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18 Oct 2007 : Column 1042
4.40 pm

Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): I am grateful for the chance to speak; I do not really deserve to because I have been on Committee duty elsewhere, and although I have popped into the debate during the afternoon, I have not been able to hear all the speeches, so I apologise for that.

I am a serial social entrepreneur, and it would be remiss of me if I did not make some contribution, but for all of us who are interested in social enterprise and the third sector, it is rather like the title of the Norman Mailer book “Advertisements for Myself”. This is not an advertisement for myself, but I have started about 40 social enterprises, most of which are still going, ranging from the charity that the House of Commons doctor and I started, working in the barrios in Peru—INCA, the International Committee for Andean Aid—to my most recent one, which some of my colleagues will have been bored by, namely an education and environment enterprise in the home of John Clare, one of the most noted English poets of the countryside. I chair a small trust that has bought his house, and we are turning it into a national centre for many things, including education outside the classroom.

Social enterprise is one of my great passions. I wanted to make my views clear to the Minister for the Cabinet Office, He knows them well because he came to talk about the third sector in Huddersfield recently, and attracted a large audience. He outflanked the Queen in one respect. Her Majesty was going to open a new media centre in Huddersfield the next week, but evidently had a secret view, whatever that is, the week before. Social and private enterprise is important in every community and I want to speak about the barriers to it. One of the barriers that the Minister will know of, and of which everyone throughout the country will tell him, is core funding. Often there is a really good team, and people forget that social entrepreneurs are the same as private ones. One can take land, labour and capital and mix them up, but it is the entrepreneur who produces something that makes a difference and adds value. Social entrepreneurs add value that at least matches the value of what is done by private entrepreneurs. I am keen that we see ourselves as entrepreneurs with those challenges.

One of the problems for social entrepreneurs is that at an early stage no profit is made, so there is no margin allowing them to employ people. They often rely on charitable money, a foundation or local authority help to get started. Often it is the kick start, the seed money, that they need. That is similar to the experience for a private sector entrepreneur getting started; sometimes a relative lends money to a new enterprise that starts, for example, in someone’s garage, and it grows from there.

There are some very good social enterprises. My hon. Friend the Member for Slough (Fiona Mactaggart) put her finger on it when she said that the secret of any enterprise is not to rely on one specific income stream. If people do, they may find that the income stream disappears at some stage. I will give the House an example. I have built an organisation called Urban Mines, which is a very successful environmental group. Our main income was from the landfill tax, but then the wicked Government changed the basis of landfill tax and prevented anyone from using it for
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educational or research purposes. Of course, the main income for my group, which employed 18 people, suddenly dried up. The good news is that we could respond because we had built up such a talented team, which was able to go out, find different sources of income and address different markets. Urban Mines is now a leading innovator in technology and science and in understanding contaminated land and recycling and reuse. We survive and thrive as a national organisation that is based in Halifax in West Yorkshire.

Relying on one source of income, especially for core funding, can cause problems. Social enterprises can approach different funders, but they are fond of projects. For example, earlier today I met representatives of HSBC. So many people want to fund a project that one can sell it to them if one gets it right. It adds value to them, the enterprise and the purposes for which one is involved in it. However, they are not keen on core funding, yet that is often what makes the difference. If I were to ask the Minister for help on anything, it would be core funding.

Core funding comes in different ways and I believe that the Treasury could change the tax rules even further to help people who are willing to give to social enterprise—not only to charities but social enterprise more broadly. We should devise new ways of doing that. We have devised a project in my constituency and in the broader area of Kirklees. When I mention Kirklees, people tend to think that it is in Scotland, but it is one of the largest metropolitan authorities in England—in many senses, it is Greater Huddersfield. We have created a Huddersfield enterprise foundation and managed to get some seed money to start it. We ask anyone who has a business idea—in the private or the social sector—to go through what is termed on television a “Dragons’ Den”. We call ours a pussycats’ den.

We sit with experienced business people from social and private enterprise and listen for 40 minutes to the pitch of the person who comes through the door. That is a wonderful innovation and we are trying to roll it out in as many towns and cities as possible. It provides a genuine opportunity for a large range of people of all ages, who have never been in business previously, to form a business, whether social or private. People who apply go before the panel and get about 40 minutes of helpful suggestions. If they get through that stage, one of the finest business plan writers in the country helps them to write a business plan. If they get through that, they go on a residential weekend in a rather nice hotel, where they work with all the other aspirant businesses. If they get through that, we can invest up to £5,000 in their business. It works and it transforms people’s lives. Let me give one example.

A young man with a scientific background came to one of our first dragons’ dens. He suffers from renal failure and was sick of having his life dominated by dialysis every four hours. He had invented a pack—a small backpack or laptop—that liberates him or anyone suffering from renal failure. It is called Renal Freedom. It means that he can go anywhere—down to London for a business trip or up a mountain—with the rechargeable pack that allows him and others suffering from renal failure to live a full life. That idea has been snapped up and has a wonderful future.


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The best organised pitch that I witnessed was made by a young man who could play four instruments and wanted the whole world to be able to play a musical instrument. He was determined to make instruments available and cheap. He had a wonderful coloured catalogue. He had worked out that the cheapest violin one could buy in Britain was £60 but that he could import one from China for £30 and still make a profit. It was the most formidable presentation of the evening. The only slight surprise was that the young man was 15. He has now reached his 16th birthday and can become a company director. He is already flying as a young business person.

But that still only leads us on to our next stage. The next stage is to create our own foundation—I understand that we are not allowed to call it a bank under the banking laws, and the banks are quite sensitive at the moment. We need to reinvent things like the Yorkshire penny bank and the mutual concept. Like many others who have spoken today, I am a Labour and Co-operative Member of Parliament. Having a social bank in each of our communities is something that the Government should help us to stimulate. If we had the backing of certain elements of the financial community and we could give people the opportunity to invest in their own communities, they would see that that investment led directly to social and private enterprises that provide employment.

That is true for all of us who represent towns like mine. When I first became the candidate in Huddersfield, there were a large number of big manufacturers, which were the major employers. ICI employed 6,000 people in Huddersfield 25 years ago. Syngenta, the successor company on the same site, now employs 400. One can go across to David Brown Engineering, to Hopkinsons Engineering or to the manufacturing sector in most towns in this country and see the enormous pace of downsizing. What is the largest employer in my constituency now? It is the university of Huddersfield. Thank God it is there. Thank God for Harold Wilson’s decision to give the technical college polytechnic status, which then became university status. It was voted new university of the year, with Patrick Stewart, the fine Shakespearean actor, as chancellor and a useful and exciting university campus, with 23,000 students.

I want to end on this point. If in all our towns and cities we had the combination of investment in higher and further education linked to what I call the new social investment banks, we could make a difference as never before. The one thing that I would like to have seen in the report and that I would like to come from the Minister is some seed money and some leadership in getting the partnership ready to roll out a new social banking system for every community in the country. We have already piloted the system. It works in two ways. People can invest in a social bank, but they do not receive any interest. We found that remarkably attractive. People who do not want to give away £50 will give £50 on the assurance that they can get it back within a month. The amount might be £500, £5,000 or larger—a charitable foundation or local company might even want to give some money to the bank. Perhaps the Government want to give us some seed money. The system means that we can have a social enterprise bank running that can do stuff early on.


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I end as I started, I hope on a campaigning note. I love social enterprise. I love the entrepreneurial challenge that it produces. More hon. Members should be social entrepreneurs, and anyone who wants to come to Huddersfield to see how we do it would be very welcome.

4.53 pm

Greg Clark (Tunbridge Wells) (Con): This has been a good debate. For the most part the honey, or treacle, of bi-partisanship has flowed through our proceedings—

Norman Baker: Multi-partisanship.

Greg Clark: Absolutely—multi-partisanship, not bi-partisanship. However, that is not surprising, because the Minister is a genial man, as we know. He has a sympathetic ear and a reassuring tongue, but we sometimes wonder whether his elbows are quite sharp enough in engaging in his job. It almost seems impolite to mention the performance of the office of the third sector, but I am not sure that it quite lives up to the billing and reputation that he enjoys personally.

The office of the third sector, which was a Conservative idea, was set up to be a strong voice and an advocate of the third sector right across government. Now that it exists, however, it is a meek organisation that is too often ignored. In June this year, the National Audit Office condemned the “baroque complexity” of the present funding arrangements for the public sector. The office of the third sector agreed that that description was a fair assessment of the regime over which it presides. If we look at the Compact—the key bulwark that exists to protect the sector and provide a Government guarantee of fair treatment—we see that it is in meltdown, as my right hon. Friend the Member for Horsham (Mr. Maude) said. The chief executive resigned in June, and the commissioner resigned in September.

The further one goes from the Minister’s office, the more widely the Compact is ignored. One chief executive of a charity told me that a major public service commissioner had physically torn up the Compact in front of her to illustrate the degree of respect that he had for it. The Compact is toothless, spineless and, as we have heard, increasingly useless when it comes to protecting local charities on the ground. What is the Minister doing about that? The purpose of the office of the third sector is to be strong, to bully people and to bang heads together. It has some way to go before it achieves that. The hon. Member for Edinburgh, North and Leith (Mark Lazarowicz) complained about a three-year funding contract that was taken away after a single year. That is precisely the kind of situation that the office of the third sector was designed to act on.

Let us consider the components involved. Full cost recovery is not a new idea. It was a binding commitment in the 2002 Treasury review, on which I assume the Minister was an adviser before he came into the House. We were promised that all Government contracts would be let on the basis of full cost recovery by 2006. According to the Charity Commission, however, last year only 12 per cent. of charities reported achieving full cost recovery all the time, and 43 per cent. said that they never
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achieved it. Another key component is long-term contracts. The 2002 Treasury review again promised stable funding, but the Charity Commission says that two thirds of funding contracts are for one year or less.

The office of the third sector is punching below its weight in seeking to make a difference to the culture around the country. It has no clout with its neighbours. Community Service Volunteers was owed £3.7 million by the Department of Health for a contract. It complained to the Minister, but that had no effect; it had to go to the newspapers to make a difference.

My right hon. Friend the Member for Horsham also mentioned the Department for Work and Pensions’ pathways to work programme. The office of the third sector exists to protect the interests of the voluntary sector, but only this year we have seen aborted contracting processes costing charities tens of thousands of pounds. Stephen Bubb, who is a self-confessed mate of the Minister, says that the voluntary sector has been “comprehensively stuffed”. If even the Minister’s mates are telling him that he is not standing up for them, what hope have we?

I was concerned that a number of Labour Members wanted the Minister to visit their constituencies—as if that would make a difference. I have been looking at the written evidence submitted to the Public Administration Committee’s hearing on this matter, and I think that those Members should think twice before issuing such an invitation. The memorandum submitted by Women’s Health in South Tyneside states:

So much for his attention to the interests of the sector!

We need to see a more robust performance from the office of the third sector. Warm words are not enough. One would think that the Minister, of all people, would have the ear of the former Chancellor of the Exchequer, now the Prime Minister, yet we know that £70 million was lost to the third sector at a stroke in the Budget, as my right hon. Friend the Member for Horsham pointed out earlier. There was no mention of it in the Budget statement or in any press release. The Budget was carefully constructed to protect all, or most, of the losers from the consequences, but the one group of people that got no protection at all was the third sector, which the office is supposed to represent.

The office of the third sector has influence without achievement, and we need to improve on that. We had the first Olympic raid, totalling £213 million, in June 2006. The second raid involved the loss of £675 million, £100 million of which was from the charities that the Minister has pledged to protect. The Minister says that grants are important, but as a proportion of the sector’s funding, they have fallen from 52 per cent. to 38 per cent.

When it comes to campaigning, the Minister for the Cabinet Office is keen to align himself with the advisory group. I would like further clarification, but he seems to have engaged in something of a climbdown this afternoon.

Edward Miliband indicated dissent.


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Greg Clark: It is made clear in the third sector review that

its objectives

Earlier, however, in response to my right hon. Friend the Member for Horsham, the Minister said that exclusively political activities would not be allowed. Does that continue to be his position? If so, what is his position on the use of “wholly or mainly” political activities to promote a charity’s interests? Is he still in favour of that? What has changed since the publication of the review in July to justify his backing away from the stated purpose to allow charities to pursue their purpose

I will give way to him, if he likes, so that he can clarify the reason for the change of heart— [Interruption.] Perhaps the Parliamentary Secretary will save his blushes.

I do not know what has happened between then and now, but the Minister for the Cabinet Office has got himself into some difficulty. He should read his own fine print and he should reflect before associating himself too closely with his colleague, Baroness Kennedy. She bases her review on an assertion—no doubt true—that trust in charities

but the Minister’s answer seems to be to make charities more like political parties. If we go down that road, we are likely to suffer a loss of confidence, which would be disastrous for all the good causes expressed here today.

Norman Baker: I seek clarification of what the hon. Gentleman thinks is going to happen here. What does he believe the Minister has agreed to, and what is the worst scenario that is likely to result from the position that he believes the Minister to hold?

Greg Clark: It is impossible to know what the Minister has agreed to; I would like to hear from him. It is clear in the review, as I have already pointed out, that the Government have no objection to charities being “wholly or mainly” engaged in political activities. Today, the Minister says that they cannot be “wholly” political, so I would like to know whether they can be “mainly” political. We would all like to know that. What we do know is that the Minister is putting pressure on the Charity Commission to change its definition. We would like to know more about that pressure.

As I said, the Minister is wrong to associate himself too closely with the review. Baroness Kennedy states that the consequence of not going in this direction is that


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