Public Services (Social Value) Bill

Lord Newby Excerpts

Friday 27th January 2012 Lords Chamber

Moved By

[Lord Newby]

That the Bill be read a second time.

[Lord Newby]

My Lords, it is a privilege and pleasure to introduce this Second Reading debate. In doing so, I declare an interest as chair of Live Sport, a community interest company which has contracts with public sector bodies.

The background to the Bill is that it was introduced in the Commons in November 2010 by Chris White, MP for Warwick. As a new MP, he was fortunate enough to come very high in the ballot for Private Members’ Bills and decided to adopt a measure which would have real impact. He steered the Bill through the Commons with determination and conviction. The fact we are debating this measure today owes a huge amount to him.

I am also grateful for the support that the measure received and continues to receive from the Opposition and, of course, from the Government. Without the enthusiastic support of Nick Hurd MP, the Minister responsible for this measure in the Cabinet Office, the Bill would have failed because, in order to gain overall government support, it was necessary to gain formal support from across the whole of Whitehall. Not surprisingly, that took a great deal of effort.

The Bill before us today is mercifully short but has the potential to transform the way in which public bodies procure services. It requires them, for the first time explicitly, to consider how what is proposed to be procured might improve the economic, social and environmental well-being of the area to be covered by the contract—that is, the social value of it. By public bodies is meant all those English and some Welsh bodies covered by the Public Contracts Regulations 2006, which includes local authorities, government departments, NHS trusts and a plethora of other bodies including your Lordships’ House. In effect, the Bill applies to the whole of the public sector.

Why is the Bill necessary and what benefits will it bring? The truth is that the Bill should not be necessary. The regulations just mentioned allow a public body to choose a supplier whose tender is the most “economically advantageous” and then defines economically advantageous to include factors such as environmental characteristics and quality as well as price. There is therefore nothing in theory to prevent a public body assessing the social value of competing tenders as part of the procurement process. Some local authorities already do this—for example, Camden, Durham and Wakefield—but they are a small minority. There is a strong tendency among public sector procurers to be risk-averse and conservative in their choice of suppliers. The old adage that nobody ever got sacked for buying IBM applies in modified form with large, traditional suppliers being the default option. This Bill seeks to challenge that mentality by requiring procurers to look beyond price—while obviously still paying due regard to it—and ask what social value particular suppliers could bring to the community.

What do we mean by social value and why is it important? Social value is really the added value you can get when a supplier, as part of fulfilling a contract, also contributes to the public good in ways that go beyond simply meeting the basic contract terms. The best way to think about social value is to look at some examples of what it means in practice. Typical examples might be a mental health service which employs people with a history of mental health problems to deliver the service, a transport company that tenders to run bus services and offers to provide added value through the delivery of a dial-a-ride service, or a housing management company which wins a contract to undertake property maintenance work and provides social value by committing to employ local apprentices.

It therefore surely makes sense for the public sector to seek such added value at any time and in all circumstances, but in the current economic environment this clearly assumes greater than ever importance. For by adding social value, a provider also contributes to broader public policy aims, whether in the sorts of ways set out above or by having a more holistic approach to public sector provision in an area as a whole—an issue that I am sure will be touched on by the noble Lord, Lord Mawson, later in today’s debate. In doing so, providers provide the state with overall greater value for money than under a more narrow, commercial approach.

There are a number of reasons why social enterprises are likely to provide this added value. They tend to have a stronger focus on users than other providers. They are often extremely innovative and flexible. They reach parts of the community that traditional providers sometimes cannot reach. And very importantly, they have high levels of public trust. At a time when some major public sector procurers, particularly in local government, appear to be making cuts that disproportionately hit the charitable and social enterprise sector, I hope that this Bill will go some way to cause them to reconsider whether the approach they are now adopting really results in best value for the taxpayer.

It might be useful to illustrate both what is possible when a social enterprise is given the chance to run significant programmes and also what constraints currently exist to the sector expanding. I should like to do so by reference to the leisure and sports sector. Local authorities’ leisure services have often been a Cinderella service and the ones most likely to be cut in times of economic downturn. They have not always been run in the most efficient way. However, in many areas the situation has been transformed by the contracting out of these services to local social enterprises. Just about the first and now most prominent of these is GLL, Greenwich Leisure, which, having started running the leisure facilities of Greenwich Council, now operates across London and beyond. GLL was recently in the news for winning the contract to manage two of the principal legacy venues of the Olympic Games—a clear demonstration of its track record and capabilities. GLL has succeeded like any good business by having a clear focus on quality provision but it has done so in ways that maximise the social value of what it does, particularly in the training and employment of local people—often young people with relatively few qualifications. Its example has been followed up and down the country, from Cornwall to Inverness, by local sports trusts, which have undoubtedly improved leisure facilities for the whole community in circumstances where any other business or organisational model would probably have failed.

The sector now provides some 30 per cent of public leisure centres in the UK and it is growing. But it feels that it could do more. A number of things constrain growth, including access to finance and management capabilities. One of the most pervasive problems is the process of bidding for and winning contracts. This is often an extremely frustrating, time-consuming and expensive business. A number of initiatives of government are trying to simplify the procurement process and help reach the target of 25 per cent of public sector contracts going to SMEs—a target that I believe is some way from being met. This Bill will play its part in weaning many procurement departments off a procurement process which can be blinkered and short-sighted. What applies in the leisure sector applies across public sector procurement.

In its initial version, the Bill related specifically to social enterprises because mutuals, co-ops, charities and community interest companies are by definition likely to be best able to provide this added social value. However, in discussion it became clear that many local companies—not least family-run businesses—also add social value and that it would be a mistake to exclude them from the scope of the Bill. The original version of the Bill also required the production of national and local social enterprise strategies. This idea did not find favour with the Government and was dropped in the interests of getting the Bill through the Commons and on to the statute book. The Bill now contains no explicit reference to social enterprise even though that is the sector to which it is principally aimed. I hope and believe that the single biggest beneficiary will be the social enterprise sector, simply because, as I have already said, organisations in this sector as a matter of routine deliver wider social value.

That is why the Bill is so strongly supported across the sector. In the run-up to Third Reading in the Commons, Social Enterprise UK, which has played a major role in supporting the Bill through its parliamentary progress and to which I pay tribute, co-ordinated a letter of support from the CEOs of 14 voluntary and social enterprise umbrella bodies. It said:

“We firmly believe that transforming procurement and commissioning is the best way to deliver effective and efficient public services, and if passed into legislation, the Bill will play a key role in enabling social enterprises and small businesses”,

to compete for public sector contracts.

Signatories to that letter included the CEOs of ACEVO, NCVO, Co-operatives UK, the Race Equality Foundation and Children England.

The Bill itself is easily described. Clause 1, which takes up 80 per cent of the Bill, states that, as part of the procurement process, which it defines, a public authority must consider how what is proposed to be procured might improve the social, economic and environmental well-being of the relevant area and how the procurement process itself might be undertaken so as to secure that improvement. It requires the authority to consider whether any specific public consultation should be undertaken. It excludes Scottish and Northern Irish authorities and those Welsh authorities whose functions are wholly or mainly Welsh devolved functions. I hope, incidentally, that the Governments of Scotland, Wales and Northern Ireland will adopt a similar measure in due course. The clause also explains that the authorities covered by the Bill are those covered by the Public Contracts Regulations 2006, the principal guidelines for public procurement in England and Wales. The remaining clauses are technical.

No single measure is going to transform the way in which public bodies procure services. Habits are deeply ingrained and innovation is routinely spurned. But as a country we must set our sights higher to ensure that public services really serve local communities by delivering social as well as financial value. This Bill will be a powerful step in that direction. I beg to move.

--- Later in debate ---

[Lord Wallace of Saltaire]

My Lords, I am delighted to speak on behalf of the Government to support this small but significant Bill. We support it because it contributes to the ambitions of the coalition Government—which, after all, are not fundamentally different from those of our predecessor Government—to reform public services by ensuring that they achieve optimum value and promote economic growth, as well as strengthen relationships with communities.

The Bill requires relevant authorities to consider how to improve the social, environmental and economic impact of public service contracts at the pre-procurement stage. As noble Lords have noted, it requires commissioners to consider consulting on public services, thereby empowering communities to play a more active role in shaping them. It ensures that commissioners consider the full impact of services on the people they serve, and it will enable them to maximise the social, environmental and economic impact of public money. It does not change procurement law but sits within the existing procurement process. It does not undermine the requirement to award the contract to the most economically advantageous tender, nor is it at odds with the Government's value-for-money agenda and efficiency reforms, and by considering the full impact of a service it reinforces obtaining value for money in procurement and should help to improve the quality and efficiency of public services.

Several noble Lords noted that we are really talking about a long-term culture change and that we still face considerable obstacles in changing that culture. As I sit in the House listening to noble Lords talking about their commitment to localism but insisting that ring-fencing should be maintained on one subject or another—that the Secretary of State should retain full responsibility for the provision of public services and that Whitehall should intervene—I am conscious that we have not ourselves entirely gone through that culture change. As the noble Lord, Lord Wei, remarked, the Bill provides a nudge in that direction. Perhaps we need to recognise that some of us still need to be nudged. The noble Lord, Lord Mawson, remarked that regulation and form-filling still stifle innovation in this area. Centralisation is part of that, as we all know. All noble Lords will be familiar with Unshackling Good Neighbours, the report last year of the noble Lord, Lord Hodgson of Astley Abbotts, which attempted to tackle that in a number of ways, but we all recognise that we need a major culture change in this area.

After all, many of the public services with which government in any shape is concerned can succeed only if they are embedded in the local community. Bringing vulnerable people back within the links of a strong community is a necessary part of effective delivery. In probation and rehabilitation, for example, one group I have been involved with recently in Yorkshire is Together Women, with which the noble Baroness, Lady Thornton, may well be familiar. It is concerned with preventing young women being caught up in reoffending. It can and does save the public purse an enormous amount of money. It demonstrates that keeping people from being caught up in the prison process again is proving to be a considerable saving. That has not been easy to demonstrate. Indeed, I have been lobbying on their behalf to make sure that the Government fully understand the extent to which these unavoidably local bodies—they have to work with local people—provide help.

Mental health support and recovery, as a number of others have mentioned, is a similar activity. I was at the Bradford mental health re-employment awards lunch last Friday. The noble Baroness will be familiar with the Cellar project and a number of the other bodies that are working in that area. There are social enterprises raising money from their activities to fund what they do in partnership with local authorities. Similarly, many groups are already operating in care for the elderly. One needs to ensure when the government outsources activities that the vulnerable people are involved in their local communities. One of the examples pointed out to me is that if meals on wheels are provided by the elderly being brought into a local community centre to be fed, they can mix with each other, it is much easier to work with them and they are back to being involved in the community. That can contribute considerably to their continuing health. There is therefore the integration of service provision at the local level.

Close co-operation among different service providers on the ground can also improve effectiveness. My noble friend Lady Scott and I were extremely happy to be shown round the Bromley by Bow Centre by the noble Lord, Lord Mawson, last week in which the health and housing advice centres have a common counter. People who go to talk about particular health concerns may often be concerned about bad housing, which can be dealt with at the same time. The noble Baroness, Lady Stedman-Scott, also underlined the advantage of linking up across the different deliveries of local public services. I know very well from some of the issues that we have in Saltaire, which is not a problem village, that sometimes you have to deal with one bit of bureaucracy that says that something cannot be done and another bit of bureaucracy that says it has to be done. One has to lobby hard against that.

The Bill is a first step. It is part of a long-term process in an attempt to change the way in which government manages public services and co-operates with the not-for-profit or not-for-dividend sector. Where might we move on from here? The Government are now concerned with simplifying the procurement landscape and building the capability of commissioners and those concerned with procurement. We are considering ways in which larger contracts can be broken up into smaller lots where appropriate, and we are also planning a commissioning and procurement academy as a way of equipping commissioners and procurement authorities with the right skills and raising capacity. We are also hoping—this point was raised by the noble Baroness, Lady Stedman-Scott—to accelerate the measurement of impact. There are a number of ways in which we are concerned to improve the way in which to measure and collect data. We need to increase access to measurement tools and systems and the data that people need.

The legislation does not explicitly favour the involvement of social enterprises or any other particular form of provider in public service delivery. However, its focus on maximising social, environmental and economic value will inevitably ensure that the full contribution of organisations with a social or environmental purpose is recognised. Social enterprises are the prime example of such organisations. The current pressure on all parts of government to make spending cuts is particularly important to ensure that the full value of organisations is recognised. Consultation may clarify social and environmental aspects of the service, which will then be reflected in the specification. Effective consultation can also lead to fewer bureaucratic procurement processes—which is much to be hoped for—and a greater range of suppliers responding, which in turn will drive value for money.

On behalf of the Government, I welcome the Bill. I know that the House agrees that it is a useful and important step in the long-term process of transforming procurement in the public sector and enhancing our work to build what the coalition Government call the big society, what Liberal Democrats call the responsible society and what others call community engagement, active citizenship or local self-government. Whatever we call it, I hope that all parties share the same objective, and I hope that the Bill will help to push us further in that direction.

[Lord Newby]

My Lords, I thank all noble Lords who spoke in the debate. I am extremely pleased to get such support from all sides of the House. The debate demonstrated the degree of experience and expertise on the subject in your Lordships' House, and a deep, common-sense approach to difficult issues. Rather than looking at principles, we look at how things work on the ground. There is widespread acceptance that the Bill will not transform the world, but will play a part in doing so. As the noble Baroness, Lady Thornton, said, it is a step on the journey. As the noble Lord, Lord Wallace, said, it is a long-term process. As the noble Lord, Lord Mawson, among others, said, we are trying to effect a culture change, which one piece of legislation can only partially do.

It is one of the attractions of your Lordships' House that one normally leaves a debate with one or two new ideas or phrases ringing in one's mind. I will take away two from today. The first is the idea of the noble Baroness, Lady Stedman-Scott, that we are talking not about not-for-profit enterprises but about not-for-dividend ones. We want social enterprises, and they have to be profitable. If they are not, they are not enterprises and they will not be around for very long. The phrase “not for dividend” is not used often enough to segregate this sector from the rest of the entrepreneurial environment. My quotation of the day is from the noble Lord, Lord Mawson, who asked us all to become the Brunels of this generation. I had never thought of myself or my colleagues in those terms, but it is a comparison to which we should all now aspire. With that, I request that the House give the Bill a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.