesses in their areas so that more of the money spent in the local economy can stay there and help local people to thrive. There is also the issue of the investment organisations make in their people.

Social enterprise is a good model from a business and a productivity point of view. As my hon. Friend said, however, it is also often one way of doing the right thing. He highlighted the fact that customers and investors are more and more interested in the way in which businesses operate. The issue is not just the return businesses provide or the price people pay at the till, but the way in which businesses operate in wider society. Through the Trading for Good website, my Department has been supporting initiatives to enable small businesses to showcase the great things they are doing, such as employing apprentices and dealing with youth employment in their area, as well as their environmental credentials and their support for fair trade and developing countries—there is a whole range of ways in which small businesses take their responsibilities seriously. There is, therefore, an increasing appetite for a different approach.

That very much dovetails with an issue I have championed in the House for many years. Before I was a Minister, I was a co-founder of the all-party group on wellbeing economics, which recognises my hon. Friend’s point about how we see the importance of growth. Is GDP the be-all and end-all? If we ask most people what they want from life, they will talk about the health and happiness of themselves and those close to them, but we have a system that has until now deified the pursuit of GDP growth above all else. That is why I was pleased to see the Government working with the Office for National Statistics on measuring national well-being so that we can assess policies and the impact of Government decisions against a much wider range of metrics than purely GDP. Although GDP remains an important tool, we should also be able to analyse social and environmental impacts, which might even lead to some more innovative policy proposals. That is an important approach in business, as well as in Government policy making.

While it is important to extol the benefits and virtues of social enterprise, it is worth noting in passing that businesses can use different models in taking their responsibilities seriously. Many businesses out there may not meet the definition of a social enterprise in terms of where their profits go and what their prime purpose is, but they none the less take great pride in conducting their affairs with a degree of responsibility we would want others to copy.

We want not only to promote social enterprise, but to encourage other business models to embrace corporate responsibility. Indeed, as part of a consultation, a call for views is currently ongoing on how to develop a corporate responsibility framework so that businesses representing a range of different models can showcase what they are doing on corporate responsibility. I encourage interested hon. Members to contribute to that call for views before it closes later this month. Indeed, for the benefit of those watching on BBC Parliament or reading the record of our proceedings in Hansard, I should say that that offer is open not only to MPs.

It is vital to recognise the clear benefit of social enterprise to our economy. While it puts social and environmental concerns before profit, it also plays a significant role in our economy. In 2012, the BIS small business survey found that there were 70,000 SME social enterprise employers. The figure is as high as 283,000 if we include sole traders, and it is even higher if we include larger companies. Many of the 1,700 registered housing associations are social enterprises, and they spend £13 billion a year in the UK. Social enterprise creates employment for about 1 million people in the UK economy, and it makes an overall contribution of £18 billion, so it already plays an important role across the wider economy.

Through public sector contracts, we need to improve the way in which smaller social enterprises can win business, and there is an opportunity to enhance further the role social enterprise plays. However, we would not be doing social enterprise justice if we viewed it purely through the lens of the role it can play in public sector contracts, because it also plays a vibrant role in the private sector, and its main source of income is trade with the general public.

My hon. Friend was absolutely right when he made the key point that BIS has a key interest in this area. Like him, I do not want social enterprise just to be lumped in with charities and civil society, important though they are. This is a business issue, so BIS is rightly involved. Back in June, we reaffirmed our commitment to helping SMEs succeed, and we will launch a strategy on that in the autumn. One of the key stakeholders we will be working with in developing it is Social Enterprise UK, because social enterprises are an important part of the SME sector.

I would like to outline a few of the ways in which the Government are supporting social enterprise. Community interest companies were mentioned, and they are a new and exciting way of forming a company. As my hon. Friend said, they are covered by my Department. Such companies are the world’s first legal form for social enterprises, so we are pioneering on this matter, which is the right place for Britain to be. That model is very helpful.

We also have the regional growth fund, which will provide £60 million of funding over six years for lending to small and micro-businesses that create or safeguard jobs, with a significant impact in communities in parts of the country that most need that funding, some of which goes to social enterprises.

There is also the European regional development fund. We secured £3 million, which increases to £6 million with match funding, to support the work of social enterprises in Yorkshire and the Humber. We hope to continue the programmes under that fund.

It is important to talk about the social investment market, which has now passed the £200 million mark, so it is rapidly growing. That figure is up from £150 million just three years ago, and we want to grow the market further so that it is measured in billions, not millions. The proposal for tax relief on social investment, which my hon. Friend mentioned, is a key part of that. The Prime Minister launched it at the G8 social impact investment conference on 6 June. Again, I encourage people to send their views into the consultation on this issue.

My hon. Friend encouraged me to ensure the Treasury did the right thing, and I am flattered by his view that I have the power to require it to do anything. However, I know my Treasury colleagues are also committed to this issue, and the intention is that we will introduce tax relief in 2014. The consultation is open until Friday, and I hope my hon. Friend will contribute; the more voices there are encouraging the Treasury, the better. The proposal will be an important part of the Government’s support for social enterprises, and it will complement initiatives that are already in place, such as Big Society Capital—the world’s first social investment bank—and social impact bonds.

I could not finish without touching on the Public Services (Social Value) Act 2012, which I am sure my hon. Friend is proud to have introduced in the House. Not every MP gets to take legislation through the House, and it is not easy to do, so I congratulate him on his success. The Act means public sector organisations must take account of economic, social and environmental well-being in connection with public services and contracts, which should be good news for social enterprise.

I hope I have outlined the Government’s support for social enterprise, as well as how significant social enterprise is to the UK economy more widely. Social enterprise adds vitality and challenge to the vibrant mix of business models in the UK economy. The goal is to look beyond simple measures of GDP, which do not capture everything that determines society’s well-being. As we still come to terms with the financial crisis of 2008, the contribution of social enterprises will no doubt be more important than ever. I hope today’s debate has encouraged us all to think more carefully about what more the Government can usefully do to support this important sector.

[Mr Philip Hollobone (in the Chair)]

Perfect to the second.