Voluntary Sector and Social Enterprise

Lord Shipley Excerpts

Thursday 21st June 2012 Lords Chamber

[Lord Shipley]

My Lords, I, too, express my thanks to my noble friend Lady Scott for initiating this important debate. The coalition agreement pledged to support the creation and expansion of social enterprises, mutuals, co-operatives and charities in public service delivery, and I am delighted that the Government are delivering on this commitment.

It is important for us to understand the scale of the third sector. In my home city of Newcastle upon Tyne, with a population of 290,000, there are 2,300 voluntary and community groups. One-third—some 800—are registered charities. These large numbers confirm the potential of the sector and, as importantly, the demand for their services. Some organisations are big with lots of contracts and experienced staff; others are of medium size, and tend to be more dependent on grant aid; but the largest number are small organisations with low income levels, often working in neighbourhoods.

As the Government are issuing more work through contracts, the ability and capacity to bid has become more important, and this is where the big and experienced organisations have an advantage. The consequence is that larger organisations that cover the whole country are stepping in. These companies can afford to bid and lose, promote loss leaders and use other income streams to repay loan finance.

What steps can the Government take to enable smaller community groups to compete? The best-value statutory guidance published last autumn, together with recent legislation on social value, requires that consideration be given not only to economic value but also to environmental and social value. This will maximise the additional benefit created beyond the simple provision of the service. As has been mentioned, the social enterprise sector has long campaigned for public sector procurement to take account of social value. This legislation should therefore prove important in enabling the sector to compete successfully for public sector contracts. The big challenge now is to make that happen and to ensure that social value becomes a key component of commissioning. That will require that social enterprises, local government, the voluntary and community sector and central government raise awareness and share good practice. I have been particularly impressed, in the north-east, by the social enterprise framework that has been developed and supported by all the social enterprises in the region. Good leadership is emerging.

As for growth and development, Pricewaterhouse Coopers is offering mentoring support from senior staff, and Teesside University has appointed a social entrepreneur-in-residence. Northumbria Water and the CBI are also undertaking work to bring more social enterprise into the supply chains of big companies. On funding and access to finance, the Northern Rock Foundation is leading a piece of work on access to finance for the sector and has already identified investment readiness as a barrier to growth. Business support seems patchy at best, with enterprise agencies generally not having expertise in this area.

Real businesses show what can be done. In County Durham, a social enterprise is designing and manufacturing collections of home and outdoor-living products. The first collection has been designed in conjunction with Durham prison by two designers-in-residence at Northumbria University. The aims are to change public perception of the quality and style of products produced in prison and to build opportunities for offenders, both in custody and back in the community, to gain employment.

What can the Government do more of and what can local authorities do, too? The Government can help to grow social investment by ensuring that social investment tax reliefs are as attractive as mainstream investment schemes. They can learn from the experience of the Work Programme, launched in late 2010. Nationally, it was expected that the voluntary and community sector would get around a third of the contracts but they got only 20%. The reasons seem to relate to the complexity of contracting and the potential for delayed funding. The Government can make sure that their intention—integral to the NHS reforms—that social enterprise and voluntary organisations could offer bespoke services in their local areas is delivered.

We have heard reference in this debate to the VAT issue, which is a matter of serious concern. I give a further example. I understand that if one housing association provides shared services to another, VAT becomes chargeable on that transaction. Maybe the Government will take the VAT issue seriously.

Local government and councils must ensure that cuts to voluntary sector organisations are not disproportionate compared with those that the council itself faces. It is right that councils can be challenged if they are. Councils should not follow EU procurement procedures when they are not required to do so. They should not use formal contracting when commissioning would be satisfactory or go out for retendering for just one year of support, doing so only weeks before a contract is due to start. Councils need to help upskill the sector with capacity-building teams, by helping them with IT, office space and collaborative budgeting, and by assisting transition where it is needed.

Finally, there is enormous potential for the voluntary sector and social enterprise to deliver growth. That potential should not be underestimated by the Government. I hope they will give it due consideration.