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Lidington: Social enterprise and Government

Extracts of the speech are below. Check against delivery.

Social enterprise and Government

These days, all politicians would readily declare that they, in the words of America's Founding Fathers, are in politics to maintain and enlarge "life, liberty and the pursuit of happiness".

But too often we talk about the central political challenges of how best to create wealth and relieve poverty in terms of models of how society works which are intellectually coherent but which also present a misleadingly simple picture of how people organise their individual and collective lives.

On the one hand, there are those who argue that all that needs to be done is to break the fetters of free market capitalist enterprise and all manner of things shall be well. The beneficent "invisible hand" of the market will ensure not only that virtue and hard work are fairly rewarded but that the benefits will trickle down to everyone in society. Capitalism will inevitably harness to the common good the natural propensity of men and women to seek reward and profit for the work that they do.

There is a great deal of truth in this analysis. But, as Adam Smith himself recognised, human beings are motivated by more than just the hope of material gain. You have to read the "Wealth of Nations" in the light of Smith's other great work, "The Theory of Moral Sentiments". There is such a thing as society. Capitalism is the best means that human beings have so far discovered to create wealth and spread prosperity, but there are and always will be people who, for a variety of reasons, find it difficult or impossible to thrive amid the rigours of the market. If we are serious as a country or as a city about the aim of life, liberty and happiness for all, then we have to find ways of doing politics which take those people into account.

The opposite political model sees government action as the answer. It holds that, in the words of the late Lord Shawcross, "the man in Whitehall really does know best".

Social Enterprise

It seems to me that the importance of social enterprise is that it bridges the gap between those two flawed analyses of what makes for effective social policy. I want to outline briefly why I think social enterprise is important to government (whoever might form that government), and what government, for its part, should do to enable social enterprises to prosper.

So what is it that social enterprise can offer to government? I think that there are three things that social enterprise has to offer.

First, outreach. Social enterprises are able to reach out to those men and women who are the most likely to resist the charms of government agencies and conventional employers: people who are long term unemployed, youngsters disaffected from society, ex-offenders seeking to go straight, people striving to overcome their addiction to alcohol and drugs.

Most employers, and in particular small and medium sized enterprises whose bosses are spending every hour God gives them battling to keep the business going, are quite properly concerned to create material wealth to benefit their shareholders. They will almost inevitably have less time and energy to spend on hard to reach groups in society than will an organisation like CRESCO whose very reason for existing is to serve a social rather than simply a material purpose.

Social enterprises, like charities and other voluntary organisations, are prepared to give people on the margins of society the emotional and psychological support that they need if they are to find their way back into the mainstream.

Second, the ability to nurture independence. Because social enterprises are embedded within the local communities that they serve, they often know far more about the needs of those neighbourhoods than supposedly expert officials sitting in an office in Stormont or Whitehall, but they also can build the capacity of those communities to take responsibility for their own futures. A social enterprise will develop an individual's basic skills like literacy, numeracy and time management, but will also nurture less tangible qualities like self-esteem and confidence. It is by enabling those qualities to flourish in individuals and through them in entire neighbourhoods that we can hope to see people increasingly taking charge of their own futures instead of looking to government to take decisions for them.

Third, commercial discipline. The fact that social enterprises are businesses, subject to financial disciplines, is itself of great importance. You are not bound to serve the interests of a proprietor or shareholders. You may measure your success in social rather than financial dividends. Nevertheless, like any other employer, you always have to keep an eye on that bottom line. You have to pay your way. That means that you are offering your trainees and employees real jobs that match a genuine customer demand, not make-work projects which can so easily become little more than ways of massaging unwelcome statistics of unemployment.

Social enterprise and Northern Ireland

Nowhere is the need for the special qualities of social enterprise greater than here in Northern Ireland. In Derry and Belfast there are thousands of families in which permanent, full time employment for any family member is a distant memory. The working skills of punctuality, accuracy and application have long since been forgotten. Even the hope has gone.

Society here is still divided. Large numbers of people are mistrustful of the state and its various agencies and institutions. Three decades of violence and sectarian tension have discouraged job mobility even over short distances within cities. A young man living in a poor estate will be reluctant to take on a good job offer if it means that he has to travel into the territory of the "other side" in order to go to work. The economy in Northern Ireland is in better shape today than for decades but still large numbers of people look to paramilitary organisations rather than legitimate employment for financial rewards and social status.

In Northern Ireland, above all in those urban estates plagued by sectarianism and low educational and career expectations, social enterprise can be a powerful and creative agent for innovation and social change.

What needs to be done

The practical steps which I think government needs to take are unglamorous but have the power to do a lot of good. I have five suggestions to make to you. These ideas are not set in stone. My Party's Policy Review is still very much work in progress, with a lot of the detail still to be filled in. I would welcome ideas from the social enterprise sector both about the overall framework of policy and about how to tailor what we propose to the specific circumstances of Northern Ireland.

The first thing that the Government should do is to simplify the complicated and fragmented flows of funding both to social enterprises and to the entire voluntary and charitable sector too. I have had meeting after meeting in Northern Ireland and in my own constituency with people who describe the countless hours that they have spent studying bidding criteria and filling in forms in order to compete (with no guarantee of success) for a pretty small sum of money from a heavily over-subscribed pot. Often details of new initiatives and specific grants are inadequately publicised. Vetting criteria imposed by one department or agency do not apparently suffice for the others and so on. It is little wonder that we now have a new profession in this country consisting of people whose job it is to advise third sector bodies on how to bid for government funds. What a waste of energy, time and commitment.

Second, we must find ways to simplify the tax, benefit and regulatory system to make life easier for social enterprise and the rest of the third sector. I have hear Second, because social enterprises are embedded within the local communities which they serve, they not only have knowledge of the needs of those neighbourhoods are exceeding that of some of officials in an office in Stormont or Whitehall, but they also can build the capacity of those communities to take responsibility for their own futures. A social enterprise will develop and individual's basic skills like literacy, numeracy and time management, but will also nurture less tangible qualities like self-esteem and confidence. It is by enabling those qualities to flourish in individuals and through them in entire neighbourhoods that we can hope to see people increasingly taking charge of their own futures instead of looking to government to take decisions for them.

I am not going to promise specific changes today. The complexity of the tax and social security system means that we have to be very careful to get the detail right before committing ourselves to specific measures and of course changes to the rules affecting your sector may be affected by wider reforms that we may wish to propose for the tax and benefits systems nationally.

One idea that David Cameron has put forward earlier this year and which we are determined to develop into detailed policy is to create social enterprise zones. These would be modelled on the enterprise zones of the 1980s, which helped economic regenerations by giving companies in a designated neighbourhood various tax breaks and freedoms from regulations. Our intention now would be to create social enterprise zones in those parts of the country which are most blighted by deprivation and crime. Social enterprises in those zones would get exemption from certain regulatory and tax demands. The aim would be to encourage not just physical and economic regeneration but also the social renewal of these neighbourhoods.

Third, I want to see the planning system reformed to ensure that the third sector has the flexibility to adapt buildings to new purposes to serve communities that they are seeking to help.

Fourth, government needs to look hard at its attitude towards procurement. There is a dilemma here for ministers which we need to acknowledge. The use of a small number of large suppliers or contractors may cut bills and allow taxpayers' money to go further in providing frontline services. But unless small enterprises, including especially social enterprises, get the opportunity to serve as contractors or suppliers for government departments, huge areas of business will be lost to them.

To my mind, government needs to get three things right here:

· information about procurement and supply must be accessible and easy to understand;

· the same rules should apply across the different departments and agencies of government,

· and there should be a determined effort by government to use long term contracts to allow social enterprise to plan for the future.

On that last point, I suspect that every Member of Parliament could cite examples of social enterprises or voluntary organisations that have not known until after the start of a financial year whether they were going to get a certain sum of money or particular contract from some arm of government. That practice has to stop.

My fifth suggestion is to do with the ethos of government rather than its actions. It is right that ministers and civil servants should be vigilant to ensure that public money is spent effectively and for the purpose for which expenditure was approved. I am in favour of openness, of independent inspection and audit and of the publication of results. (I would add, in passing, that I think that Parliament needs to raise its game in holding government of any political colour to account for the delivery in practice of its policies.) But I think that government should rely on less on targets and box ticking and trust more to the good judgement of the people, whether they are professionals employed by the State or social entrepreneurs working independently, who have been entrusted with the responsibility for delivering a particular service. Those people at the front line will know more about the needs of their clients and how to meet them than will even the best trained and most nobly intentioned official sitting in a distant government office. People on the ground will understand that human beings do not always fit neatly into categories described in official forms and strategy papers.

A culture in government that relies on trust rather than on compliance will, I think, help to deliver the better services that we all wish to see. Crucially, it will also help you to do your job of enabling people on the margins of our society to share those dreams of prosperity and happiness which many of us too easily take for granted."

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