Today might be a great day for social enterprise. Today’s the day that Chris White MP’s Public Services (Social Value) Bill reaches its report stage in the House of Commons which – roughly speaking – means it’s almost completed its journey through the House of Commons, at which point it will move to the House of Lords.
The main aim of the Bill is to tackle the perceived failure – certainly perceived by social entrepreneurs – of public sector agencies to consider wider social value (beyond price and competence) when commissioning services from outside providers.
For those readers who haven’t been following the story so far, White’s original Bill had ‘social enterprise’ in the title and included a clear definition of what a social enterprise was. It also committed councils (and the government) to producing social enterprise strategies but these elements were removed during the committee stage in October as a condition of government support (which is more or less essential if a private members’ bill, introduced by a backbench MP, is going to have a chance of becoming law).
In ‘Legislating for the Big Society? The Case of the Public Services (Social Enterprise and Social Value) Bill’* a paper presented at this year’s International Social Innovation Research Conference, Simon Teasdale, Pete Alcock and Graham Smith from the Third Sector Research Centre use the debates that have taken place during Bill’s journey through parliament to examine what they see as the paradox at the heart of the Conservative Party’s (and therefore the coalition government’s) Big Society project.
The underlying problem, Teasdale et al suggest, is that: “Government wants to promote the development of independent providers of welfare services, arising out of communities, voluntary action and social enterprise, at the same time reducing the role of the state and removing red tape and legislative interference” but without legislative interference there is no obvious way to enable that to happen so “There is a potential contradiction here between the desire for a Big Society (and a small state) and the need to level (or tilt) the playing field in order to achieve it.”
So, if the Big Society is going to be anything other than whatever would have happened anyway, the state has to play a major role in shaping what it is.
Teasdale et al outline the debate within the Conservative Party between strong supporters of the Big Society and other MPs who they describe as ‘market liberals’. The key difference between the two views is that Big Society supporters, who include Chris White MP, believe in reducing the role of the state but also believe that more public services should be delivered by social enterprises (and voluntary sector organisations). On the other hand, market liberals want fewer public services to be delivered by the state but don’t favour delivery by social enterprises over delivery by private sector organisations – and, in some cases, would prefer that many services were simply not funded by the state at all. The market liberals’ vision of the Big Society is effectively the creation of a space which may or may not be filled by voluntary or commercial activity.
The fact the Public Services (Social Value) Bill is now likely to become law might suggest that Big Society supporters have won the argument but the reality is that, on balance, the market liberals have come out on top. Teasdale et al note that when the Bill was originally introduced: “The aim, according to the Bill’s sponsor, Chris White was to help bring about the Big Society through legislation by ‘trying to help one set of providers at the expense of others’”
The original Bill was an explicit attempt to tilt the playing field for public contracts in a direction that favoured social enterprises. The amended Bill, if and when it becomes law, will not do that. As Teasdale et al explain: “The original draft of the Bill contained a stricter definition of social enterprise than the loose definition favoured by the last Labour administration. This would have excluded any organisation which paid out more than half of distributed profits to external shareholders – as opposed to using them to achieve social purposes. In this case, Government support for the Bill became conditional on the clauses containing this condition being omitted.”
They effect of this being: “As a result it simply becomes associated with the opening up of public services to any organisation that creates social value, however defined.”
So, commissioners of public services will be expected to consider wider social value in the commissioning process but there is no agreed definition of social value and this gap has not been filled during the progress of this Bill, as Teasdale et al note: “Neither the Bill or its sponsor, nor any of the MPs debating its passage specify clearly what is meant by social value. Instead they offer examples of actions or organisations that create social value.”
The problem highlighted during the debate is that while Sam Gyimah MP – like Chris White, a Big Society leaning Tory – took this position: “I see the Bill as a way of encouraging organisations whose main purpose is to deliver services that could be delivered by the state for the community“, market liberals had very different interpretations including: “all enterprise is necessarily social because it seeks to create value for other people” (Steve Baker MP) and “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” (Christopher Chope MP).
Clearly the latter approaches to social value aren’t much help to social enterprises and charities hoping to benefit from social value-based commissioning. Despite these developments social Enterprise leaders, such as Social Enterprise UK chief executive, Peter Holbrook, have sensibly avoided over-reacting to the changes to the Bill.
This is sensible not because the amendments are good for social enterprise but because the principle – that commissioning based on social value rather than simply paying the lowest price is explicitly allowed and endorsed by central government – is more important that the specifics.
The passage of the Bill will primarily serve to make it easier for commissioners who had already been keen to commission services from social enterprises to do so without being seen to be taking an unacceptable risk or to be wasting public money. It won’t force commissioners who’ve never heard of social enterprise (or oppose it) to change their minds but the original Bill wouldn’t have done that either.
A likely additional result will be that private companies delivering public services – Capita, Serco etc. – will also look for ways to demonstrate that they provide additional value. For me, that’s a positive thing and could in itself provide opportunities for social enterprises.
There are plenty of other factors affecting the opportunities for social enterprises to deliver public services but this is hopefully a small step in the right direction. As Nadeem Zahawi MP said during the debate: “The procurement officers will not be compelled to do something from the top down, but will have the same choices before them as they always had. Rather, they will be asked to look imaginatively at those choices. We are talking about benevolent libertarianism and a nudge forward.”
*In addition to direct quotes from the paper, quotes from MPs have been from quotes that appear in the report. These quotes are publicly available but Teasdale et al did the work to find them.