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I am grateful for the opportunity to debate stability beyond our shores. In closing, let me recall to my noble friend the Minister the words of a Conservative Prime Minister, Benjamin Disraeli, who said:

"War is never a solution; it is an aggravation".

Let us hope in this House that we can redouble our efforts to avert it.

2.13 pm

Lord Black of Brentwood: My Lords, I warmly welcome the publication of the Building Stability Overseas Strategy and congratulate my noble friend Lady Falkner on securing such an early and, I hope, comprehensive debate.

We have seen in very sharp focus in recent years the consequences of societal breakdown in too many countries. It must be right to address this crucial issue and to do so, as this paper does, by drawing together expertise from across government and across disciplines.

I have always set great store by the axiom that prevention is better than cure, which in this field means that we should try to build stable and cohesive democracies before trouble strikes, rather than picking up the pieces afterwards. While the paper has an admirable amount to say about rapid response and the handling of crises once they have become established, I want to concentrate on what it describes as "upstream prevention", which in the words of the strategy means,

This paper sets out with great clarity the building blocks of that process. Society must respect human rights and the rule of law. Governments must win the consent of their populations, and political systems must have broad-based public legitimacy.

The "web of institutions", in the paper's phrase, that provide the basis of trust and confidence-the police, the legal systems, the banks, and religious and civil society groups-must function effectively. Political systems must be accountable and everyone should have a voice. All sectors of society-the paper highlights women in particular, as well as young people and diverse ethnic groups-must feel that they are part of society's "warp and weft". Corruption and bad governance need to be rooted out. The strategy document rightly points to a range of states, including Somalia, Zimbabwe and Burma, where corruption is rife and is a breeding ground for conflict. And then, of course, most crucial of all is the question of economic growth. The strategy document highlights how that is an essential part of the glue sticking stable societies together.

Central to the achievement of all of these laudable aims is, in my view, the role in a stable society of a free and independent media. I should like to talk a little about that today and, in doing so, declare an interest

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as chairman of the Commonwealth Press Union Media Trust and executive director of the Telegraph Media Group.

The one slightly disappointing aspect of this otherwise excellent strategy is that it does not cover this issue, and the positive role that free independent media-print, radio and broadcast-can play, more centrally. There is, to be fair, some mention of it. The BBC World Service is highlighted, along with the excellent work of the British Council, as an example of how "soft power" can be deployed in building stronger societies. The media are also cited as being among the institutions that can help cement together riven societies. But their role is far more central and far more essential than that. The strategy sets out how:

"The most peaceful political systems are accountable, giving everyone a voice and trusted to manage difference and accommodate change".

It adds that where elections take place,

That is absolutely right. But what more effective way is there to secure this than through a vibrant and diverse media which can tackle at their heart that sense of exclusiveness which fosters instability? This is particularly true, as the paper highlights, among women.

The example of what has been achieved in Ghana is highly pertinent, where a move towards democracy could not have been achieved without a move towards a free and diverse media, particularly radio, which is the main medium for communication. In Ghana, it is worth noting, women play an enormously significant role in the media, reflecting their importance in society and the economy. Ghana is now one of only three sub-Saharan African countries which appears in the top 30 of the world press freedom index. This set of principles will be particularly important in the countries impacted by the Arab spring, specifically Libya.

The paper highlights how, from Sierra Leone to Afghanistan, we are learning that we cannot build stable states without a properly functioning justice system. But for a justice system to be effective, and to build confidence among the public, again a free media is crucial. Justice always needs to be seen to be done, and that means that someone independent has to report it and ensure accountability in the system. The same is true, as the paper points out, for the accountability and legitimacy of the security services.

There is also the issue of corruption. The strategy document admirably sets out how corruption, discrimination and violence against women or children,

I have to say again that a free press and bad governance do not coexist, because free media hold those in positions of power and influence to account. Establishing independent media that are prepared to undertake this watchdog and scrutiny role is vital to rooting out corruption and bad governance.

There is also the vital question of economic growth. Lack of economic opportunity is most often cited, as the paper points out, as a cause of conflict, particularly among young people who, often out of desperation, join gangs, rebel group and other criminal organisations.

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Again, the link between a free and plural press and economic growth is well established. At its bluntest and crudest level, you will never find famine in a country with independent media, a point underlined famously by the Nobel laureate, Amartya Sen, back in 1994. He argued, rightly, that gross disadvantage is not tolerated in democracies with a plurality of voice and free media which underpin them. Only recently, in 2008, a report from UNESCO, Press Freedom and Development, set out in painstaking detail the linkage between growing economic prosperity and press freedom. It is a link that cannot be ignored. I certainly recommend the report in that regard.

In all these areas, press freedom is crucial to achieving the aims of this strategy, to build stable, peaceful societies. I am pleased that the Government have committed in this paper to working with the media-among other groups-to impact on what it describes as the "dynamic amongst political actors". That is absolutely right. I would like to highlight three practical steps in such a partnership, which are, as my noble friend said earlier, likely to be long-term ventures.

The first step is to invest in the training of journalists, and to harness the expertise that exists in this country, and in a number of other Commonwealth countries, to do so. This can be achieved by working with established in-country training institutions and experienced media organisations. It is crucial that this training is tailored to local requirements, as there is never a one-size-fits-all solution. Advice must always be sought from individuals and organisations who have a successful record in training, and not from government, or government-led organisations. That would be entirely inappropriate.

Secondly, I believe we must encourage the removal of barriers to the development of a free and independent media in countries that are at risk, including licensing systems of the sort that exists, for instance, in Zimbabwe, statutory press controls, and laws such as criminal libel, all of which make the establishment and work of a free press exceptionally difficult.

Finally, I strongly believe, following what my noble friend said earlier, that we should encourage women to play a more active role in the media, especially in developing countries. The strategy document highlights the key role of women in achieving stability in societies, and there could be no better way to enhance that than to make sure that they have an active voice in the media.

This is a very welcome initiative and an effective framework for the Government to move forward. I hope that the debate we are having today can help identify areas such as this, for further work and consideration, as we set about building, with our international partners, the stable societies which are vital for peace and prosperity across the globe.

2.21 pm

Lord McConnell of Glenscorrodale: I, too, thank the noble Baroness, Lady Falkner, for securing this debate, not least because it is taking place at a particularly appropriate time. This year we have seen not only real progress in the international processes for dealing with stability, peacebuilding, post-conflict reconstruction and conflict prevention; we have also seen the temperature

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change. We have seen further progress in the United Nations and the Peacebuilding Commission, and in the different agencies of the United Nations, and a further momentum towards improvements in the way in which they support those trying to build stable societies out of previously conflict-affected states.

We have seen a tremendous report from the World Bank-the World Development Report-which provides a route map for all of us, particularly the international institutions, for the way in which they need to tackle this challenge. In recent weeks we have seen the European Union agree to review the Gothenburg Programme before the end of this year, through the Foreign Affairs Council, and so again make its contribution towards this end.

We have also seen real progress in individual actions that can provide momentum for those of us who believe that change is possible. We do not have to have conflict-affected states in a permanent state of conflict. There is a potential for change. We have also seen actions this year that challenge the pessimists.

There are those who say that there are countries where democracy is never possible; cultures where democracy will never grow and where independent institutions will never be respected. We have seen people across north Africa and the Middle East this year demand those independent institutions-transparent, democratic frameworks in which to live and develop their societies. That should hearten all of us and convince us that where that demand exists, we can help and support those countries, through existing international frameworks, towards stability, progress and growth.

These issues are important for us in this country because they affect us directly by the encouragement of drug trafficking and human trafficking and by providing hiding places-and, in many ways, growing places-for terrorism and other challenges to our security. But they also affect us because they are issues of global justice. It cannot be right that half the children in the world who die before the age of five will die in conflict-affected or fragile states. It cannot be right that not one of the fragile or conflict-affected states anywhere in the world is in a position to meet even one of the millennium development goals.

Stabilisation across the world is an issue for our security, but it is also an issue of global justice. That is why it should concern us. The ability of the international community to support conflict-affected and fragile states to a position of stabilisation, prosperity and growth is the single biggest development challenge of our time. In the period ahead, as we move from the millennium development goals to a fresh challenge set by the international community for the next decade and beyond, this particular challenge should be the one that the international community sets as its number one priority.

We all now know what is required: greater international leadership, and better in-country leadership, both from the elected Government and from the international community, working together. Stronger, firmer co-ordination is needed. I have heard Paul Collier say on a number of occasions that everyone talks about co-ordination, but nobody wants to be the one who is

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co-ordinated. But greater co-ordination among the agencies, and throughout the international community, is essential.

It is a long-term commitment, and it is important to stick with it, going beyond national-level support for countries coming out of conflict, and going deep into communities to resolve local conflict and long-standing issues of identity and mistrust. It is about changing international institutions in the way that they approach these issues, as highlighted by the World Bank. It is about coming together, compromising and accepting the leadership of others; not always looking after your own internal interests but working collectively as an international community to support societies in developing.

It is also about early wins in social and economic development. Yes, it is about the rule of law, democracy and better governance, but it is also about proving to populations that through jobs, and through educational, health and water improvement, there can be real change in local communities as a result of peace, and that conflict is never going to be the answer again. The United Kingdom is in a unique position to help with these challenges. We are not only a member of the UN Security Council and a leading member of the European Union; we are also active in the OSCE and a key participant in NATO, and we have the incredible breadth of the Commonwealth in which we participate across the world.

We also have a record on aid and a leadership-in recent years in particular-on these kinds of issues that gives us a unique position in which we can contribute to this international debate. I had the absolute privilege of serving as the Prime Minister's special representative on peacebuilding for two years, from 2008 to 2010, serving with the noble Baroness, Lady Kinnock, and her predecessor, the noble Lord, Lord Malloch-Brown, in the Foreign Office, but working across the departments.

The UK was at that time, and I believe still is, leading the international debate on this issue. We need to ensure that in the United Nations, the World Bank and the European Union, and elsewhere, each of these institutions addresses this issue consistently, coherently, and with firm resolve, in order to ensure that no more time or resources are wasted. We must ensure that in every country where there is a UN mission, there is fast and effective action working with the elected Government of that country, to take the mission forward and ensure that the mission will not still be there in five, 10, 15 or 20 years' time, as has far too often been the case in the past.

For every good example, such as Sierra Leone or Rwanda, where real progress has arisen out of terrible conflict over the past 10 or 20 years, there are bad examples too. I saw some terrible examples of lack of co-ordination or misappropriation of resource. One country in particular had had its national police force trained by nine different nation states from around the world, in different police techniques, in a three-year period. The Justice Minister in that developing country despaired of ever having a coherent set of police standards in her country that could be taken forward with the trust of the population.

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I saw political stalemate in Nepal, Bosnia and elsewhere, where politicians were unwilling to compromise in the national interest, and the international community struggled to force them in that direction. So there are problems and bad examples, but there are good examples too. We have seen economic progress in Sierra Leone, and progress in terms of governance and the creation of institutions in Rwanda and elsewhere, as well as the participation of women in countries such as Rwanda, which now has the highest levels of women's participation anywhere in the world. There is the potential for progress. We should highlight those examples at the same time as dealing with those that are falling behind.

I want to make three brief points before concluding. First, the UK needs to continue to practise what it preaches. I welcome very much this strategy and the new Government's commitment to continue with the cross-departmental approach begun by the previous Government. I also welcome their commitment to the Stabilisation Unit, the Conflict Pool and the other mechanisms under the National Security Council that we hope will allow the UK to be as effective as it has been this year in Libya in this regard.

Secondly, I also want to see further progress on the international stage. We need to ensure that there is accountability; that the responsibility for action within individual states is clear; that there is fast and effective action and that the international community is pulled together by those of us who contribute to each of those institutions in every state where they have a mission. The regional organisations have a key part to play in the longer term. It is not possible for a body the size of the United Nations, the World Bank or perhaps even the European Union to play the sort of role that a neighbourhood, regional organisation can play in somewhere like west Africa or even in south-east Asia and elsewhere. It is important to build up the regional capacity. There are two great African proverbs. One is that rain does not fall only on one roof; it falls on several roofs at the same time and therefore conflict affects everybody in a neighbourhood. The second is that if your house catches fire, the first people to help are your neighbours when they bring buckets. You do not wait for the fire engine. Neighbourhoods are becoming increasingly important in this respect but help from the African Union, ASEAN and others is also vital.

My next point has been mentioned, so I will not labour it. However, it is fundamentally important that women should have a role not only as elected politicians, community leaders and mediators-they are not used enough in that regard by the United Nations and others-but also as entrepreneurs and leaders in every field of society. The post-conflict societies where women occupy leadership positions at every level are those that are making the most progress. That is not a coincidence; it is a reality that we should continue to encourage.

It is not possible or desirable for the world to continue to increase the number of peacekeepers year after year as we have done in the past 40 years. It is almost scandalous that every UN peacekeeping mission that has ever been set up is still in place. There are now

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120,000 UN peacekeepers across the world. If a small proportion of the budget that is spent on those peacekeepers was spent on peacebuilding and post-conflict reconstruction and stabilisation, it would make a huge difference. The loss of human potential and the scale of human misery associated with conflict should make us strive more and more in that direction. I hope that as the Government take forward this strategy, they will do so with vigour, dynamism and enthusiasm. They will certainly have my support. The 21st century provides us with many challenges but it also provides us with an opportunity to make this strategy work in practice.

2.33 pm

Lord Chidgey: My Lords, I, too, welcome this debate and congratulate my noble friend Lady Falkner on securing it. I am pleased to follow the noble Lord, Lord McConnell, who reminds those of us who take a great interest in the affairs of the developing world of the stark reality of the impact that instability and conflict have on developing communities in terms of poverty, sickness and the denial of basic rights of education and a reasonable life. This affects many communities, and not just African countries such as Sudan or the Congo. Afghanistan is a classic case in point. We should not forget the terrible situation that existed in the Balkans. Therefore, I welcome the debate and I welcome very much the Government's paper, Building Stability Overseas Strategy, about which I wish to make some detailed remarks.

Part one concentrates on the reasons why we should engage in conflict prevention and why stability matters. As recent international events have clearly shown, there is little to disagree with in this assessment. Part two of the paper, however, is where the meat of the argument, discussion or analysis-whichever way you want to put it-lies, dealing, as it does, with the concept of early warning, improving our ability to anticipate instability and conflict triggers. It deals with rapid crisis prevention and response, improving the ability to take fast, appropriate and effective action to prevent crises developing, spreading or escalating. The final section deals with investing in upstream prevention, building strong institutions and robust societies in fragile countries able to withstand and manage tensions and shocks, reducing the potential for instability and conflict. That should be underpinned-it must be added-by democratic accountability, locally and nationally.

Within the concept of early warning, the production of a watch list of fragile states and an early warning report based on a Cabinet Office six-monthly review of countries at risk, and assessed by the building security overseas steering group for overall efficacy, are all appropriate measures. There is no question of that. They do, however, suggest that previously departments of state went about conflict prevention in a more ad hoc and unco-ordinated manner. The danger is that these high-level initiatives will not be followed by positive action at working level. In the context of early warning there is a need to ensure that evidence gained from these initiatives is acted on in a timely manner. For example, the UNPD produces a monthly early warning report, which originates in the field, on

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countries at risk. Rarely is it acted upon in a timescale that prevents further deterioration of a situation. To quote senior officials,

Therefore, my first concern that I ask the Minister to address relates to the processes that will be established to ensure that departments, particularly DfID, are recording and then working on indicators produced by the early warning report and annual horizon scan. Too often these outputs are read and then just filed while existing planned programmes continue stubbornly on their way unaltered and unaffected.

As regards crisis prevention and response, the BSOS recognises the speed at which events can change and stresses the UK's comparative advantages in adaptability, speedy action and whole-government approach. That is very worthy. The creation of a £20 million annual early action facility within the Conflict Pool seems to underline this. Given the anticipated greater use of stabilisation response teams, as first deployed in Libya earlier this year, can the Minister provide details of the composition, training and availability of personnel for these SRTs? Are they to comprise serving civil servants from government departments and military personnel drawn from the MoD? Will they be held on the strength of the Stabilisation Unit or will they be called on as required? How are their training, availability and fitness for deployment to be monitored? Will deployable civilian experts or civilian stabilisation groups be deployed or will it be a combination of both? Again, how will they be recruited and trained? Is the Minister confident that the core team at the Stabilisation Unit is of sufficient size and has the right expertise to deal with rapidly changing scenarios, and that the right mix of DfID, MoD, FCO and Cabinet Office staff will be maintained? In this regard, are these civil servants and military personnel to be "double hatted" to ensure that we get value for money in periods of calm between crises?

The Minister will be aware that in its responses to the BSOS document Saferworld suggested that the Government could build on their multilateral aid review and the BSOS by evaluating the impact that multilateral institutions have on prospects for promoting peace and sustainable security. Saferworld has also suggested that the scope of the Government's analysis of multilateral institutions should be expanded beyond those with which the UK has an aid relationship; for example, to the UNSC, the African Union and the OSCE. What is the Government's assessment of the usefulness of such measures, and are they considering implementing them?

A number of noble Lords have mentioned investing in upstream prevention. Upstream conflict prevention requires, in part, developing a thorough understanding of what generates conflict within or between communities. As Saferworld points out, responses need to address both underlying drivers of conflict and the factors that lead to it becoming violent. The BSOS considers that work to prevent conflict is most likely to succeed when it marshals diplomatic effort with development programmes and defence engagement around a shared integrated strategy.

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The Government are providing more resources for upstream prevention through the Conflict Pool, which provides joined-up delivery across DfID, the MoD and the FCO. Stronger results focus and improved programme management will be introduced as part of this process. As I understand it, some £1.25 billion worth of funding will be provided for the BSOS, which will include investing in partnerships beyond fragile-state Governments in, for example, key groups such as local government, the private sector, faith groups, civil society and the media, as previous speakers have discussed.

The to-do list includes work to reduce corruption and enhance the role of women. It also includes ensuring that the defence engagement strategy sets out clearly how a commitment to direct more non-operational defence engagement to conflict prevention will be implemented. The BSOS also provides an opportunity to set out the Government's analysis of how the broader international aid effectiveness agenda impacts on conflict and fragility and how it can promote dialogue on ways in which aid can support peace and stability in fragile states.

As many noble Lords will know, the Government have been co-chairing the International Dialogue on Peacebuilding and Statebuilding that will feed into the Fourth High Level Forum on Aid Effectiveness in Busan. The UK is seen as a world leader in this area and in many other international initiatives that are taking place. Do the Government agree that a vital aspect of their programme and that of the Building Security Overseas Strategy is investing in the development of democracy in fragile states, investing in strengthening Parliaments and in their capacity to hold Executives to account, and in monitoring the delivery and effectiveness of aid projects?

With regard to the overall extremely worthy, not to say challenging, to-do list, can the Minister elaborate on how engagement with civil society and faith groups and how efforts to reduce corruption will be undertaken in practical terms? What procedures are envisaged for facing host Government opposition and observing key, defined and stubborn local ownership practices? How will they be monitored and evaluated?

We seek clarification of the monitoring and evaluation and results framework that the BSOS will use to assess the long-term impact of actions taken to prevent conflict upstream. These actions frequently concern changes in institutional and individual policies, along with attitudes of behaviour, which are very difficult to measure. How do the Government plan to overcome these problems?

In its response to the BSOS report, Saferworld stresses that a key aspect of evaluating upstream conflict prevention should be the measurement of public perceptions of safety and security in conflict-affected and fragile states. It also sees a need to include an assessment of how well conflict-affected communities have been included in the planning, implementation and monitoring of the UK's conflict-prevention work. The BSOS does not set out how measurement of upstream conflict-prevention efforts or its rapid crisis-prevention and response activities will be achieved. It will be helpful to know what criteria and what indicators

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will be used, and which organisation in London and in the field will be responsible for this onerous and costly responsibility.

Finally, the successful implementation of the BSOS will require the closest possible co-operation between key departments-the FCO, DfID and the MoD. This will not just happen. The creation of the National Security Council will provide that umbrella but that will not in itself ensure that the three departments adopt a common approach. It can happen only through making sure that key players establish working relationships and come to appreciate the different cultures and skills that the other departments can bring to the table.

There have already been some very good reports on the outcomes of joint exercises, which have brought together the three departments to work together on resolving problems that require military, diplomatic, humanitarian and aid interventions. I trust that Ministers will now ensure that there are more such opportunities for the departments to work together on such exercises to maximise the chances of success when we have to deal with real situations in the real world.

2.44 pm

Lord Hylton: My Lords, I join in the thanks that have been expressed to the noble Baroness, Lady Falkner, for securing and introducing this debate. It is good to be able to welcome a joint paper from three government departments. I hope that the Department for Business, Innovation and Skills will study this in relation to our military exports.

I suspect that the work of producing this paper may have been more important than the document itself. The paper has a wide focus on the whole world, so it can seldom be specific. However, in just one paragraph, 3.5, it mentions that by 2025-that is, in 14 years' time-2.8 billion people in 48 countries will be facing water shortages. The signs are already obvious. The Aral Sea, for example, is largely dry. The Jordan is reduced to a trickle, while the Dead Sea has receded by several hundred yards. I saw this myself last year. In China, the Yellow River now seldom reaches the sea and some Pacific islands have to rely on imported bottled water. All these examples are mainly caused by human activity.

At the same time, the world's population is rising steadily and will do so for some years before it is likely to level off. Climate generally seems to be getting more extreme so that some areas have serious and disastrous droughts while others suffer typhoons, hurricanes and floods. The stresses and tensions over resources are likely to get worse.

If one looks at eight of the world's major rivers, all flow through two states and many traverse three or four. The fresh water in them is crucial for human consumption and for food production, as well as for other uses. In some regions there are already consultative processes for discussing water use and allocation but in others nothing is set up. Already the Euphrates and Tigris are causing much concern. In Turkey, more irrigation and more hydro-electricity are planned. Downstream in Syria and Iraq, some former farmland is turning to desert, whose production cannot be balanced by just increasing irrigation.

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The report, rather charmingly, speaks about "investing in upstream prevention". Will the Government take this both seriously and literally? Will they discuss with the major riparian states the need to establish dialogue and consultation on whole-river strategies for co-operation? Is this something that the Commonwealth could usefully promote among its members, not only in Africa but also, and especially, in the context of détente between India and Pakistan? The report is helpful in setting down what we mean by conflict and suggesting that this becomes problematic only when it turns violent. Some countries, which might otherwise be quite prosperous, such as Colombia, have a tradition of civil war.

The report goes on to mention frozen conflicts. In my experience, in Moldova, Georgia and Nagorno-Karabakh, the conflicts frozen following ceasefires almost always have an external as well as an internal dimension. I suggest that interested external parties should not be called upon to act as mediators. Will the Government concentrate greater effort on resolving frozen conflicts, especially when British NGOs are already involved? This also makes sense because the unresolved conflicts cause poverty and make people migrate, as we have seen, for example, from Armenia, Moldova and Kosovo, the last of which we debated on 15 September.

The report ticks many important boxes, such as the role of women, reducing corruption, justice and law enforcement, or political reform in the Arab states. It speaks of helping to build strong, legitimate institutions able to manage tensions, and it mentions the EU, the OSCE, the African Union and the Economic Community of West African States. Of those, nearly all have their own internal weaknesses. They have nevertheless made a start, and regional groups for preventing war and other disasters should be encouraged everywhere.

I conclude by posing a more fundamental question. In Britain, we still have memories of the days of Empire, when our sea-power enabled us to impose our will in most parts of the world. In today's circumstances, should we not adopt a narrower focus and select those regions where we can best contribute to preventing violence and promoting good government and economic prosperity? Would we not be more effective by concentrating our efforts on, say, south-east Europe, the Middle East and North Africa, and perhaps the Horn of Africa? We have historic responsibilities arising from the Middle East but also much local knowledge and expertise. Progress towards resolving the long outstanding issues of Israel and Palestine would be a huge benefit to our interests, not least in reducing the motives for terrorism and in helping the Arab spring to produce worthwhile fruit. Progress, I believe, is likely to depend on work with the many shades of political and public opinion as much as on negotiation between the elites in government in the various countries.

2.52 pm

Lord Sheikh: My Lords, I thank my noble friend Lady Falkner for securing this debate. This is an important and timely debate and an area of policy in which I have had considerable interest for a long time. The Building Stability Overseas Strategy is of great

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importance to our domestic and international interests. It is focused and comprehensive in identifying three pillars upon which the strategy is formed: early warning; rapid crisis prevention; and response and investing in upstream prevention.

The early warning system makes a commitment to produce an internal watch list of fragile countries that have the potential to become unstable over a 12-month period. The watch list is subject to an annual review. I welcome this requirement, as it will ensure that our efforts are targeted at the most fragile regions. Early intervention may prove to neutralise tensions among warring factions. We can take the lead, along with our international partners and supranational organisations to prevent conflicts from occurring.

The rapid crisis prevention and response pillar comprises a stabilisation response team, as mentioned in the strategic defence and security review. The progress made by the stabilisation response team deployed in Libya last May is a testament to the importance of such an initiative in promoting stability. By investing in the upstream prevention of instability, we can ensure that our aid goes towards promoting democracy while addressing civic challenges in fragile nations.

I welcome the announcement that 3,000 former combatants will be re-integrated into civilian life in Nepal by 2015. I would be grateful if the Minister could elaborate on the progress made by Her Majesty's Government in meeting this target. I visited Nepal last July, where I inaugurated a business school of excellence in Kathmandu.

I am also involved in helping with the trade delegation that will be visiting Nepal next week, and I am pleased that our ambassador to Nepal is participating in the arrangements of the visit. I feel that we need to develop stronger business links with overseas countries which will help our economic situation and build bonds between us and other countries.

The Secretary of State for the Foreign and Commonwealth Office has recognised that untapped potential. He has undertaken to overhaul our network of foreign embassies to turn them into engines for trade, supporting the Government's ambitions for an export-led recovery from the current economic situation. There is good will towards the United Kingdom, but we need to build on these relationships to achieve mutual benefits.

I am pleased that the Building Stability Overseas Strategy mentions this vital element. Our diplomacy should recognise the importance of greater dialogue among the Department for International Development, the Ministry of Defence and, of course, the Foreign and Commonwealth Office. Those departments are paramount to achieving progress through preventive diplomacy, and should form an integral part of any decision to embark upon any intervention overseas.

I am encouraged by the fact that that strategy has been developed by the various departments. In helping fragile nations to build institutions, we can make a vital contribution in furthering our national interests. Building institutions is important if we are to achieve progress. In addition, we should also of course assist in bringing peace and stability, making democracy

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work, helping economic growth, creating jobs, empowering women and children and helping to deal with poverty and lack of education. I emphasise the need to empower women and raise their standards of education.

The challenges facing our nation and the world at large require a multifaceted approach to our conduct of future relations. In recognising our status in the global arena, we have a role to play in preventing the rise of dictatorships and rogue states. Democratic values and freedom should be at the heart of our approach to international and foreign affairs. Our policies and actions must support countries that aspire to achieving democracy and ending the oppression of citizens. It is vital that the strategy should enable us to work more effectively with our international partners such as the Commonwealth nations and the European Union.

I have spoken on several occasions in your Lordships' House about the importance of the Commonwealth. I feel that the Commonwealth may play a greater role in conflict resolutions and promoting trade between the various countries.

I am pleased that there are now closer links between Commonwealth countries and Sri Lanka. I have visited Sri Lanka, where I was impressed with recent developments following the end of hostilities. I am a strong believer in the merits of education and its ability to contribute to stability in fragile nations. I feel that we must build connections between universities in the United Kingdom and educational institutions overseas.

Through initiatives such as the Union for the Mediterranean, the European Union has a part to play in the reconstruction of countries in north Africa, following the Arab spring. This is reminiscent of the role played by the European Bank for Reconstruction and Development in helping countries in central and eastern Europe to achieve democracy and build a free market economy following the collapse of communism.

I have visited both Egypt and the Gulf region in the last six months, where I have spoken with citizens about the challenges facing their countries. I feel that our involvement in any such country must be soft; we should exercise soft influence. When I visited Egypt, I found that the Egyptians had very high expectations. Although we can provide assistance to the people of a country where there are problems, the people must themselves find the solution and form a system which suits their circumstances. We should not expect foreign countries to adopt our form of government and there should be no attempt on our part to do so.

I have always supported the Government's plan to ring-fence the international development budget. However, I remain concerned that there is consternation among the general public about this commitment. I would therefore be grateful if the Minister could provide information on what Her Majesty's Government are doing to inform the public that this makes a vital contribution to stability in fragile nations.

I also welcome plans to boost the resources of the conflict pool and efforts to expand the Arab partnership initiative over the coming four years to support economic and political reform in north Africa and the Middle East. The tragic loss of life as a result of the Arab spring must not be in vain and it should be used to

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promote commerce and a strong civil society in these nations to make them free from corruption. Achieving peace and stability in any region that has been ravaged by war and has a wealth of cultural differences is always a challenge. It is important to recognise the strong regional dynamic of the barriers to peace in any region. By focusing on individual nations, the risk of instability in neighbouring countries must be heightened as ethnic divisions transcend borders.

Foreign policy and national security are intertwined and should be treated as such. The success of our foreign policy will work to promote our national security and interests both at home and abroad. We have the capability and intelligence to identify volatile regions where there is a danger of an outbreak in hostilities. World history is littered with examples of the repercussions inherent in a failure to identify unstable regions or places that have the potential to descend into instability. Government departments involved in forming this strategy deserve praise for devising a scheme that is both pragmatic and strongly relevant to the challenges facing both Britain and our national interests overseas.

3.02 pm

Lord Desai: My Lords, we are grateful to the noble Baroness, Lady Falkner, for introducing the debate. I compliment her on her speech, and say all this because I will be quite critical of the document we are discussing. I find it intellectually inadequate and do not think that it can be a basis on which to frame any sort of policy. I shall go into some detail about why I think that.

It is economically deterministic and takes a rather naive view that in any conflict there are bound to be economic causes, and only economic causes. In proposing a solution, it has the defect of all the UN documents that I have had to read over the years of being far too idealistic in the requirements that it imposes on what kind of a perfect solution there has to be. Everything has to be democratic, transparent, accountable, gender-friendly, environmentally sustainable and what-not. I once headed something called the Centre for the Study of Global Governance at the London School of Economics and, on one of the first discussion papers we published, a brilliant Canadian scholar pointed out that people sitting in New York ask their UNDP branches out in Kenya and so on to add new things that they have suddenly thought of that we must have in conflict resolution. We do not have to do it but people out there have to satisfy so many constraints. At the end of it, whatever we do will be inadequate.

I start by saying why I think that the document is analytically defective. Then I will say something about the solution. First, the document is analytically defective because the notion of a fragile state is not an adequate notion. Most things that are called fragile states are not states. They are not even nations. Because of various things, either colonial developments, or something else, they have been designated as states by some constitutional accident but then have followed a long struggle to find out whose nation it is. Consider Afghanistan, where we have had trouble for 40 years. It was a kingdom once upon a time, and as kingdoms go it was stable. In a kingdom you can command the loyalty of different tribes who may not agree with each other. Then there was the communist revolution and

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other things later on, and we are still trying to establish a nation state there. A nation state is very different from a kingdom. In a nation state, numbers count and different tribes have to quarrel to take command of resources. The notion that everything is a state is inadequate for analysis of fragility.

I even say, at the opposite end, that we should consider Sri Lanka. Virtually everything that people want-gender friendliness, good health, education, a fantastic welfare state, high literacy, high ranking of human development-was reported over the years. What happened? Almost horrendous genocide takes place there in a 25 year-old civil war. The notion of a fragile state does not help us to analyse Sri Lanka or Zimbabwe. Until the late 1990s Zimbabwe was thought to be an ideal combination of social development and economic growth. I was part of the UNICEF project. In an article somebody listed Zimbabwe as one of the 10 most successful countries combining social development and economic growth. Why did Zimbabwe fall apart? This document will not help us to explain that. We have to be much more critical.

What are we being asked to intervene in? We may be asked to intervene in situations not because states are fragile. None of the states in the Arab spring revolutions was at all fragile-not Egypt, Tunisia, Libya-but all were subjected to considerable change and had to respond to it. I urge Ministers to look again and to have a more robust doctrine on why we have to have early warning and on what we can do. We were able to do nothing about Sri Lanka despite it being a member of the Commonwealth. We were not able to expel it, like Zimbabwe, or even Pakistan. It not only continues to be a member but will host the CHOGM in 2013. We need a slightly better concept of not just fragile states, but rogue states and maybe states that are perfectly well functioning but which because of that can be perfectly efficient at oppressing their people. Iraq, for example, under Saddam Hussein, was not a frail state at all-not even a fragile state. It was a very powerful state but it was oppressive to its own people.

The doctrine of liberal interventionism, of which I think I am the last friend, says that if you live in a global village and see a neighbour beating his wife you will intervene. You do not regard it as his affair. If a country-especially a non-western country, if I may say so-has a dictator who is eliminating some part of the population through genocide and so on, we do not say, "No. Their values are different, so we cannot intervene". I think that it is quite right to intervene. It was right to intervene in Iraq. I have no problem with that. Iraq today is a democracy. Not only that, I believe-although I cannot prove it-that some of the inspiration for the Arab spring must have come from the fact that Iraq was seen as a functioning democracy. It is such a stable functioning democracy that after the elections it did not have a Government for six months but still nothing happened that could upset the political balance.

That is an achievement and that kind of liberal interventionism was successful in Bosnia and Kosovo and very effective in Sierra Leone. We have to learn positive lessons from that. We cannot just rely on the doctrine of fragility. Maybe we should have "fragile

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states"; we should have "rogue states"; we should have states that are perfectly all right but suddenly undergo a conversion-in all these different situations we may be required to intervene and what kind of intervention we make will be important.

Time is running out so let me say a few things on the ideal solution. It is very important, especially in fragile states, states that are breaking down, or even states in which we are intervening, that we prioritise what kind of intervention is needed. Before all the democracy and accountability and transparency-all those good things of life-are achieved, we have to restore law and order. The restoration of law and order and the security of property and people is absolutely the top priority. In doing that you may not achieve all the good bits that you want to achieve. Very often, especially after a civil war, it would be very difficult for even the domestic security forces, let alone somebody from outside, to really be able to give proper, perfect equal justice to people who were previously the masters and committing the genocide-just think of how it was in Rwanda. First should be some sort of security of property and life on an equal basis, and later one can go on to look at institution-building and things like that.

How many years did we stand by and wring our hands over Darfur and all the time the crisis was happening? Was Sudan a fragile state? Was Sudan a state at all? Now coming out is what we knew all the time: that Sudan had very deep divisions, north and south, on the basis of religion. At that time we were not able to operate on the idea that perhaps Sudan should not be a single country. My own private view is that the Democratic Republic of Congo should not be a single country and is not viable as a single country, but that is for another day.

As far as Her Majesty's Government are concerned, if you are going to set up an early warning system, please have a much more robust analytical model on the variety of different situations in which we will have to intervene and not just this notion of a fragile state and that it is fragile because it is economically weak. That will not do; that is not a proposition which would pass any examination. Therefore, we should be deeper in our analysis and economise on the objectives we pursue when we intervene-and once we intervene, get out fast.

3.13 pm

Lord Hussain: My Lords, I thank my noble friend Lady Falkner for initiating this important debate. I welcome the Building Stability Overseas Strategy as it clearly stipulates the importance of peace and stability overseas and its impact in the United Kingdom. I sincerely hope that in pursuance of this strategy, among other things, we will be able to bring an end to what is perceived by many in the outside world as double standards on our part when dealing with conflict zones; for example, our active participation in response to the situations in Iraq and Libya versus the laid-back and semi-neutral position in the cases of Palestine and Kashmir damages our credibility and reputation in the eyes of many.

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May I take this opportunity to remind the House of the Jammu and Kashmir issue which is one of the oldest conflicts in United Nations history? The Kashmir issue goes back some 64 years. Many people outside the Indian subcontinent have lost track of this and others may have forgotten about it, but Kashmiris do not forget it. I was born in Kashmir and have friends and relatives living both sides of the line of control, and would like to remind the House of some of the facts on this issue. First, as many Members of this House will be aware, India took the matter to the United Nations in 1948 and the first UN resolution of 13 August 1948 promised a plebiscite for the Kashmiris to decide about the future of the state. This was followed by many similar resolutions. Both India and Pakistan made numerous public pledges and statements honouring the promised plebiscite. The famous words of India's first Prime Minister, Pandit Jawaharlal Nehru, are part of history, when he said: "It will be Kashmiris who have the final say about the future of the state of Jammu and Kashmir. At the end, even if they decide to stay separate from India, we will swallow that bitter pill". Those promises were never kept.

Since then, India and Pakistan have been to war three times. There have been many formal agreements, including the Tashkent Declaration in 1966 and a similar agreement in 1972, when both countries agreed to resolve Kashmir through negotiations-but they never did. Kashmir remains one of the most heavily militarised zones in the world. India's 700,000 armed forces, with special powers given to them under the notorious Armed Forces (Special Powers) Act, are committing some of the worst human rights violations in the world. Killing, rape, arrests and torture are taking place regularly; for example, the incident of Kunan Poshpora, where the whole village was rounded up by the Indian army, the men and boys detained in the nearest army camp while girls from the age of six to elderly women of the age of 80 were all gang-raped by the forces.

This and many other such cases are well documented and reported by Indian human rights organisations. In the last 20 years, more than 100,000 people have lost their lives. Tens of thousands have left their homes. Thousands have gone missing, while 2,800 mass graves have been identified with no knowledge of the victims. This needs an international independent inquiry. According to Amnesty International, India is using draconian laws such as the Jammu and Kashmir Public Safety Act to arrest, torture and detain people from two years to up to 20 years. According to its report, 16,000 to 20,000 people have been arrested under this law so far.

Periodic, bilateral negotiations and so-called confidence-building measures between India and Pakistan have proved to be no more than minute gestures which are often halted, derailed and discharged, and are used as a time-passing exercise and nothing more, as far as Kashmiris are concerned.

Jammu and Kashmir is not a territorial issue. It is one of the British legacy's unfinished agenda of the partition plan when we decided the fate of more than 500 such other princely states in India and left Kashmir bleeding. Not only do we owe it to the 12 million

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Kashmiris directly affected by this conflict to oppression, occupation, rape and torture on a daily basis, but also to a further 1.2 billion people of India and Pakistan. They could benefit immensely from better use of the multi-million pounds in the defence budgets that both countries are spending due to the conflict in Kashmir, while millions of people in both countries are living without houses, electricity or access to drinking water.

Given the importance and helpfulness of the Building Stability Overseas Strategy, how does the Minister think that this strategy will help to resolve the long-standing issues such as Kashmir and will the Government consider taking the issue of Jammu and Kashmir back to the United Nations asking for the implementation of the UN resolutions? Will he raise the human rights issue with his Indian counterpart at his next meeting and press for an international inquiry into the mass graves? Will he ask the Indian Government to repeal the notorious laws, such as the PSA and AFSPA, and for withdrawal of the army from residential areas to start with? Finally, will he ask both countries for a complete withdrawal of their forces from the state to allow the plebiscite to take place?

3.19 pm

Baroness Warwick of Undercliffe: My Lords, I join in the thanks to the noble Baroness, Lady Falkner, for securing the opportunity to debate this new Building Stability Overseas Strategy. I share her view that this is a timely and important piece of cross-government work, drawing as it does on much expertise and experience within the Foreign and Commonwealth Office, the Department for International Development and the Ministry of Defence.

The strategy is bold and its aims are clear. This is essential if we are to respond effectively to conflict where it arises but, even more importantly if we are to anticipate and prevent triggers for future conflicts. The recent uprisings in the Arab region have been a reminder of how quickly and unexpectedly political landscapes can change. They also, I believe, reinforce the importance of our continued investment in governance in complex and challenging regions.

When announcing the strategy earlier this summer, the Secretary of State for Foreign and Commonwealth Affairs noted that at its heart lies the conviction that stability can be achieved only when a society has the "strong, legitimate institutions" it needs to manage tensions peacefully. I share that conviction, which stems from my time as chief executive at the Westminster Foundation for Democracy during the early 1990s-a function that I shared with the noble Baroness-and my continuing involvement with Voluntary Service Overseas. I further believe that working with local, credible organisations, as do both these organisations, will continue to be a critical element of effective UK support for those legitimate institutions.

Increasing the proportion of UK official development assistance that supports conflict-affected and fragile states to 30 per cent by 2014-15 is a bold decision. Explicitly focusing on unstable states is not an easy or necessarily an obvious option, because it produces potentially higher risks for those involved on the ground. I do not mean just the Armed Forces, of course, but

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the many involved in humanitarian work, aid workers, NGOs, the media and others engaged with civil society in those states. On the other hand, the emphasis on co-ordinating all the forces available-the 3D approach which puts diplomacy, development and defence into an integrated strategy of prevention-makes complete sense. It is, as they say, a no-brainer as the basis for a more effective approach to managing tensions, offering the greatest chance of success.

I welcome the strategy's intention to create an early warning system to help us anticipate instability. I support its creation of a £20 million early action facility within the conflict pool to help us act fast to prevent a crisis or to stop it escalating. However, I believe that it is the third of the three pillars of this strategy-that of upstream prevention-which will be the most effective and most likely to succeed in the long term. It is here that I want to focus my remarks. Upstream prevention tackles the underlying drivers of instability before a crisis occurs, avoiding the enormous human and financial costs of conflict. As the Secretary of State for International Development, Andrew Mitchell, said in another place, upstream prevention,


As the strategy reminds us, nine of the 10 poorest countries in the world are classed as fragile states. Five countries, all in the midst of conflict, produced 60 per cent of the world's refugees in 2009. It is right to focus our efforts on helping fragile states build those strong, legitimate institutions that provide the basis for trust and confidence. These institutions range from the police and legal systems to civil society organisations, religious groups, political parties, government departments and banks. The strategy is also right to emphasise that,

That is at paragraph 4.4.

Bodies such as the Westminster Foundation have long recognised that working with local government, communities and the media is how we will reach the most vulnerable people. This so-called soft power is critical. I particularly welcome the recognition that our capabilities to ensure that this strategy is effective go beyond government. Our universities, NGOs, think tanks and the private sector have much experience and indeed expertise to offer. The Westminster Foundation works explicitly to help encourage democracy as it believes, as the strategy acknowledges, that democracy provides the best route to building accountable and responsive states that are able to promote social and economic development.

Of course it has long been the work of the British Council, on whose council I served for 10 years some years ago, to build engagement and trust for the UK through the mutual understanding of our values. Our universities have also had a key role to play in this in their links with overseas institutions, their welcoming

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of international students through scholarship programmes -some sadly no longer funded-and their education of the future leaders of many countries.

I have spoken on this issue previously but make no apology for referencing the vital role that educating and empowering women can play in building stability, as indeed did the noble Baroness, Lady Falkner, and my noble friend Lord McConnell. For example, I draw noble Lords' attention to the work of the Westminster Foundation in Sierra Leone, a country where concentrated action has had real impact. WFD helped build the capacity of elected women and women community leaders to take a greater role in political life following a decade of civil war.

Working with local organisations that have credibility is key to all this. It is what will make upstream prevention a truly worthwhile and effective strategy. People directly affected by conflict offer unparalleled insight into changing dynamics but this is of limited value if local institutions are not in place with legitimacy to respond. As bodies such as the Westminster Foundation are working to show us, partnering local civil society offers the best chance that interventions will be relevant, legitimate and sustainable.

So far so laudable, but I raise two related issues of concern. I do not feel they have been sufficiently addressed in this strategy and ask the Minister to comment. The first relates to evaluation. We are all feeling the impact of public funding cuts and will do so for some time to come. But we must see results when we spend substantial sums-I remind noble Lords that 30 per cent of UK official development assistance will go to conflict-affected states by 2014-15. We must also know that what we are spending represents value for money. The strategy makes only a passing promise of

and an annual progress report within the public statement about SDSR. That is about it and that is not good enough.

The strategy itself says that,

Yet the strategy proposes to spend millions in high-risk situations and high-risk states. Given the financial climate I am not impressed by the strategy's bland assertion that we need to be "realistic" about what we can achieve and about the pace of change. Can the Minister tell us about the evaluation to be put in place? Will we have the mechanisms to ensure that our money will be spent effectively? What are we learning from the evidence that currently exists on aid effectiveness in conflict situations?

My second question is a related one: the issue of corruption in conflicted-afflicted states. We know that corruption is endemic in fragile states. It is not limited to the Governments, and misappropriation of funds is widespread. Instability is one of the drivers for organised crime. Yet when outlining why we should put more of our money towards supporting these countries, the strategy has very little to say about what it will do about tackling corruption to ensure that money is

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spent effectively. Indeed, as the Select Committee on Economic Affairs observed last month, it is pretty well silent on this issue.

I am rather astonished by this. Guidance on applying the UK Bribery Act and supporting local efforts to tackle organised crime do not amount to a strategy to tackle corruption in fragile states. In the absence of any more detail in the strategy, my question to the Minister is whether our existing anti-corruption programme at country level is enough to support the delivery of this strategy and, if not, what are we going to do about it?

3.31 pm

Lord Stone of Blackheath: My Lords, I too am grateful to the noble Baroness, Lady Falkner, for this debate and for her ever-present energy and smile in the House. I recall debating here as early as 1999 the idea of detecting areas of potential conflict. Then we suggested devising a plan for more subtle, non-military interventions before, or even during, a conflict and certainly after a conflict. In fact, more than 10 years ago, we were talking in this House about building stability overseas. Now that this has become a BSO strategy, with an agreement to draw on external expertise and cross-governmental co-operation, the next step should be to find pragmatic, large-scale projects that are already under way. They should be monitored and, if they are successful, could be replicated across the world under the strategy being suggested.

In February this year, I reported on an example of such an intervention. It started three years ago in the Middle East-in the Palestinian West Bank and in Jordan. We called it Moon Valley. I must declare an interest as I have been involved, unpaid, in this project from its inception. It is a perfect example of a conflict zone which at this moment has the potential to erupt into a major war or settle into progressive stability. The Moon Valley project has opened the way to allow, in the future, thousands of Palestinian farmers access to the international market for food and agricultural products.

The project has had great support from external expertise; Marks and Spencer, Sainsbury's and the Co-operative Group in this country, Whole Foods in America and Carrefour in Europe have been supportive. It is a good example of cross-governmental co-operation. The Foreign Office has been helping, particularly the consul-general in east Jerusalem, as has the Department for International Development, both locally on the ground in the region and here in London.

Our perception is that the creation of stronger local enterprises, with firm backward linkages to the poor, creating jobs, opportunity and prosperity, are essential for the prevention part of this strategy. It is obvious that such a strengthening of well led, well managed, inclusive businesses is not going to happen automatically in these more conflict-prone regions, where investors will be more risk-averse. When such regions have benefited from the old-style aid handouts that were driven by political rather than economic reasons, this type of intervention creates a culture of aid and political dependency, which can be antithetical to social and economic development. That type of aid

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does not build strong, local, civil society institutions, such as business associations and unions. Instead it creates monopolistic regimes that specialise in bidding for and squandering aid.

Moon Valley, on the other hand, has created trade. It is transferring technology and skills. It is planning to build a much greater capacity involving thousands of small farmers while still improving quality and reliability. Since February, to help this happen, DfID has sponsored a programme whereby an experienced NGO-Technoserve-is working with Oxfam and DAI, completing research into the entire agribusiness sector in the West Bank and Gaza. It will show that helpful interventions such as these can build a vital industry on an even greater scale and benefit tens of thousands of Palestinians. This kind of mindful intervention can drive the development of high-quality, export-oriented businesses, which operate on sound business practices, foster inclusion and enable people to influence the development of their own community and have a say in the future of their own country.

It is exciting that since this initiative, interest in food from Palestine is being shown, not only by European retailers and supermarkets in America but, as my noble friend Lord McConnell suggested, by neighbours-that is, interested parties in the Gulf. All these countries and companies now have a growing need for a future supply of large quantities of high-quality food products; and there is a desire for them to be from Palestinian farmers, to help their cause. In some cases, parties are prepared to offer the possibility of providing up-front cash, in pre-orders, to allow us to scale up the venture to millions of pounds a year. The noble Lord, Lord Howell, is familiar with this project and has been very supportive in the past.

Now, with this new BSOS strategy, I call on the Government, through the Minister, to organise high-level missions to various countries. The delegation would comprise representatives of our Government, together with Palestinians who are developing the agriculture in the West Bank and some of the experts who have been involved from Technoserve and Moon Valley. The quartet can also provide helpful support, and the Israeli Government have said that they can provide secure and reliable passage for the products' transportation. We would go together to several regions to put forward a plan and agree a strategy for Palestinian agriculture to become a reliable and viable source of high-quality food products on a worthwhile scale. In this way, this could become a model for other BSOS projects planned for the future in other countries, particularly the Middle East and north Africa.

3.36 pm

Baroness Kinnock of Holyhead: My Lords, I thank the noble Baroness, Lady Falkner, for initiating this timely debate, which has offered all of us a wealth of expertise and analysis, which I and all noble Lords welcome. The report, as many noble Lords have said, has a number of very positive elements, which we need to follow very closely. It will, of course, involve the importance of holding the Government to account on this strategy. It is, of course, not a new agenda, because it was under the last Government that the stabilisation

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units and other initiatives were taken. For many years there has been an analysis and there have been efforts to link and integrate defence, diplomacy and development. Therefore, we have to applaud the joint strategy-we like joined-up government, do we not?-which is designed to bring coherence across DfID, the FCO and the MoD.

The report acknowledges, as I know many noble Lords have done, that what we are talking about-indeed, conflict has been the central subject this afternoon-has repercussions for countries, individuals and whole regions. We have a comprehensive definition of stability in the strategy, which goes beyond definitions confined to merely the absence of war or to threats to national security. It also clearly and unequivocally identifies the need for humanitarian aid to be delivered on the basis of need alone. The strategy is also about recognising the need to be in for the long haul. If transformational results are to occur, clearly that has to be what we do.

We should also welcome the commitments to the international arms trade treaty. On this subject, we know that the Arab spring raised many concerns about arms transfers that have taken place over a number of years, whereby arms are transferred by the UK to authoritarian Governments. More than 150 licences had to be revoked, for instance on sniper rifles, teargas, ammunition and armoured vehicles, which had been delivered to Bahrain, Egypt, Libya and Tunisia. It would be good to know what is being done to avoid a repetition of these mistakes. I would certainly appreciate it if the Minister could comment on whether we can expect a full-scale review with engagements with Parliaments, civil society and the arms industry. It is good to see that the early warning system will inform the work of BIS on arms export licensing.

Stability is characterised not just by an absence of war but by promoting open, inclusive societies, which are the key to tackling fragility and conflict. We need to know more from the Minister about how it is anticipated that this will be achieved. Since 9/11, we have seen increasingly that development and security concerns have been linked. The lexicon is: fragility; radicalisation; stability. Many of us hoped that development objectives, when clearly identified, would deliver human security, but we have also feared the securitisation of aid, which serves only to compromise development and humanitarian activities. After all, DfID has now joined the National Security Council, and David Cameron has explicitly said that development aid,

Countries selected for aid increases-Afghanistan, Pakistan, Somalia and Yemen-are also all seen as actual or political terrorist threats. UK aid to Afghanistan is set to increase by 40 per cent over the next three years. It remains essential that aid is allocated according to need and not to serve short-term political or military gains. We know that since 9/11 we have increasingly seen statements from politicians linking poverty and alienation with terrorism, while we see military engagement with development work in order to win hearts and minds. People want security and justice, but communities must identify their own security priorities and concerns.

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Will the Minister confirm that the new approach will seek to meet the genuine security and justice needs of vulnerable people?

I am also interested to know more about the distribution of aid. DfID has said that 30 per cent will go to fragile and conflict-affected states. Would the Minister care to clarify, now or later if necessary, whether this is bilateral or multilateral aid, or both? How does the new commitment fit with the limited number of countries-27-that will receive aid following the bilateral aid review? The criteria for country selection in the strategy are also not the same as in the multilateral and bilateral reviews; those identified are different. Paragraph 1.5 says:

I fail to see any reference there to criteria on improving the lives of poor people.

What, then, is absent from the strategy? On military engagement, it addresses soft power and security sector reform, but what about the places where the UK is militarily engaged? The strategy is strangely silent on this. There is nothing at all on when, how or if military intervention is appropriate, or on checks and balances when it happens. Is this not a serious omission? It will also be necessary to address how potential tensions between the three departments will be handled, because I and many other noble Lords know that it cannot be assumed that there will not be tensions between the various departments. On the role of the MoD, when working with armed services overseas we need to know that the notions of the importance of human rights programmes, democratic oversight, gender equality and the accountability of security forces are understood and promoted. The FCO must lead on addressing the causes of fragility and conflict and ensure that conflict is firmly on the list of UK diplomats' priorities.

There is such a lot to say on this subject, but I now turn to a serious lack of emphasis, to which many noble Lords have referred: clarity on the commitment that is to be made on the importance of women in peacemaking and peacebuilding, and, indeed, in tackling the appalling levels of violence that women experience. In every single aspect of this report, we should see a strong commitment to the integration and involvement of women. On early warning systems, we need to see indicators on levels of violence against women; on government co-ordination, I suggest that Lynne Featherstone, the Home Office Minister responsible for following violence against women overseas, should be engaged in the process and take part in NSC discussions in that role. On partnership and accountability, we should make a commitment to provide core funding for women's organisations in these countries. Security and access to justice is a critical issue because women have particular problems with accessing justice.

Much more needs to be included, and I hope that consideration will be given to drawing up a focused set of policies now to address the fact that there are only fleeting references to women in the strategy and that it is necessary to come up with tangible and substantial commitments on this issue. Indeed, there is scant reference in the strategy to human rights more generally

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and no clarity about why human rights matter. In the context of the nature of the objectives of the strategy, this is regrettable.

We are, of course, aware of the difficulties that we face when we talk about state-building, and a number of noble Lords have identified those difficulties. It is a highly political activity. Lessons have to be learnt from Afghanistan, for instance, where the state's loss of legitimacy and accountability is a major source of instability. The process has to be nationally owned, not devised or imposed by outsiders. That is critical. For instance, it took Portugal a decade to move from military to civilian rule, and this when they already had fairly strong institutions. We should learn from those kinds of examples.

Finally, the UK must work closely with others. The OECD recently reported that there is generally a lack of co-ordination or even contact between those working on stabilisation. We need to reassess this and see how we can change it. In this and many other areas of policy, going it alone is simply not an option, and I trust that in future we will see more collaboration.

3.47 pm

Lord Howell of Guildford: My Lords, we are deeply grateful to my noble friend Lady Falkner of Margravine for initiating this debate. It has confirmed once again something that is obvious and known to us already, but I repeat it: the staggering accumulation and store of informed expertise and experience available in this House that can be marshalled and focused upon issues such as the one that we are discussing today. As always, for all of us it has been a fascinating and a learning experience to listen to the views of your Lordships, many of whom have been deeply involved in the practice, assessment and implementation of the issues in building stability overseas and meeting our international aims, interests and obligations. I thank my noble friend Lady Falkner, as we have all done, and all noble Lords who have taken part. I welcome the chance to comment on the Government's strategy and on the statements that have been made, and to update the House on what the Government are doing to prevent and resolve conflict and promote stability overseas.

The opening sentence of my noble friend's speech set the tone when she quoted President Kennedy in saying that the great issues of our times internationally are not susceptible to military solutions. There are great warriors around who are always telling us about defence expenditure and, as it were, measuring effectiveness by such expenditure, but that is the wrong measure-it is not the measure that counts any more. In this debate we are dealing with efforts, programmes and resources that are just as important in establishing what might be called "the new defence". It is not just a question of moral rectitude, but of our national interest. The truth, as many who are sitting in this Chamber now know, is that the texture of international relations has changed beyond recognition in the past decade or so. That was fully recognised by the previous Government, it is recognised by this Government, and recognised perhaps a little more slowly by the media and commentators who tend to go on repeating the shibboleths

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and mantra of yesterday. However, there is a new world which we must now address and cope with, and develop the instruments to battle with. That is what we have been discussing today.

I announced in this House on 19 July the publication of the Building Stability Overseas Strategy, which was the first integrated cross-government strategy to address conflict issues, building on the work of the previous Government. The strategy took on board the lessons of the Arab spring and sets out three ambitious aims where the Government will concentrate our efforts. The first is early warning, where we will improve our ability to anticipate instability and potential triggers for conflict-a matter which my noble friend Lord Chidgey and many others raised. I will come to that in a little more detail in a moment. The second is rapid crisis prevention and response by taking fast, appropriate and effective action to prevent a crisis or stop it escalating. The third is investing in upstream prevention-again, mentioned by the noble Baroness, Lady Warwick, and many other noble Lords-by helping to build strong, legitimate and robust societies in fragile countries, a phrase about which the noble Lord, Lord Desai, had one to two characteristically acute and somewhat critical comments to make, to which I will also come in a moment. The strategy makes clear how we will try to deliver these aims, across the Foreign and Commonwealth Office, the Department for International Development and the Ministry of Defence, using our diplomatic, development and defence capabilities in an integrated way.

Many of your Lordships have raised the issue of how, being a tri-departmental operation-as it is under the building stability overseas board-this can be properly integrated and co-ordinated. I do not want to sound like an ancient mariner, but I have now been in and out of Whitehall for 41 years and engaged on many occasions, right back to the new style of government in 1970, in wondering whether we should co-ordinate or disperse more, delegate or gather together. It is a sort of cyclical process. The impulse to co-ordinate activities, particularly the impulse to appoint a Minister who is going to be responsible, can often end in tears. The Minister may feel that he is responsible. Somehow all the channels are opened around him or her and, in the end, they co-ordinate nothing.

One has to be a little worldly wise about co-ordination. The programme we have now, bringing together the three departments under the Building Stability Overseas Strategy, drawing on the resources of the Conflict Pool and delegating tasks to excellent organisations such as the stability unit is-we are entitled to say this with a little pride-working experimentally but extremely effectively as we go on into the new international landscape and events such as the Arab spring bring us new lessons and new ways of tackling these problems.

We have announced the substantial extra resources to underpin this strategy. By 2014-15 we will have increased to 30 per cent the proportion of UK official development assistance that supports conflict states and fragile states. The 100 per cent UK-funded Arab Partnership Initiative will expand to £110 million over the next four years, to provide support for political and economic reform in the Middle East and north

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Africa. The resources of the Conflict Pool, jointly operated by the FCO, MoD and DfID to fund our conflict prevention work, will increase over the spending review period to a total for the period, as one of your Lordships mentioned, of £1.125 billion. Through the Building Stability Overseas Strategy, the Government will prioritise those countries where risks are high, our interests most at stake and where we know we can have an impact. This involves-as your Lordships have emphasised-some difficult decisions about where to focus efforts and there is not always 20:20 vision about exactly how events will develop or what crises will spring up.

I should like to refer to some of your Lordships' specific comments, which have been very valuable, in the time available. My noble friend Lady Falkner began this debate so well with the quote that I have already mentioned. She urged the stabilisation unit to have a long-term perspective and I totally agree about that. She asked how we decide about really difficult issues, such as Bahrain, where we have seen some deeply concerning developments, particularly the ongoing disturbances; or Syria, where we have tried repeatedly to get an effective resolution through the United Nations. Our latest efforts, as your Lordships know, have been blocked by Russia and China.

We urge the Government of Bahrain to meet all their human rights obligations and to uphold political freedoms, equal access to justice and the rule of law. These do not run contrary to security, but are integral to long-term stability. We believe that dialogue is the best way to bring long-term stability to Bahrain and we encourage the Bahraini authorities and opposition groups to show real leadership by engaging constructively with one another. Whether the latest news from Bahrain indicates some acceptance and realisation of the strong views of Britain and the rest of world I do not know, but one certainly hopes so.

My noble friend Lady Falkner also raised-as did several other speakers, such as the noble Baroness, Lady Kinnock, in her comprehensive comments-the central question of the role of women in building stability overseas, including in Libya and many other areas. The Government have mainstreamed the importance of the role of women in conflict prevention through our national security strategy and our Building Stability Overseas Strategy. I repeat: mainstreamed. Women have a central role in building stability. In line with our national action plan for UN Security Council Resolution 1325 on women, peace and security, we will continue to address violence against women and support women's role in building peace. I do not think there is any ambiguity about that, barring only the concern we all have about the dangers of stereotyping, which I know many women feel strongly about. Barring only that, the commitment to upgrading and opening up the opportunities for women to play their proper and full role is unambiguous, determined and one that we will support with all possible resources.

The noble Lord, Lord Black, spoke about practical steps towards media and press freedom. These make a great deal of sense, particularly training journalists. I cannot comment precisely at this moment but it is certainly the basis for a good and sensible approach.

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The noble Lord, Lord McConnell, said we should tackle this area with vigour. I promise him that we are doing that and will continue to do so. The noble Lord, Lord Chidgey, and the noble Baronesses, Lady Warwick and Lady Kinnock, asked about evaluation and monitoring. How do we know that the system works? A lot of money is involved, as the noble Baroness, Lady Warwick, rightly said. Let me put it this way: the strategy is clear, but investments must deliver results while providing value for the UK taxpayer. To ensure this, a new transparent cross-government reporting framework, subject to independent scrutiny, will be implemented to measure and compare the UK's impact across the regions.

Aspects of our conflict prevention work are being examined by each of the House of Lords Economic Affairs Committee, the National Audit Office and the Independent Commission for Aid Impact. Focusing on upstream prevention is central to the strategy, but, ultimately, establishing the UK's contribution to conflict prevention relies on counterfactual analysis-examining what level of conflict would have been likely without intervention, which is obviously a very difficult assessment to make. That, I hope, meets the concern about the very proper need for evaluation.

The noble Lord, Lord Hylton, spoke about waters and rivers, a vital and central issue. I have a very long briefing note on the matter which I shall try to impart to him, though possibly not in this debate because I do not want to take all the time available. We understand that the analytical work being undertaken by the South Asia Water Initiative is already yielding benefits by brokering greater information-sharing between riparians on water, development of co-operative research and the development of a Ganga River Basin authority in India. Rivers drying to trickles and causing despair, or turning into raging torrents and causing floods, are obviously a central issue on the international scene.

My noble friend Lord Sheikh spoke with great authority on Nepal, where he has been recently. It was extremely helpful to have his views. As always, he gave support to a cause dear to my heart, which is the immense value of the Commonwealth network in promoting stability overseas and carrying forward all our programmes.

The noble Lord, Lord Desai, to whom I have already referred, made a critical remark about fragile countries. If the criteria are to be the rule of law and respect for property, I can hardly think of a single country where that does not apply, including possibly our own. He knows as I do that judging fragility is fraught with subjective standards and is often governed by, to use the words of Harold Macmillan, "events, dear boy, events" which no one foresaw beforehand.

My noble friend Lord Hussain asked whether we would help in Kashmir. It is our view that this matter must be handled between two great countries, India and Pakistan, and that remains all I have to say on that matter.

I have already mentioned upstream prevention and evaluation in response to the noble Baroness, Lady Warwick, who was quite right that the issue of corruption is central and must receive our full attention.

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The noble Lord, Lord Stone, knows that I think that his initiatives and what he has already achieved with his colleagues are quite marvellous. We take the view that the private sector should take the lead in these matters, but with DfID's support. I shall look again at his latest set of ideas, which I believe are totally constructive and to be supported in every possible and practical way.

I have not covered every point that was raised-there is never time-but I hope that I have responded to as many of the very important observations as has been possible. Since the launch of the BSOS, the Foreign and Commonwealth Office-my own department-DfID and the MoD have been working across government and with NGOs and international partners to implement the strategy. Our actions for weeks and months ahead will include establishing an improved early warning system that can inform early action to help prepare for and prevent conflict; putting in place a new £20 million early action facility to speed up support for emerging crises; supporting multi-year programmes through the Conflict Pool; and engaging bilateral and multilateral partners and NGOs, whose support we must have to make real progress in reducing the risk of conflict globally.

We are committed to drawing in more external expertise and data to challenge, evaluate and strengthen our work. We also look forward to the recommendations from your Lordships' Economic Affairs Committee inquiry into the economic impact and effectiveness of development aid, and to the forthcoming evaluations of the Conflict Pool by both the National Audit Office and the Independent Commission for Aid Impact. A vital element of delivering the BSOS will be working through the multilateral system, with the European Union, the Commonwealth network, our bilateral partners and civil society in all its multiple manifestations.

At the UN Security Council in September my right honourable friend William Hague emphasised the UK's commitment to conflict prevention: at one end of the spectrum by supporting local upstream conflict prevention efforts, and at the other end, as a last resort, through coercive measures to prevent conflict. In Libya the United Nations Security Council mustered legitimate diplomatic and military pressure to prevent a regime from waging war against its people, and to deter its members from committing horrific crimes. Swift action prevented a major humanitarian catastrophe and saved thousands of civilian lives.

In Syria, as I have indicated, we believe that a response from the Security Council is overdue. We have been pressing for it, but it has been blocked in the way I have already described. The consequences of an action would weigh heavily on us if we turned a blind eye to killings, abuses and repression.

In the margins of the UN General Assembly a week or two ago, I had a number of bilateral meetings with ministers from states who had been through the most appalling periods of conflict, including Algeria, Iraq, and-further into the past, but still very difficult-Azerbaijan. What struck me was the determination of these states to move on from the past and to deploy economic resources as a way of consolidating peace and stability.

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Our European Union partners also have a role to play, and we welcome the Foreign Affairs Council conclusions of 20 June this year, which set out the need for a more comprehensive EU approach to conflict prevention, including the strengthening of early warning and a greater emphasis on early action, such as mediation.

The strategy recognises the need to strengthen ties with partners, such as Brazil and South Africa. We shall invest greater diplomatic efforts in new prevention partnerships with these countries, and we are already reinvigorating relations with Commonwealth partners. The Commonwealth is an ever more relevant body that can add its collective voice and collective action to the great global challenges that we all face.

I leave your Lordships with the message that we can all play our parts, particularly the many experts who have spoken in this debate. Your Lordships have an important role in engaging with civil society, and with other parliamentarians through your networks, both in this country and overseas. Through these networks we can help to strengthen partnerships beyond government, supporting efforts to strengthen and develop effective conflict management and peacebuilding capacities. I thank noble Lords for this debate. I am sure that there are one or two questions that I have not covered, but I have covered quite a range. I will always be ready to write to any of your Lordships who have a particular point they want to pursue with me. I thank noble Lords again for an interesting and informed debate, which has raised many issues that can be carried forward greatly to the benefit of our nation and the wider world.

Baroness Falkner of Margravine: My Lords, it has been my privilege to move this Motion. It has been a fascinating debate, and we have certainly heard a diverse range of views, painting on a very wide canvas. I look forward to reading these speeches in more detail tomorrow, so that I can inform myself better.

In these foreign affairs debates we often have the pool of usual suspects. We all know each other and are enthusiasts for many of the same causes, so it has been particularly gratifying today to see additions to our pool with speakers who are not usually involved in this, from all Benches and from three political parties. I thank all noble Lords who have spoken, and beg leave to withdraw the Motion.

Motion withdrawn.

Social Enterprise

Question for Short Debate

4.09 pm

Tabled By Baroness Andrews

Baroness Andrews: My Lords, it gives me great pleasure to open this debate on social enterprise. I am particularly gratified that at this hour on a Thursday so many noble Lords have decided to join it. That clearly indicates that we consider this issue to be very

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important. Since I tabled the debate some months ago, there has been a cast change. I am very pleased to see that the noble Lord, Lord Wallace, will reply to the debate, and I look forward very much to hearing the Government's response.

I had hoped to have the debate earlier in the year, but today's debate has turned out to be more timely. We urgently need to discuss the future of social enterprise, particularly in the light of the comments made by the Chancellor at the Conservative Party conference this week about how to revive the economy. My argument is very simple: if the Government were really smart, the Chancellor and his colleagues would engage, as a matter of priority, with the social enterprise sector to provide it with the tools it needs to prompt growth through innovation, enterprise, skills and jobs, particularly in hard-pressed communities. There is not a moment to waste.

It is fair to say that this country is a world leader in recognising the unique possibilities of social enterprise, whether we are talking about social business or the habit of enterprise, which is clearly now spreading across the whole of the third sector. Over the past few decades we have seen a range of very effective and successful models emerging.

Some years ago I had the enormous privilege to work with Lord Young of Dartington, probably the greatest social entrepreneur of the previous century, when he was creating the School for Social Entrepreneurs. That was a hugely prophetic idea and one which has not only had great success in this country but has been replicated in other countries. The school and the growth of social businesses in general across the country show how innovation, skills, jobs, enterprise and social solutions can grow modestly but effectively in local circumstances, and sometimes in very unpromising circumstances.

The evidence suggests that social enterprises can succeed where private enterprise might fail or not entertain the idea of going. That is why, no doubt, in 2010 the Government promised to support the creation and expansion of mutuals, co-ops, social enterprises and charities so that they could have a greater say in the running of public services. It was a brave step forward, but it was not a new idea. My colleague on the Front Bench and I were in a department which committed itself entirely to the promotion of social enterprise. With the New Deal for Communities we saw in very disadvantaged communities across the country extraordinary innovations developing by way of social enterprise. I think, for example, of the Shoreditch Trust, led ably by Michael Pyner, and many different examples across the country. However, more significant than the scale or the diversity of the sector- £20 billion at one estimate-is the rate of growth, the evidence of sustainability and the public support that it commands.

We hear a lot about how the private sector is the solution to our economic malaise and how it must lead the economic recovery. In fact, the research undertaken by Social Enterprise UK, tellingly called Fightback UK, contains evidence of how, compared with the private sector SMEs, social enterprise shows three times the level of start-ups. It is outstripping private sector SMEs in growth, confidence and sustainability. I give a couple of examples of that.

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Some 800 social entrepreneurs who have graduated from the School for Social Entrepreneurs generate jobs to the value of £13 million each year-70 per cent of them are in the 20 per cent most deprived communities. Unlimited, another extremely interesting social innovation set up with millennium funding years ago, has enabled the most vulnerable in our society-refugees, no less-to start successful small businesses which address the aspirations as well as the needs of communities which might otherwise be excluded. The problem is that this window of opportunity may now be closing, just at the point when we need new ideas, new energy and new commitment. To quote from the SEC's research:

"Social enterprises working in public services are drastically low on confidence. A large proportion of these are planning redundancies or turning away from public service markets".

Across the third sector as a whole, there has been a 5 per cent reduction in jobs just in the past year.

Social enterprises seem to be facing a perfect storm. On the one hand, they have cuts in public spending and services which have a disproportionate effect on them because they are nearly always outward-facing into the public sector. On the other hand, they have not been equipped with the tools to enable them to compete with a highly capitalised private sector. Specifically, we see cuts in grants but, more critically, cuts in contracts from local authorities and national bodies. There is an absence of strategies or support for local and national commissioning to enable the sector to contribute. There is an increase in demand for local services, which is bound to increase in the next three years.

So far we have not seen much understanding from this Government of the impact of this and we have not seen a great deal of response to these threats. The Mutual Support Programme announced by Francis Maude in November 2010 has yet to materialise, as has a national programme for third sector commissioning. Therefore, my first question to the Minister is: when will these policies be published and what will they contain, and what impact does he think they will have? On the other hand, all the signs are that, far from public service markets opening up to social enterprise, they are being captured by a small number of highly capitalised large private sector providers. The barriers to entry at the moment are simply too high for even the most efficient social business. The Wise Group, which has an outstanding record of performance, to everyone's dismay lost out to massive private sector providers to deliver the welfare to work programme.

The Government's health flagship, Central Surrey Health, which is an exemplary social enterprise, lost out to Assura, which is 75 per cent owned by Virgin. If these bodies fail, what hope is there for smaller social enterprises, no matter how good and no matter how efficient? At the same time, they are of course, like other small businesses, being turned down for loans by banks. This week, I understand that a leading social enterprise with £5 million-worth of contracts was refused a £50,000 overdraft to ease its cash flow.

The Minister may well say that Big Society Capital and social impact bonds give us a way out of all these problems. They will help but they will not solve the structural problems that we are facing. For example, I understand that the pilot which is under way in

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Peterborough on reducing reoffending has generated partnership but not from the private sector; it is from the charitable sector and charitable investment. Social impact bonds, which are a very important new idea, are very cumbersome and slightly oblique. They will be very slow to deliver, or to understand how to deliver, the long-term complex, subtle problems that they are supposed to be assisting with. I should be interested to know from the Minister what lessons are being learnt from the way that these two initiatives are working so far.

The diagnosis is fairly simple. If the country is to take advantage of what social enterprise can offer, it means putting the resources, advice and skills into commissioning bodies, whether it is health or social care or crime reduction, so that they can identify, design in and invest in social enterprise. It means recognising the ecology of social enterprise in the system and why outcomes need to be defined appropriately and not by imposing crude regimes such as payment by results on the sector. There has to be a serious and intelligent attempt at dealing with lending and capitalisation. For example, why do the Government not ensure that further investment in the banking system from UK taxpayers will be bound to quotas on SME lending and job creation in the UK's most deprived areas?

In a very timely fashion, George Osborne came forward this week with seven plans for credit easing to support small businesses. Can the Minister tell me whether this will extend to social enterprise and, if not, why not, and will he be an advocate for extending the principle to social enterprise? It also means supporting the sector itself, enabling umbrella bodies such as Social Enterprise London or the Social Enterprise Coalition to spread and support good business practice in order to jack up competitiveness.

It means, in short, promoting national infrastructure to extend and exploit the value of social enterprise for social and economic benefit, drawing on local, national and international expertise and knowledge. Those are not my words but those of the prospectus of partnership offered by the University of Plymouth, which is leading the higher education sector in developing social enterprises to ensure that they become more competitive and more sustainable. That is a very progressive move.

If there were time, we might be able to wait for this to evolve, but there is not time for the economy or for the sector. Capacity and resources are draining away. The exam question for the Minister is: given the expectations raised and the urgency of the situation that we face, when will the Government engage with the sector on these very practical terms so that it can realise its economic and social potential? The Chancellor also said in his speech last week, very loudly and clearly, that he was willing to work with anyone. There are thousands of social businesses and thousands of social entrepreneurs who are willing to work with him. They are waiting for the chance to do so and I hope that he acts now on that opportunity before it is too late.

4.20 pm

Baroness Wheatcroft: My Lords, I first congratulate the noble Baroness, Lady Andrews, on securing this debate on what is such an important issue which could

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be so beneficial to our country. I confess that, over the years, I have learnt a bit about entrepreneurs and enterprise, but "social enterprise" was a term with which I only relatively recently became acquainted. I have known many entrepreneurs. Only a few of them would claim to have been social entrepreneurs; some of them probably should not have been let out on civil society.

Social enterprise is now a growing phenomenon, and we should all be doing all we can to encourage it. Before going more deeply into that, I make a plea that we do not fall into the trap of thinking that if businesses are not social enterprises they are antisocial. From what I hear, someone was coming dangerously close to asserting in Liverpool last week that businesses that were not social were antisocial-not his words, mine. That is misguided. Business generally is a force for good. It creates jobs, produces wealth and provide for our pensions. We are in a terrible financial state at the moment. We need business to help us out. To categorise businesses as producers or predators is simplistic. To suggest that there should be differential tax rates for them is to risk turning Her Majesty's Revenue into an outpost of the Taliban, threatening physical floggings for those companies which flash a glimpse of predatory tendency.

All businesses should, in one way or another, see themselves as social enterprises benefiting the community not just through various charitable donations but through a wide range of their activities. Nevertheless, there is a special breed of organisation now emerging under the term "social enterprise", and we need to help that sector to grow. The noble Baroness, Lady Andrews, detailed the obstacles that currently face many in that sector. There is no denying those obstacles but personally, given the straitened finances of the country, I do not think that it is such a bad thing if charities step in and invest in those enterprises rather than them having to depend on public sector handouts.

We also have the Government making serious moves to encourage social enterprise. We heard about the Big Society Bank. It is shaping up now and, through the big society investment fund, has made its first loan of £1 million. By 4 July, the closing date for the first applications, there have been 57 entries. Many of those will receive funding in the medium term from the Big Society Bank. It will have resources of £600 million. That will be leveraged because of the way that the money goes to investing institutions, which will then put that into the hands of the many smaller organisations that are going to do the good work that they can.

The Government are also making it easier for social enterprises to win public sector contracts. There is a new website, for instance, that speeds up the process. They do not have to go through the early stage application forms that larger contracts require. The Government are also cutting the red tape that is one of the real barriers to small firms generally and social enterprise, too.

My noble friend Lord Hodgson of Astley Abbots produced a report earlier this year entitled Unshackling Good Neighbours, which was an excellent read. It contended that enterprise and energy, particularly social enterprise, was being held back by a combination of

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red tape and a bureaucratic wish to cut back risk. In one telling example, he cited the snow code. Some noble Lords may be familiar with the Government's snow code. I recommend it. It says that you will probably not be prosecuted if somebody falls down after you have cleared the ice. That is not the sort of satisfaction that people need. They need to be sure that if they have done their best they will not be dragged through the courts. The whole tenor of regulation at the moment is prohibitive. It does not encourage people to do things. The snow code is just one of the bureaucratic barriers to enterprise.

To be fair, the Government have put a moratorium on regulation for small firms-the smallest-and that will benefit some social enterprises. They have launched the red tape challenge in an attempt to scythe through all the regulations but the scythe is blunt. We need a stronger weedkiller to deal with this crop that keeps producing new barriers. There are too many regulations. Despite the barriers, community interests continue to generate thriving social enterprises. The registrar of community interest companies now has almost 5,000 companies on his books. They are businesses that are committed to social enterprise and to doing social good, but they can also pay a dividend-a dividend that is capped but nevertheless an incentive for people to invest in them. All sorts of businesses have subscribed to becoming community interest companies. Very few are turned down. One that was, I am told, was a sadomasochistic organisation that claimed that it produced public benefit because it disseminated information. That shows a lack of education in what social enterprise is all about. The Government could spread the word much more than they already do. Jobcentres, for instance, should really be making more of the opportunities that there are for people to launch social enterprises.

There are other positives that the Government could do without great cost. I refer noble Lords to Robert Ashton, who dubs himself "the barefoot entrepreneur". He has been a social entrepreneur, has written books and comes up with ideas. I shall cite just two of them. He suggests that community interest tax relief should be at the same level at least as that for the enterprise investment scheme. That seems a reasonable suggestion. After all, if you are investing in businesses for the good of the community, why should you not get the same incentives as those who are investing in small risky businesses in the hope of making big profits? Even at a time of straitened finances, I suggest that the Government might want to look at that. His other proposal, which I fully endorse, is that unemployed graduates might be put to work in social enterprises. Before very long the subsidy that they would need would turn into a wage paid for by the social enterprises that they would help to grow. It seems to me that the big society intern programme would be no bad thing.

4.29 pm

Lord Bhattacharyya: My Lords, we are all indebted to the noble Baroness, Lady Andrews, for giving the House an opportunity to debate the Government's plans to support social enterprise.

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Social enterprise is a very broad topic. As time is limited, I will focus on one issue that is essential to achieving the Government's ambition: the need for social innovation to drive the strength of social enterprise. Social innovation is a vital yet often neglected component of any social enterprise. It is the development of new technical, product or process solutions to pressing social issues. At the root of any successful social enterprise, you will find social innovation.

The most famous social enterprise in the world is the Grameen Bank, with its hugely innovative approach to microfinance, but even Grameen faced challenges when expanding its innovation to different environments such as cities. As microfinance expanded, banks struggled to maintain the bonds of trust that sustained the early lending programmes. Indeed, Mohammed Yunus, who was given a Nobel Prize, has criticised the impact some microlenders have had on the urban poor. Yet those people still desperately need capital to improve their lives. Therefore, there is the demand for more regulation but that would not stave off the predatory lenders. This is a challenge only further innovation can answer. You have to find new ways if the old ones are not working. In Britain, there is a tendency to focus on identifying new funding methods, not developing the social innovations which will attract funding. Both are vital.

Take the case of social impact bonds, which Professor Paul Corrigan has recently argued should be expanded into the NHS. In a recent paper he showed that innovative methods of managing patients with diabetes or severe asthma can reduce costs and A&E admissions. He powerfully argues that bonds can help deliver these changes if the innovation is credible and sustainable. Whether it is developing a better inhaler for severe asthmatics or helping diabetics manage their blood sugar without hospital visits, any attempt to fund social enterprises through mechanisms like bonds will require proven improvements. Bond investors will not be convinced by hopeful assertions. They want hard evidence. This requires investment in the discipline of scientific evaluation.

This can lead to a Catch-22 familiar to all entrepreneurs: developing an idea into a working product requires funding, yet funders require evidence the product works. As a result, we find many social enterprises travel more in hope than expectation of outside investment. Without support for social innovation, we risk creating wonderful social market models, then finding that no one is in a position to take advantage of them. The Government are taking some welcome steps. The Innovation in Giving Fund is most welcome, as is the Social Action Fund to support structural innovation, and the Big Society Bank.

However, I am concerned that the initial big society capital proposal suggests that the only innovation the Big Society Bank will be mandated to support is financial innovation. If the last few years have taught us anything, surely it is that financial innovation alone is not a good basis for long-term growth. We should make it a priority to support social enterprises that wish to pursue social innovations. Without support,

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they will find it difficult to compete with private businesses that can fund research and evaluate new products with superior cash flow.

If we do not help social enterprises innovate, we risk regularly repeating the recent failure of NHS Surrey to award its community services contract to a social enterprise, as investors or commissioners will worry about the stability of social business models and the quality of social products. The Americans are ahead of us here, with their recently announced Social Innovation Fund. This brings together state, private sector and philanthropic funding to encourage R&D and to rapidly expand innovation in the undercapitalised social enterprise sector. We should pursue a similar initiative in the UK.

The NHS Social Enterprise Investment Fund might offer a model to expand further; for example, the fund is helping Bromley Healthcare develop ideas like virtual wards to reduce expensive A&E admissions. Beyond the NHS, the UK does not yet do enough to support social innovation, but the capability exists. NESTA, the Young Foundation and the Skoll Foundation are all interested in supporting what you might call social R&D. It is four years since the Young Foundation's report on social innovation was produced and a clear lead from the centre is still needed. Therefore, perhaps I may ask the Minister what plans the Government have to extend the important area of support for social innovators. We could look at how social innovation could help social entrepreneurs to develop products with a clear impact in areas such as accident reduction, child safety or offender management. We are rightly setting up mechanisms that make social enterprise attractive to investors. We must also help social enterprise to develop attractive innovation for investors. We need social innovation to make social enterprise work.

4.35 pm

Lord Newby: My Lords, I, too, thank the noble Baroness, Lady Andrews, for introducing this timely debate. I begin with a declaration of interest as the chair of Live Sport Community Interest Company, which provides education programmes to disadvantaged children via the medium of sport, and as chair of the All-Party Social Enterprise Group.

Previous speakers have already mentioned a number of advantages that social enterprises bring and I should like to refer to three of them. The first has to do with the ethos. The commitment of those who work for many social enterprises is often exceptionally high. The consequence of that is that the productivity of those enterprises is correspondingly high. An example which I have given previously in your Lordships' House is that of Sandwell Community Healthcare Services, which was able to take over services provided by the local authority and to do it for literally half the price. One of the main contributions towards that saving was that the number of days of sick leave fell from 30 to three. It was all to do with the motivation of people who in their previous local authority guise had not been valued or motivated.

Secondly, social enterprises tend to be extremely flexible, partly because they are small and partly because they tend to have a very flat management structure but

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they do have the flexibility that one associates with the small business sector more generally. Thirdly, the sector appeals to a new sort of entrepreneur. Many people, particularly young people, want to be exactly the kind of social innovator to which the noble Lord, Lord Bhattacharyya, referred. But they do not want to do it via the medium of a straightforward private sector company or through a public body. They want to have a go themselves. They have an idea and they are just like other entrepreneurs, except that their motivation is towards producing a social good rather than a straightforward commercial good.

However, the sector now faces a number of problems, to which, to a certain extent, reference has already been made. The first is the problem of scaling up. Most social enterprises are small for a number of reasons. One is that they are typically overreliant on a charismatic founder. I see a charismatic founder in the shape of the noble Lord, Lord Mawson-sparing his blushes. The challenge is how, as it were, to clone these charismatic individuals who start an enterprise and get it to a certain size, but then find it very difficult to get beyond that size because there are not the support structures that there are around straightforward private sector activity.

The second general constraint around scaling up relates to finance. There is limited scope for investing in community interest companies bar in a straightforward way because of the asset lock and the limit of dividends. There is an unwillingness in the banks to invest in the sector because it is slightly outside the ordinary. Even in good times, banks find that challenging. At the moment, they find it impossible. So there is an over reliance on high net worth individuals and charities to fund the sector.

The good news is that the sector has grown significantly and there is more recognition that value is to be had in investing in it. It will be very interesting to see how big society capital uses its resources and £600 million is quite a nice start. We hope that it will act quickly and that the big banks which have contributed a third of that will be so inspired by what they see that they might get the habit and either use big society capital through which to invest more of their own funds or put money into social enterprises directly.

There is also quite a lot of activity around more traditional forms of funding. The report commissioned by the City of London Corporation from ClearlySo on investor perspectives on social enterprise showed that there was plenty of scope for progress there. The report produced by my noble friend Lord Hodgson, to which the noble Baroness, Lady Wheatcroft, referred, had the sensible idea of creating a social investor, equivalent to the established concept of an experienced investor, which would make it easier for people to invest in charities and social enterprises. I hope that the Minister will say that the Government support that proposal.

The other big issue that has been referred to relates to winning contracts, given that a large proportion of social enterprises look to the public sector for contracts. The starting point in terms of problems is that the cost is typically twice as much for public sector contracts as for private sector ones. There is a terrific inertia in

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many parts of the public sector in terms of providers. The sector has a comfort zone of whom it likes to give contracts to and is very wary of going outside that, particularly in the risk-averse environment in which we now find ourselves. As the noble Baroness mentioned, large private sector operators have the ability to undercut smaller social enterprises. They have huge resources with which to do the whole bidding process.

Finally, there are ridiculous delays-I see them myself-between the point at which a public sector body says that in principle it is prepared to let a contract go to a social entrepreneur and then actually signs it and makes the first payment. From my own experience, that sometimes takes well over six months. The social enterprise does not very often have six months of cash flow to cope with that kind of delay.

What is to be done? First, some social enterprises go on the back of successful private sector contractors for the work programme and other big public sector programmes. They become subcontractors, which is a way forward but not ideal. Secondly, on my point about the timeliness of decision-making, the Government ought to see whether there could be a presumption in terms of making a decision and finishing a contract with a social enterprise-and more generally SMEs-within a certain timeframe. This dragging on, which is now almost an art form in parts of the public sector, is very worrying. Thirdly, I commend the Public Services (Social Enterprise and Social Value) Bill which Chris White introduced in another place last November. It has government support and would nudge local authorities and other public sector providers into supporting social enterprises. Social enterprises do much good work already but they have much greater potential.

4.42 pm

Lord Mawson: My Lords, I join other noble Lords in thanking the noble Baroness, Lady Andrews, for securing this important debate. We are all conscious that we live in a world that is quickly changing around us. If you stand still, you can feel as though you are moving backwards. People are no longer willing to accept the same predictable services from the public sector but are demanding higher quality services, more choice and the personalisation of services. In reality, can governments deliver this choice?

The situation in Europe at present is just one example of political drama that makes people wary of trusting Governments. People are sceptical-often with good reason-of politicians who hide behind grand phrases, processes and hubris but take little care of the detail and fail to deliver positive, practical and sustainable action. In the social enterprise sector in Britain at present, I, along with many of my colleagues, welcomed the coalition Government's pledges about social enterprise because they are exactly in the right direction of travel. Yet, worryingly, there is a growing sentiment in the sector that these promises are just not being delivered on and once again Governments cannot be trusted to turn rhetoric into reality.

The coalition Government agreement had two main pledges to support social enterprises in public service delivery. First, it said that they will support the creation and expansion of mutuals, co-operatives, charities and

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social enterprises, and enable these groups to have much greater involvement in the running of public services. Secondly, they will give public sector workers a new right to form employee-owned co-operatives and bid to take over the services they deliver. This will empower millions of public sector workers to become their own boss and help them deliver better services. Yet, as has been said, the Social Enterprise Coalition, which represents many in the sector, while standing in a slightly different place from me, cannot see at present much support for social enterprises delivering public services. What we all see, they say, is a lot of stagnation: the waters, instead of being clear, are increasingly muddy. The Mutual Support Programme which was announced by Francis Maude in November 2010 has yet to materialise. The national programme for third sector commissioning, a programme designed to support the commissioning of social enterprises and charities, has not emerged.

Without some intervention, there is a real danger that public service markets will be opened up and dominated by a small number of large private sector providers. The Social Enterprise Coalition says that it has seen this happen in a number of public service markets: welfare to work, waste and others where a small number of private companies dominate and the barriers to entry are too high for social enterprises and other small businesses to operate. There is some truth in this and I know from past experience how government departments love to talk to large bureaucracies because they are adept at using that language. Bureaucracies love to talk to bureaucracies. Talking to small and medium-sized social enterprises is quite a different matter because they speak a different language. We will need more than websites to address this issue.

Some of us have seen all this before and it requires focused leadership in government to break the impasse. I am a great believer in the power of the market but sometimes the Government have to intervene to make the market happen. The noble Baroness, Lady Thatcher, knew that.

There are three ways of governing: the centralised state solution, the market, or the present favoured choice referred to by our major parties as going local. While those of us who have operated at a local level for more than 30 years are tempted to welcome this attention, we worry that politicians on all sides do not actually comprehend a lot of the practical detail. The systems of government and the Civil Service can present themselves as something new but when you actually examine the details, old out-of-date processes and systems still prevail and are in danger of replicating themselves a thousandfold in local communities across the country. On my travels, I keep meeting old men in new clothes. There are real and very practical opportunities to grow the social enterprise sector in the process of going local, but it needs nurturing and it will not happen without the devil in the detail being understood within government.

If this does not happen, I fear that we will see yet another phase of a very expensive cycle. Vast sums of money are wasted every year by those politicians who do not take personal responsibility, get hold of the practical detail, and drive forward viable change. The

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public are tired of seeing very little change and know that the processes of government carry on very much as before, regardless of which party is in power.

There is a challenge here that has not been grasped because there are no particular easy brownie points to be gained by any Government if they grasp this particular nettle. Yet the long-term rewards will be worth the short-term difficulties.

I welcome both the localism and health Bills, but I ask the Minister what evidence is there that the Government are making life easier for those of us who are attempting to deliver these welcome changes on the ground? What evidence is there that there is a level playing field on which social enterprises can compete with large companies? What practical evidence is there that red tape is actually being removed? I can hear many fine words but outside your Lordships' House, the jury seems to be out on these issues.

The world may be changing but the systems of government and the Civil Service seem to chug on regardless. Without very clear and focused leadership within government none of this will happen and, as with all recipes, the end result depends upon proper preparation, mixing and baking. No one likes an undercooked chicken.

This pretence at change will not do for the modern enterprise culture that our children are now growing up in-a culture where at the press of a button you can receive information from anywhere in the world about virtually anything; a culture where young people, through technology, are learning by doing. The public sector still thinks that the world is about process, system and strategy, but our children are growing up in an integrated world created by entrepreneurs like Steve Jobs, co-founder of Apple, who died today, based around people, relationships, practice and networks. These two worlds are fundamentally at odds and I see little attempt to address the issue from any of our political parties.

The big breakthrough will start to come where social enterprises and business work ever more closely together. My colleagues and I have created a regeneration business, which we have set up as a social enterprise, called One Church, 100 Uses-and I must declare an interest. We have recently moved our head office into the London offices of HLM architects, a business and a well respected firm of architects that operates nationally and internationally. This decision was taken because, as we grow the business, we recognise the potential synergies between us. The development of public buildings over the next decade may necessarily be more small scale with less money about. The churches in Britain own nearly 50,000 buildings across the country, many ripe for redevelopment in favour of the local community. Maybe there is synergy between this business and a small emerging social enterprise. We think there is, and are ready to discover opportunities together. We need to see more partnerships like this in the social enterprise sector.

4.51 pm

Lord Wei: My Lords, I, too, thank the noble Baroness, Lady Andrews, for tabling this excellent debate, and declare an interest as an adviser to the Community

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Foundation Network. Given the limited time we have in this debate, I will not dwell on definitions, even though the term "social enterprise" does differ, depending on whether one uses the more narrow legal definition based on percentage of income earned, or the broader sense of the word, which comprises more a sense of solving social problems in an entrepreneurial way. I prefer to use generally the term "social venture", which explicitly encompasses both definitions.

There is much about government policy on promoting social enterprise that should be welcomed. Here I must declare an interest in having had a hand in developing some of it. It is particularly pleasing to note that while traditional volunteering and giving may be on the wane, social enterprises have been starting up at an explosive rate since the election. I believe these two trends are actually two sides of the same coin; as we age and as technology changes our lifestyles, it is not surprising that traditional attitudes to giving and volunteering, in which money and work may have tended to be handed over to professionals, are on the wane, and more and more people, old and young, want to give of their time and money in a more hands-on, technologically enabled-that is to say, convenient and, indeed, entrepreneurial-manner. Social enterprises or ventures will be the likely beneficiaries of such a shift.

Social enterprises facilitate all three parts of the Government's programme of sharing greater responsibility for tackling social problems with citizens, otherwise known as the big society. Social action, community empowerment and public service reform are all made possible through social ventures, and the Government have recognised this, for example through their national citizen service programme, which seeks to engage young people from widely different backgrounds in serving their communities, often through social action-orientated social ventures, or their programme of training community organisers who can help citizens locally develop social enterprises as a means of addressing neighbourhood issues, or through the big society capital wholesale fund, designed in large part to help social enterprises to achieve the scale needed to help compete for and then deliver devolved public services.

However, despite this great start, more could be done in each domain to encourage social enterprises to thrive. In the area of social action, for example, there needs to be more follow-through on implementing the recommendations on barriers faced by social organisations, including social enterprises or ventures in the report from the noble Lord, Lord Hodgson, Unshackling Good Neighbours, such as redrafting guidance from government departments that can be written in too risk-averse a manner, causing many smaller organisations to be overly fearful of liability and causing them to incur unnecessary costs that they can little afford.

In the area of community empowerment the Government need to encourage a more consistent treatment of social enterprises by local authorities and front-line officials, which in my view have a very wide range of attitudes to the role of such enterprises locally across the country. In some places, social enterprises are seen as a valued part of the local ecosystem and

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supported well, whereas in others they are seen too often as a quick way for the local state to offload assets. One low-cost way of achieving this better understanding of social enterprises in the public sector that I have come across is encouraging leaders from the public sector to work in the offices of social enterprise leaders, and vice versa, for parts of their week, which can often help to increase understanding of the challenges and strengths of each others' models and ways of operating, which can then lead to more nuanced policy and co-operation at a local level.

In the domain of public service reform, there remains a real need to create more of a level playing field in commissioning based on social value, as articulated in Chris White's Private Member's Bill, which was also mentioned earlier. Officials should desist from trying to water down provisions in the Bill for fear that they might complicate tendering processes or lead to economically inefficient decisions. On the whole, seeking social value does not, in my view, have to complicate or render commissioning decisions uneconomical. Rather, good commissioning should always seek to balance complexity and simplicity in the short and long term. Sadly, too much commissioning today seeks to go for the overly reductionist and short-term answer, which too often in turn leads to a lack of the originally desired outcomes and longer-term costs because best value principles were not followed. It is disappointing, for example, to see organisations such as Surrey Community Health not winning tenders and to see the lack of successful bids, so far, from employees in the NHS to form mutuals, which has a lot to do with the way in which commissioning is currently configured.

I believe that the Government have made a good start in supporting social enterprise and ventures in what are financially difficult inherited circumstances, but the pace has definitely slowed. The Government now need to show how they, too, can be socially entrepreneurial and implement further reforms to build on that strong start-not succumb to timidity or be stymied by bureaucratic roadblocks. To achieve this, they could well do more to work with the likes of community foundations, which are experts in facilitating the start-up, scaling and, increasingly, the turnaround of social enterprises up and down the country. Indeed, the community foundation movement covers about 97 per cent of the country.

I know from personal experience that there are parts that government ultimately cannot reach and I encourage social entrepreneurs, public servants and commissioners to work with their local community foundations to overcome the barriers that they face in helping to support the social enterprise sector, so that the many promising existing and newly started social ventures can continue to thrive, expand and collaborate, forming together a full part of the ecosystem of players needed, now more than ever, to strengthen our society.

4.57 pm

Baroness Randerson: My Lords, as the noble Lord has just said, social enterprise is a very broad umbrella term and we could spend the whole of this debate just defining it. We could mean charities that do some trading or we could be talking about large commercial

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enterprises that redistribute their surpluses to their employees. Taking the generally accepted definitions, however, social enterprises contribute greatly to our economy. They contribute an estimated £24 billion annually and a consistent 1.5 per cent of our GDP, employing about 800,000 people. That is significant, but it could be much more significant still, so I thank the noble Baroness, Lady Andrews, for initiating this important debate.

As many noble Lords will know, I come from Wales, and I want to bring to your Lordships' attention one notable example of a social enterprise that flies in the face of the general trend that my noble friend Lord Newby referred to earlier: for social enterprises to be, on the whole, small scale. That pattern is indeed the same in Wales as in the rest of the UK, but we have one notable exception in Wales. That is Glas Cymru, better known to its customers as Dwr Cymru, or Welsh Water.

Glas Cymru is the only one of the privatised water and sewerage companies in England and Wales to adopt a social enterprise model and is a single-purpose company formed to own, finance and manage Welsh water. It provides services for some 3 million people throughout Wales and in the borderlands with England. It is a company limited by guarantee under the Companies Act and was established in 2001, when it was bought from Hyder plc, a traditional for-profit company. As a company limited by guarantee, of course, it has no shareholders, and its assets and capital investment are financed by bonds and retained surpluses. It is run by a board of members who have no financial interest in the company and receive no dividend. The customers do not own Glas Cymru; it is not a mutual. In other respects it has the same framework as other water companies, but customers receive a rebate on their water bills in times of surplus-and I declare an interest as a Glas Cymru customer. Customers get a good deal with lower bills, and profits are reinvested in capital development for the company.

When the company gave evidence to the enterprise committee of the Welsh Assembly, it stressed that in its view the model could be replicated elsewhere, and that is my point in raising this today. In its view, the energy market was a prime area for that model; its not-for-profit status has greater legitimacy and greater community involvement than a normal for-profit company. Glas Cymru believes that it is better equipped to make the long-term decisions and investments that are needed in the energy sector than a normal shareholder-owned short-term competitive company. I urge the Government to look at this model with an eye to the energy market as a whole and the renewable energy market in particular.

It is worth pointing out here that the political support of the Welsh Assembly Government was crucial when Glas Cymru was set up. It could not have been done without that support. The UK Government need to provide that political support if that model is to be replicated.

That is an example of a large-scale social enterprise, and there are of course others. However, as has been said, the general problem with social enterprises in the

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UK is the lack of suitable financial models to allow them to grow. There are a number of potential solutions to this problem, and several noble Lords have referred to that. The important thing is that the Government have a crucial role in developing the levers to ensure that suitable finance options are much more broadly available to allow social enterprises to grow and develop. The signs are good and a number of useful options were flagged in the government report on growing the social investment market, which was produced in February this year.

I shall touch briefly on an interesting option included in that paper: the idea of piloting a social stock exchange or providing incentives for existing stock exchanges to develop an exchange of stocks in social ventures. I believe that there is a largely untapped wealth of interest in investment in social enterprises. Many people would prefer to have a stake in their local community-based business. They are not necessarily interested only in getting the maximum possible profit and, despite being in very hard times now, many people would be prepared to give some of their money to invest in that kind of enterprise, with at least part of their investments going in that direction. I have long had an interest in local stock exchanges generally, and the model suggested in this Cabinet Office report is worthy of further investigation. I urge the Government to pursue it.

It is important that we move on from supportive rhetoric. We had such rhetoric from the Labour Government prior to the current coalition and it is important that the new Government, who have provided so much leadership on this, now provide some concrete support in the months to come.

5.04 pm

Lord Haskel: My Lords, many years ago, I was responsible for installing the first computers in our business in Leeds. They were a novelty. Everybody wanted to have a go and so we opened the office in the evening to staff and their families. Before long we had a little computer training co-operative going, which helped local people, particularly staff members' families, to get better jobs and do better at school. It certainly raised the morale, commitment and loyalty that the noble Lord, Lord Newby, spoke about.

Was it a social enterprise or a social venture as the noble Lord, Lord Wei, put it? In those days, we socialists-that is what we called ourselves in those days-spoke about common ownership. To most people, such as my noble friend Lady Andrews, social enterprise was a contradiction in terms. A few of us were influenced by Michael Young, the social entrepreneur, who convinced us that business was as much about society as profit, as the noble Baroness, Lady Randerson, said. In truth, the name scarcely matters. What matters is that it was right for the time, it was right for the place and it was right for the people. Our little enterprise met the social need for people to become more computer literate: a local and specific social need which we did not even know existed when we started.

That is the secret of successful social enterprise, and why they are generally small and local. Otherwise they become ordinary businesses and lose their

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distinctiveness and that special aspect which sometimes enables them to succeed when ordinary business fails. As the noble Lord, Lord Mawson, explained, this is why in practice most big contracts in public services go to large private firms which, in turn, subcontract to local enterprises. This is in spite of the rhetoric from the Government, about which the noble Lord spoke.

It is easy to be cynical about social enterprises. It is easy to talk about them having mixed objectives and achieving neither. It is easy to talk about them being soft and therefore being crushed in the tough world of business. However, somehow, the idea of social enterprise keeps going. It just reinvents itself and adapts to the changing times. Indeed, its ability to deliver social benefits as well as commercial benefits may be another intangible asset that we have only just rediscovered about modern business.

The Government are making every effort to promote social enterprise, but they have got some of their thinking the wrong way around. Making 1 million public servants redundant and then trying to persuade them to sell their services back in the form of a social enterprise is getting things the wrong way around. Why? Because nobody is sure what need is being satisfied. Is it cutting public expenditure? Is it encouraging the private sector to provide public services? Or is it social engineering: trying to get people to improve themselves? Perhaps the Minister can clarify this, because until it is clarified it is not going to work properly.

There is clarity over what the Co-operative and Community Finance organisation is about. It calls itself the "lender for social purpose" and has been doing this for nearly 40 years. It raises money by public share issue and I declare an interest as a long-standing investor. Its prospectus says that it lends money for social purposes and collective benefit. But it is small, not because it has no money but because most social enterprises-apart from perhaps housing, mentioned by my noble friend Lady Andrews, or even water-also have a limited capacity to absorb and justify major loans and equity. Social enterprises have to perform. Their leverage is limited. Yes, we may do business with them initially because we support their social aims, but to get the repeat business they have to deliver quality, service, value, efficiency and profits like everybody else. So they have to be careful with debt.

Indeed, the big society and other fundraising ideas may not be all that relevant unless the terms on which loans are made are eased, and the need for more formal management is changed. Social investment bonds may be an idea whose time has come-the social investment market is expanding-but these are early days. We will have to see whether they survive the innovation of the City without the social innovation that the noble Lord, Lord Bhattacharyya, spoke about.

Traditionally, most social enterprises work in towns and cities: housing maintenance and refurbishment, collective living, training, health and welfare, especially for the benefit of those who are failed by the usual system and have particular needs. Interestingly community ownership is moving to the countryside where community-owned shops are replacing some of the many village shops which close each year.

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An article in Tuesday's Financial Times told us that there are 60,000 social enterprises in the country, employing 800,000 people and turning over £24 billion a year. I suspect that figure depends on what you mean by social enterprise, but obviously this is a growing sector-growing in terms of numbers and public acceptability. The concept is being promoted by the Government; it has its own advocacy body, business schools are teaching it and institutions are appointing social entrepreneurs in residence.

As the noble Baroness, Lady Wheatcroft, suggested, jobcentres could also play an important role. All this is to the good and, like other noble Lords, I hope this is the way business is going. I wish it every success. I also hope it does not allow itself to be taken over by-or become part of-the existing business establishment. It would then lose its distinctive, special and attractive features and that would be a loss.

I am most grateful to my noble friend Lady Andrews for moving this Motion. It gives us an opportunity to debate some of the better business practices-not social business practices as the noble Baroness, Lady Wheatcroft, suggested-about which my party leader spoke last week.

5.13 pm

Baroness Scott of Needham Market: The noble Baroness, Lady Andrews, has done the House a great service by tabling this debate today, which has demonstrated that huge disagreement is not needed for an interesting debate. We by and large agree, but nevertheless there have been lots of different and interesting points. It is perhaps not surprising that we agree because one thing which unites us, wherever we sit, is a sense of public service. That is why we are active in your Lordships' House. It is also why we do what we do outside this House. As we go around the country, the ideal of public service is absolutely alive and well. Everywhere there are people who, in some way or another, devote their life to service to the public.

Until fairly recently, I regarded public service and the public sector as synonymous. I was wrong and I admit it. I was also wrong to believe-as I did until 1997-that all that was wrong with our public services was a lack of funding. I am sure that privately if not publicly even Members opposite would accept that the large amounts of money put into public services in the last 10 or 15 years have not delivered the outcomes for many of our citizens that we would have hoped. I am not going to theorise why, although I strongly feel that the blame, if you want to call it that, does not usually lie with individual workers. Personally, I deplore the demonisation of people who choose to work in the public sector.

However, if we are looking for solutions and ways to improve public services, the solutions very often lie with the people who are working within our public services. They are the key to reform and making services more flexible, responsible to individual need and circumstances, locally focused and cost-effective. Last year, I met a former youth worker in Suffolk who had left the county council and set up, almost by accident, a social enterprise. She is doing great things

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with young people with multiple problems. Local social services had to admit that they had virtually given up on those young people, but that lady has been able to deal with it.

Earlier in the summer, I met Dai Powell, who runs Hackney Community Transport. Founded in 1982 from very modest beginnings, it now operates across the country and last year provided more than 12 million passenger journeys. Government need to be sure that they know where these existing, very successful models of social enterprise are. Something like Hackney Community Transport should be used as a benchmark for service delivery, because it is not only cost-effective and efficient but also ethical and locally responsive. It would make a change for government to benchmark against that rather than conventional service delivery.

In this current economic climate, as we have heard, there is a great incentive for this sector to grow, but the danger is that it is seen as some way of getting public services on the cheap, which it certainly is not. Nor will this growth somehow happen all by itself. Some will of course, but if we are to see the step change that the Government seek, then the Government have to get serious about it.

How do they do that? First, they have to play their part in creating a culture in which social enterprise is seen as a serious career option for people leaving education and for those looking for work, and not as some sort of last resort of employment. In this regard, Ministers' attitudes are crucial both in terms of saying the right thing and ensuring that social enterprise is seen as an intrinsic part of service delivery and not bolted on as an afterthought. It needs to be mainstreamed into all policy and legislative decisions.

Secondly, the sector needs support. I recently spent a very enjoyable day with the School for Social Entrepreneurs in Ipswich, where I met a variety of people seeking to set up social enterprises. Their dedication and enthusiasm will carry them a very long way, but professional support in finance and business planning, legal frameworks and so on is key, and this is where the school comes in. The Ipswich school is great, but we need more of this sort of thing right across the country. We also need social enterprises which themselves help other social enterprises. My colleague in Suffolk, Craig Dearden-Phillips, does this very well through his business, Stepping Out. Social enterprises need help not only in being established but in scaling up, as my noble friend Lord Newby, said, although not every social enterprise wants to get bigger-that is precisely the point.

If services are to be divested from local authorities or health trusts, it is senior managers from those bodies who are likely to head the social enterprises. If they are to make the transition from senior manager to chief executive, they will need help in doing so. Social enterprises continually cite public procurement policies as a major obstacle to growth. The Government need urgently to address that.

For many years now, local authorities have been encouraged to join together to create purchasing consortia to benefit from economies of scale from larger contracts, but this simply has the effect of freezing out new

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providers who are smaller and in the long run generates higher costs by driving diversity and competition out of the market.

Traditional procurement and commissioning tend to focus on hard financial data and lose sight of those rather harder-to-measure aspects such as advocacy, support and accessibility-those things which make social enterprise so attractive.

The Government have to give serious thought not to giving a handout to this sector but to giving it a step up, perhaps by thinking about quotas for the transfer of services or, as my noble friend Lord Newby said, about speeding up the process, which is so protracted that it stymies local initiative. Starting a new social enterprise is a huge risk for the individuals concerned. They need assurances over length of contracts and the future of the pensions that they have built up while working in the public sector.

The other major problem, which a number of noble Lords have addressed, is finance, both in terms of availability and affordability. A policy of credit easing-or whatever we call it- needs to be extended to mutuals and social enterprise.

Social enterprise has so much to offer us in terms of value for money, flexibility and genuinely responsive public services. The track record of such organisations in some of the poorest and most deprived parts of our country is already impressive, but we can do so much more to unlock the energy and enthusiasm of all these people who are genuinely committed to public service.

5.19 pm

Lord Hunt of Chesterton: My Lords, I am grateful to be able to speak in the gap. This is a most important debate, led off by the noble Baroness, Lady Andrews. I was head of the Met Office, an example of a large public sector operation, which relied hugely on community involvement. In fact, many of the community activities supported by this big public body then led to local enterprises. Community projects in the environment lead to tremendous skill and know-how, and I sometimes think that the Government should encourage protest as a way of developing great expertise and local activity. Some of these have become quite successful businesses and social enterprises.

My other point is that it is very important that the government agencies that are interacting with these local groups, and encouraging them, do more to publicise them. We should not denigrate the role of the internet; it can play a tremendous role in explaining what is being done, and it enables other countries to see what is being done here, from-as one might say-an export point of view.

However, one should not ignore that some complex local community exercises involving health and businesses and local communities can be publicised, for example, on London buses. For instance, these tell you what to do if you are suffering from air pollution and are dealing with your local doctor, and want to get very specific local information. Indeed, it was rather disappointing that the Cabinet Office did not, in describing the scheme this year, describe all the aspects that would be possible. There is more to be done by central government and large corporations to help social enterprise.

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