Session 2010-11

Public Services (Social Enterprise and Social Value) Bill

These notes refer to the Public Services (Social Enterprise and Social Value) Bill

as introduced in the House of Commons on 30 June 2010

Explanatory Notes


1. These explanatory notes relate to the Public Services (Social Enterprise and Social Value) Bill as introduced in the House of Commons on 30 June 2010. They have been prepared by the Cabinet Office with the consent of Chris White, the Member in charge of the Bill, in order to assist the reader of the Bill and to inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.

summary and background

3. This Private Member’s Bill makes provision regarding the promotion of social enterprise in a national social enterprise strategy and in local authority sustainable community strategies. A social enterprise is a business that acts for the benefit of the community and whose profits are for the greater part reinvested for that purpose in the business or in the community.

4. The Bill also requires certain public authorities to take account of wider economic, social and environmental well-being in commissioning goods, works or services and throughout the procurement process. This includes a requirement that authorities consider whether to consult the persons who will benefit from the function in connection with which the goods, works or services are to be provided.

5. Guidance on taking into account social and environmental issues in the context of procurement has been published: Social issues in purchasing (February 2006) and Joint note on environmental issues in purchasing (October 2003).

6. Government has committed both to publishing a Green Paper on modernising commissioning by the end of November 2010 and to involving social enterprise in public service delivery.

Bill 6-EN


territorial extent and application

7. The Bill extends to England and Wales.

8. Its application to Wales is limited. The national strategy to be prepared under Clause 1 relates to the promotion of social enterprise in England. Clause 2 concerns strategies issued by local authorities in England. The provisions as regards procurement by public authorities in Clause 3 do not apply in relation to functions that are devolved functions as regards Wales.

9. The Bill does not extend to Scotland or Northern Ireland.

10. The Bill does not contain provisions falling within the terms of the Sewel Convention. Because the Sew el Convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament, if there are amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will be sought for them.

commentary on clauses

Clause 1 – National social enterprise strategy

11. Clause 1 requires the Secretary of State to prepare and publish a national social enterprise strategy for the promotion by government departments of engagement in social enterprise. The strategy is aimed at central government. Only one strategy is required to cover the work of all departments.

12. Subsection ( 2 ) requires that the strategy be designed with a view to the involvement of social enterprises and the public in its implementation.

13. Subsection (3) provides that the national social enterprise strategy may be replaced from time to time by a new strategy.

14. Subsection ( 4 ) requires the Secretary of State to consult with social enterprises when preparing a strategy. The Secretary of State must also conduct such public consultation when preparing a strategy as he or she considers appropriate.

15. Subsection (5) describes what is meant by engaging in social enterprise. A social enterprise entails the carrying on of a business. The business must meet the criteria in paragraphs (b) and (c) as to its primary purpose and the use of its profits. It may be carried on by a company, or charity or any other person or body, including a micro-business, that is, a very small business.

Clause 2 – Local authority strategies

16. Clause 2 sets out amendments to section 4 of the Local Government Act 2000. Section 4 requires local authorities in England to devise what are known as "sustainable community strategies". These are strategies for promoting or improving the economic, social and environmental well-being of their area and contributing to the sustainable development of the United Kingdom.

17. Subsection (2) amends section 4 to add a subsection (1A). Subsection (1A) requires a local authority to include in a sustainable community strategy the authority’s proposals in connection with promoting engagement in social enterprise in the authority’s area. The strategy must also include a statement of measures proposed for enabling community participation in the implementation of the proposals.

18. Subsection (3) defines social enterprise. A social enterprise for the purposes of local authority strategies is the same as for the national social enterprise strategy.

Clause 3 – Contracts of contracting authorities

19. Clause 3 requires certain public authorities to consider how they may promote wider economic, social and environmental value in the context of procuring goods, works and services. The duties imposed by clause 3 operate against the background of the Public Contracts Regulations 2006 (S.I. 2006/5). These Regulations implement for England and Wales and Northern Ireland Directive 2004/18/EC of the European Parliament and the Council of 31 March 2004. The Regulations impose requirements as to the way in which certain goods, works and services are to be procured by certain public authorities.

20. Clause 3 affects public authorities that are contracting authorities as defined by regulation 3 of the Regulations and it affects contracts that are subject to the Regulations (public procurement contracts). But it does not have effect in relation to functions that are Welsh devolved functions. These functions are described in subsections (8) and (9), with reference to subsection (10).

21. Subsection (1) identifies the pre-procurement stage when the requirements of subsections (2) to (4) will apply to an authority. This is the stage at which the authority identifies its needs, establishes a business case for proceeding and determines its specifications. The specifications may affect how the procurement process is afterwards conducted. Subsection (2) requires an authority to consider how it might, in addition to using a contract to procure goods, works or services, advance the wider economic, social or environmental well-being of the relevant area. Subsection (7) defines the relevant area as being the United Kingdom or, if the area in respect of which the authority is exercising its function is an area within England and Wales, that area.

22. Subsection (3) requires that in the consideration of how it might promote or improve well-being, a contracting authority must consider proportionality and relevance to the subject matter of the contract.

23. Subsection (4) requires authorities to consider consultation with the persons who will benefit from the exercise of the function in relation to which a public procurement contract is being considered. This may be a small number of persons or the community more widely.

24. Subsections (5) and (6) require contracting authorities to take into account the matters identified at the pre-procurement stage as being ways of promoting or improving well-being throughout the procurement process and where appropriate in the terms of the contract entered into.

25. Subsection (11) provides definitions for the purposes of C lause 3.


26. It is not anticipated that the requirements regarding national and sustainable community strategies will incur significant costs. Local authorities already have to undertake consideration of a wide range of factors in preparing sustainable community strategies.

27. The cost of producing the initial national social enterprise strategy is estimated to be around £41,000. As and when the strategy is reviewed further costs would also be incurred. These costs will be met from within existing expenditure. It is anticipated that overall costs incurred will be offset by the benefits of promoting social enterprise.

28. It is very difficult to estimate the additional cost of requiring local authorities to include provision relating to the promotion of social enterprise in sustainable community strategies. Local authorities are already subject to a duty to involve local persons under section 3A of the Local Government Act 1999 where they consider it appropriate. They must also consult and seek the participation of such persons as they consider appropriate when preparing or modifying their sustainable community strategies under section 4 of the Local Government Act 2000. Both of these provisions may already affect local social enterprises. So the cost for local authorities of including the promotion of social enterprise in their sustainable community strategies is estimated to be very small.

29. In respect of Clause 3, the Bill does not specify exactly how authorities should take account of the wider economic, social and environmental factors. This decision is left to the authority. Therefore it is not possible fully to quantify the wider costs that may result from the Bill. For an individual contracting authority, additional costs are likely to be small. It is already best practice to take into account wider value when undertaking procurement and to consult in such circumstances, and guidance and tools are already available.


30. It is not anticipated that there will be significant additional public sector manpower required for this Bill.

31. For Clause 1, it is anticipated that compliance will take up to five days of an existing policy official’s time.

32. For Clauses 2 and 3, it is not possible to quantify the additional public sector manpower required, as it is at the discretion of the authority affected how it undertakes the requirements. However, it is anticipated that additional public sector manpower will not be significant.


33. The impact assessment for the Bill analyses the costs and potential benefits of the proposals and assesses their possible impact on race, gender and disability equality. No negative impact on equalities groups has been identified. In fact, this legislation would promote forms of enterprise with a likely beneficial impact on equalities groups. For example, the State of Social Enterprise Sector Survey 2009 (Social Enterprise Coalition, 2009) found that 40 per cent of social enterprises employ people with disabilities, and in 17 per cent of social enterprises more than 25 per cent of their labour force have disabilities.


34. This is a Private Member’s Bill and the Minister is not therefore required to make a formal statement of compatibility with the European Convention on Human Rights under section 19 of the Human Rights Act 1998. However, the Minister is nonetheless in a position to make a statement concerning the compatibility of the Bill.

35. The Bill does not engage human rights or otherwise raise any issues in relation to the European Convention on Human Rights. Each of the persons on whom the Bill places obligations is a public authority within the meaning of the Human Rights Act 1998 and would be required to act in a way that is compatible with human rights in carrying out its obligations under the Act.


36. Clause 5 provides that it and clause 4 come into force on the day on which the Bill is passed. Clauses 1 to 3 come into force at the end of the period of two months beginning with the day on which the Bill is passed.