Voluntary Sector and Social Enterprise

Lord Watson of Invergowrie Excerpts

Thursday 21st June 2012 Lords Chamber

[Lord Watson of Invergowrie]

My Lords, I congratulate the noble Baroness, Lady Scott, on identifying this important subject for debate. The standard of the debate has been very high and it has been varied.

I declare an interest of sorts. After graduating from university, my first two jobs were in the voluntary sector. The first was with the Workers’ Educational Association, as a tutor organiser, and while there I became active in my trade union, then known as ASTMS, which is now part of Unite. I am surprised that no one has mentioned the trade union movement. With 6.5 million members, many of whom work unpaid on behalf of their colleagues, it is the UK’s largest voluntary sector organisation, although it is not typically seen as such.

I think that the voluntary sector is imagined by many people to have developed relatively recently, certainly since the Second World War, but that is not the case, as demonstrated by the fact that the National Council for Voluntary Organisations, the umbrella body for the sector in England, will celebrate its centenary in 2019. According to the NCVO, there are more than 163,000 voluntary sector organisations throughout the UK. As noble Lords have mentioned, the total income for the sector is around £37 billion, with more than a third coming from statutory sources. It is important to point out that, by a ratio of 3:1, that public funding is in the form of contracts for services delivered, rather than straightforward grants.

The effects of public spending cuts on the voluntary sector are already dramatic. A survey by the NCVO in August 2011 found that the sector stands to lose £3.3 billion from the Government over the current spending review period from 2011 to 2016. That is a conservative estimate based on analysis of the Government’s figures published by the Office for Budget Responsibility. The figures assume that cuts will be made proportionately. However, in practice we know that many local authorities have been making disproportionate cuts to voluntary sector funding. Hard hit by cuts in their own funding, councils are putting charities and voluntary organisations that deliver services in the firing line when it comes to cuts. For councils, cutting their own staff means paying redundancy, whereas cutting contracts means that the voluntary sector takes the redundancy hit.

When combined with the wider impact of cuts on vulnerable people and communities, many charities are facing what might be described as a perfect storm of rising demand for services, combined with falling income. As a result, the voluntary sector workforce has been significantly reduced, with the latest figures suggesting a fall of 33,000 over the past year. There are 162,000 registered charities in England and Wales, with another 23,000 in Scotland. They have a combined annual income of more than £60 billion and employ around three-quarters of a million staff. These figures are testament to the power and importance of the voluntary sector.

Social enterprises complement much of what the voluntary and charity sectors do, although they differ from registered charities in that they expect to be revenue-generating from the service that they provide. Social entrepreneurs are establishing businesses that operate to different values. They believe that their business has a moral purpose and they use their entrepreneurial skill to benefit wider society. Traditionally, capital hires labour with the overriding emphasis on making a profit over and above any benefit either to the business itself or the workforce. In contrast, in a social enterprise, labour hires capital, with the emphasis on social, environmental and financial benefit.

My noble friend Lord Giddens commented that the Cabinet Office figure of 62,000 social enterprises currently in the UK was a considerable underestimate, and I go along with that. However, even those 62,000 contribute £24 billion to the UK economy, which is a considerable amount. Some social enterprises in the UK are major players in their sectors, including the Co-operative Group, John Lewis, Welsh Water and Cafédirect.

All that begs the question as to whether voluntary organisations, charities and social enterprises fit into the coalition’s big society project. The voluntary sector has given the big society a qualified welcome, although a number of concerns have been raised, including the impact of public spending cuts, to which I referred, on the sector’s ability to play an increased role in the provision of public services and whether the sector’s independence might be compromised. Some have gone further, claiming that the big society is little more than a cover for the privatisation of public services. Indeed, the union, UNISON, was unequivocal, stating:

“The government is simply washing its hands of providing decent public services and using volunteers as a cut-price alternative … Public services must be based on the certainty that they are there when you need them, not when a volunteer can be found to help you”.

Many noble Lords will have seen in March 2011 the Channel 4 investigative programme “Dispatches”, which concluded that the big society was about,

“privatising the welfare state on a massive scale”.

The programme explored the increasing degree to which the companies Serco, G4S, and Capita are being paid to carry out work previously performed by central and local government. Charities and the voluntary sector, which might like to deliver some of that work, are increasingly unable to compete with those groups, which are making large profits from outsourcing contracts.

When the Office for Civil Society was formed in 2010, one of its first acts was to cut £11 million from existing organisations aimed at encouraged volunteering. The youth volunteering charity, v, lost a further £8 million and almost 100 jobs with the abolition of its schools programme. When you have a stated aim, as the big society does, of seeking to encourage people to become involved locally, where is the sense in cutting experienced organisations and staff who know how to do the job?

Criticism of the big society has also come from within the House of Commons, but the coalition Government are not listening. In December 2011, the Public Administration Committee published a report calling on the Government to re-assess their delivery of the big society by appointing a single Big Society Minister with a cross-cutting brief to ensure that the work involved was consistent between departments. Having received the Government’s negative response, the committee was forced to reiterate its recommendations last month. Perhaps the Minister might enlighten us as to whether, this time, the committee can anticipate a more conciliatory response.