Public Services (Social Enterprise and Social Value) Bill

Debate between Richard Fuller and Christopher Chope

Friday 19th November 2010 Commons Chamber

[Richard Fuller]

My hon. Friend makes a good point, and I agree that we want the opportunity to discuss these issues in Committee.

Where will the Bill lead? The right hon. Member for Salford and Eccles—I apologise for referring to her again—talked about this being a relatively modest-sounding Bill that could have significant consequences. From my short time looking at politics, that often seems to be the way. The Conservative Government in the 1980s, when they started with their approach to privatisation, were probably not aware of what a significant wave of change they were unleashing and that it would be a model around the world. In a different way, this Bill and the additional measures that I hope the Government will introduce, building on the work of previous Governments, could have the same significant impact.

To make that happen, however, we need a couple of additional efforts. First, we need to recognise that many social enterprises and charities are institutionally small and consist of few people—perhaps 10 or 20—a lot of whom might be volunteers. They might have a lot of spirit, but the procurement process will be quite complicated for them, so we need to enable them to come together to procure efficiently and compete effectively with the very efficient and knowledgeable for-profit procurement companies. I hope that the Minister will, either today or in the months ahead, come forward with suggestions for how that can be better enabled, so that the window opened by the Bill can be taken advantage of by these social enterprises.

[Mr Chope]

Does my hon. Friend agree that it is equally, if not more important that small for-profit businesses run by local entrepreneurs should be able to compete for these contracts? At the moment, only 16% of public contracts are taken by small businesses. Should we not be concentrating on that as well?

[Richard Fuller]

My hon. Friend makes an excellent point. One of the consequences of the Bill would be that local and national Government would have to start thinking more locally about where they procure services. I, for one, believe that a local business making a local profit that is retained in its local community is of enormous social value to its local community. At the moment, as I was saying earlier, some of that profit is being exported. The very fact of passing the Bill would assist social enterprise, but would also help local businesses that do so much in their local community. That is why I welcome it so much.

The Bill would also have an impact on the financing of our social enterprises. Many right hon. and hon. Members will be familiar with the social finance work and the initiative in Cambridge with the St Giles Trust looking at ways of constructing the support for financing social services and social goods in a way that is more oriented to successful outcomes and takes away from taxpayers the one-way, pay-it-whatever-the-outcome approach to social services and social goods. That is another step that we need to take. This Bill is an enabler down the path of providing a comprehensive and different way for each of us as individuals, with our motivations and our sense of fairness, to be able to rely on a different institutional form—the social enterprise—to achieve what we all believe would be in the best interests of our country and our people. I commend my hon. Friend the Member for Warwick and Leamington and the Bill.

--- Later in debate ---

[Richard Fuller]

One of the objectives we hope to achieve through the Bill will result from its focus on local social enterprises. By its very nature, that will weaken the default position whereby contracts go to large, national organisations, with their inbuilt advantages in procurement. Does my hon. Friend agree with that point?

[Mr Chope]

I do. One of the amendments to clause 2 that I would have suggested is that social enterprises should be defined as small businesses with those objectives, because of the danger of ending up with some very large social enterprises that are, in many respects, not dissimilar from large public limited companies.

--- Later in debate ---

[Mr Chope]

I am grateful to my hon. Friend, who made a powerful speech on the same theme.

People going into public procurement often say, “We’ve got to do it for the long term, with a five-year, a seven-year, or an even longer contract period.” If a relatively small and untested organisation is bidding, it will be a very big risk for it to sign up to a seven-year contract. Procuring on the basis of a one-year contract gives new organisations on the block much more of an opportunity to show their worth, and if they make a Horlicks of it after a year, they will not expect to be invited to re-tender. Some long contracts have been particularly damaging to the interests of small and social enterprises. Minimising risk for the procurer has made it much more difficult for new entrants to take on such contracts.

I hope that the FSB will be encouraged by the attitude of the Government. We are all proud when we have businesses in our local communities that flourish, no more so than those which start up with only half a dozen people, or even one or two, and then become national enterprises, perhaps ultimately getting a listing on the stock exchange.

I was worried that my hon. Friend the Member for Warwick and Leamington suggested that businesses that are in it for profit are at odds with those that are in it to produce good for society. In my constituency, some of the businesses that have been the most successful in the marketplace have made profits that they have been able to use to help to support local activities in the community. For example, one of the most successful companies in this country, Tesco, puts a lot of money back into the community every year by enabling people to get vouchers that are then used to buy IT equipment, and other equipment, for schools. Every year for the past 10 years, I have had the privilege of presenting some of that equipment to the schools in my constituency because parents, teachers and supporters of those schools have been able to get those vouchers and then convert them into important and useful goods.

[Richard Fuller]

My hon. Friend makes an excellent point, and I have shared his experience of Tesco at one of the two branches in my constituency. He mentioned profit, which is often put in the same vein as people being rich. Actually, profit is what people reinvest in their business so that they can provide better services in their community. For social enterprises and charities, the ability to earn a surplus is important. Often, they find that they do not have enough of an earnings margin from local contracts to be able to reinvest in local projects, so that they can continue to provide services for five or seven years. Does he recognise that we need to go beyond the crass definitions of profit being bad and social enterprise good, and instead concentrate on the services that local businesses and social enterprises provide?

[Mr Chope]

Absolutely, and that is very much the theme behind the submission from the Federation of Small Businesses on the Bill, which a number of hon. Members will have received. It makes the point:

“The Bill describes social enterprises as businesses ‘carried on primarily for a purpose that promotes or improves social or environmental well-being’. While such organisations are undeniably valuable, micro businesses also serve such a function. What sets them apart from social enterprises however is that their primary purpose will be to make a profit and remain in business.”

That is the important part—remaining in business. They cannot do that unless they make a profit, as they are often unable to raise capital. That was the problem with the charitable trust that I mentioned earlier. It was not able to reinvest in the leisure centre, which as a result became rather dowdy and did not meet the needs of the customers.