Britain’s social economy

2nd February 2014
The Minister for Civil Society (Mr Brooks Newmark): I am pleased to have the opportunity to serve under your chairmanship, Mr Havard. I congratulate the right hon. Member for Salford and Eccles (Hazel Blears) on securing this important debate, which is my first of the new parliamentary term and only my second as the Minister for Civil Society. I also pay tribute to my predecessor, my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd), for his brilliant leadership when he was in this role. I have large shoes to fill, but I will do my best.
I cannot think of a more exciting subject with which to begin, because Britain’s social economy is indeed thriving. We have got to this point through the hard work and commitment to support the sector provided by successive Governments, including that of the right hon. Member for Salford and Eccles. She continues to be a champion of charities and social enterprises as a member of the all-party group on social enterprise and shows commitment to ensuring that the Public Services (Social Value) Act 2012 achieves its full potential.
I take on board the right hon. Lady’s point about the importance of having measurables and consistency. Thinking about how to extend the social economy to infrastructure is a great idea. The hon. Member for Newcastle upon Tyne Central (Chi Onwurah) was absolutely right to say that, with £86 billion of public procurement, there is much scope for social enterprises to take advantage of what is out there. As the new Minister, I hope that I can try to facilitate that.
Chi Onwurah: I omitted to welcome the Minister to his position, but I would like to do so now. If he is going to carry on saying that I am absolutely right, long may he remain in his position.
Mr Newmark: The hon. Lady represents Newcastle, which is the home of my football team, so she can do little wrong in terms of representing that exciting city—it is second only to Braintree, of course.
I also pay tribute to the right hon. Member for Salford and Eccles for her support of Big Society Capital through her role on its advisory board and her regular public appearances, as well as for her support for mutuals. Such contributions have been invaluable to a growing economy that includes organisations, entrepreneurs, innovators and investors who are committed to supporting positive social change.
I am grateful for the bipartisan approach to this issue and to the right hon. Lady for regularly reminding us how this work transcends party differences. It is about supporting those charities and enterprises who work tirelessly to improve people’s lives and communities. 
Members of all parties have the same agenda: we want to improve people’s lives, and the voluntary and charitable sector leads on that objective.
I think the right hon. Lady said that medium-sized social enterprises employ more than 1 million people; in fact, they employ 2 million people and contribute more than £55 billion to the UK economy each year—an enormous amount. The UK already has one of the most developed social investment sectors in the world and it is growing all the time. A few weeks ago, I visited the Repair Academy in Wiltshire, which transforms unwanted household goods into marketable, new products: upcycling as well us recycling. It is not only doing that to make a quick buck; it is equipping the young people who work for it with the skills they need for the world of work and working to change public attitudes to waste and recycling.
So yes, there is a business mentality, but it is also about public and social good. Too often, we think of those things as being mutually exclusive; allied together, they can be a truly powerful force, strengthening communities and changing lives, developing new solutions to seemingly intractable social problems and transforming the way we deliver public services to this country.
The right hon. Lady also mentioned three other great examples, including Place2Be and—was it Born Back?
Hazel Blears: Bounce Back.
Mr Newmark: Bounce Back, which I thought was a great idea. The qualification is that someone goes to prison, but there are people there who want to change their lives and help them transform back into the community. Bounce Back seems a great example of that.
For all those reasons, the Government have made it our mission to help strengthen Britain’s social economy. Just like any other business, social businesses need access to long-term capital. For years, charities and social enterprises had been telling successive Governments how hard it was to find affordable and sustainable finance. We listened to them and helped establish Big Society Capital, the world’s first full-blown social investment institution. Much credit is due to my ministerial predecessor, my hon. Friend the Member for Ruislip, Northwood and Pinner. People had talked about a social investment bank for the best part of two decades, and his leadership in Government made it a reality in less than two years. He made an excellent point in mentioning the discussions on having a collaborative approach between business and Government, in terms of developing the social economy to unlock social innovation.
Hazel Blears: A lot has been said about collaboration, and I agree entirely with the previous Minister, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd), that government needs to change. I suggested interdependent budgets for Cabinet Ministers when I was in the Cabinet and I believe that there is some interest in that issue now.
However, I should say to this Minister that I am seeing the Health Minister, the right hon. Member for North Norfolk (Norman Lamb) with my social enterprise, Social adVentures, on the issue of dementia care. Collaboration between Ministers is essential. Perhaps this Minister could add his weight to some of our proposals with his colleagues across Government.
Mr Newmark: I think I am seeing the same Minister myself. I have a meeting with him, so hopefully we will be singing off the same hymn sheet.
I also pay tribute to the contribution that the right hon. Member for Salford and Eccles has made to Big Society Capital’s advisory board. Since 2012, Big Society Capital has made more than £150 million of investment commitments into the third sector, creating specialist intermediaries actively providing finance and support to front-line organisations. The beauty of that model is that it is self-sustaining. Big Society Capital is independent of Government, and because the money is provided on a repayment basis, it will constantly be reinvested in new projects, and in turn, will generate more cash.
In April, the world’s first social investment tax relief, which is important and which the right hon. Member for Salford and Eccles alluded to, came into force. We estimate that it could unlock an additional £500 million of new finance into the social economy over the next five years. Taken together, these measures mark a move away from reliance on hand-to-mouth grants towards long-term affordable finance.
I like the idea that the hon. Member for Huddersfield (Mr Sheerman) had about other ways of finding finance. Crowdfunding and the seed enterprise investment scheme, which in my previous life I was pushing very hard for, are excellent ideas. Creating a more level playing field when it comes to taxation is also an important point, which I have taken on board.
Of course, many smaller or fledgling charities and social enterprises could make use of the funding, but sometimes they need support to do so, so alongside Big Society Capital, we have introduced the investment readiness programme. That provides start-ups with the intensive support necessary to get off the ground. It also helps established social enterprises improve and expand their operations in a sustainable way, making them ready for investment or ready to bid for a public sector contract.
However, capital itself is not enough. We have also been working to make it easier for charities and social enterprises to provide services in both the public and private sectors. Over many years—and different Governments—traditional private sector organisations have dominated the outsourced public services market, a point made by many colleagues today. We have worked hard to change that, enabling staff to take control of their own services by spinning out into public service mutuals.
Freed from the bureaucracy of the public sector but instilled with the public service ethos and run by committed public servants, mutuals are improving outcomes for users, communities and commissioners across the country. There are already 100 live and trading, up from just nine in 2010, with even more in development. The right hon. Member for Salford and Eccles said that in her constituency a new one has now been launched—for adult services, I think—and I welcome that.
It is not only mutuals that are getting in on the act. Other forms of social enterprises and charities have an enormous amount to offer. Civil society can also do things that Government cannot do. It is often much closer to the people we want to help, so we are pioneering some really exciting models to allow it to play a more direct role in delivering front-line services.
Social impact bonds, for instance, enable private investors and philanthropists to invest in a project to address complex, entrenched social problems. The taxpayer only pays for what works, and because private investors are able to take on the risk, it means social organisations can get involved. There are now 17 social impact bonds across the UK, four of which were supported by the Cabinet Office’s social outcomes fund. From rough sleepers in London to NEETs—those not in education, employment or training—in Perthshire and Kinross, to children at risk of going into care in Essex, around the country we are going to see social impact bonds opening up serious resources to tackle long-term problems in new ways.
I welcome the work of the previous Administration on the first of these and the continued cross-party support that helps to ensure that such interventions have a transformative effect. The right hon. Member for Salford and Eccles has championed these as part of her impressive efforts to improve the life chances of disadvantaged children and young people. We are starting to see how social impact bonds can focus capital towards those services that provide strong, effective support for those young individuals.
Because we want to weave innovation into the fibre of national and local government, the Public Services (Social Value) Act 2012 places a legal requirement on commissioners to consider the economic, environmental and social benefits of how they commission and buy services. I know that the hon. Member for Warwick and Leamington (Chris White) has been absolutely resilient on pushing that point through, with the great support of the right hon. Lady. That will help shape the design of services from the outset, so that due consideration is given to innovative social delivery, which gets full social value from the taxpayers’ pound.
I am confident that we will see more and more public sector commissioners bringing communities, businesses and charities together to change people’s lives. Already, many private sector organisations are interested in how they can include social value in their supply chains, which is why, with Social Enterprise UK, we have created the Buy Social Directory, which lists over 10,000 social enterprise suppliers—a point made by my hon. Friend the Member for Ruislip, Northwood and Pinner.
I know it is still early days. We have made a start, but there is so much more to come. We want to encourage more investment in the sector and open up new markets. The Buy Social campaign, beginning in September—and we have Social Saturday coming up—will encourage businesses and consumers to buy from and invest in the social economy, so the great British public can invest in the causes that they believe in. We want to make social investment as easy as possible. We are also exploring how pension and insurance funds can participate in the social investment market, but we are also looking further afield, helping the sector export overseas as well as attracting inward foreign investment.
The UK is experiencing a rising wave of dynamic social entrepreneurship that seeks to improve people’s lives. Britain can be proud to be recognised as the world leader. Even in the few short weeks that I have been a Minister, I have seen first hand some of the fantastic opportunities that the social economy presents, for jobs and economic growth, for innovation and new ideas and for better public services.
I again thank the right hon. Member for Salford and Eccles for her commitment. The social economy has much to contribute to her constituency and to the UK as a whole. I welcome her input and that of the hon. Members for Huddersfield and my hon. Friends the Members for Ruislip, Northwood and Pinner and for Warwick and Leamington.
We are a nation of philanthropists and campaigners, time-givers and fundraisers, poppy wearers and marathon runners. We have a fantastic heritage of social innovation, from the great Victorian social reformers to modern-day social entrepreneurs, so the Government will continue to support the growth of Britain’s social economy. I am optimistic that by working together, we can build on the progress we have made to create the bigger, stronger society that we all want to be part of.

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