By Lee Mannion (Thomson Reuters Foundation) | 31 July 2018
“About 250 billion pounds is through external suppliers but social enterprises are estimated to win only about 10 percent of public sector contracts”
LONDON – Britain is likely to strengthen a law that favours ethical firms bidding for government contracts, experts said ahead of the sector’s biggest policy review in years, as the UK seeks to cement its status as a global leader for innovative businesses.
Experts said a new strategy to support social enterprises – businesses that seek to do good and make a profit – is likely to be revealed in August, after the government invited the public to submit their ideas earlier this year.
“If it’s the right strategy, it could propel things forward like it did in the early days of Labour,” said Dai Powell, chief executive of HCT, Britain’s biggest transport social enterprise, which hires the long-term unemployed as bus drivers.
The Labour Party championed social enterprises during its 13-year rule, creating a Social Enterprise Unit in the trade department in 2001 to promote firms that could create jobs in deprived areas and provide innovative public services.
Britain is seen as a global leader in the innovative social enterprise sector, with about 70,000 ethical businesses employing nearly 1 million people, according to Social Enterprise UK, which represents the growing industry.
The government has provided legal, financial and policy support to ethical businesses, such as tax relief for investors putting money into enterprises providing a social benefit.
Most notable is a landmark 2012 law, known as the Social Value Act, that encourages government procurement officers to consider the social and environmental impact of contracts they award, rather than just going with the lowest bid.
Experts believe that this law will be revised in the upcoming civil society strategy, following culture minister Matt Hancock’s statement in May that it had yet to deliver on “its revolutionary promise”.
Prime Minister Theresa May hosted a meeting in June with about a dozen people from the social enterprise sector to discuss how the Social Value Act could be amended to encourage the private sector, not just government, to trade with them.
“The main topics of conversation were around mainstreaming social enterprise,” said John Montague, who was at the meeting.
“How do we extend their trading opportunities?” asked Montague, managing director of Big Issue Invest, the social investment arm of The Big Issue, a magazine sold on Britain’s streets by homeless people.
Experts are confident of reform following a June speech by cabinet office minister David Lidington, who promised to build a more “responsible capitalism” after the collapse of the private sector service-provider Carillion.
While Britain’s Labour opposition has proposed bringing billions of pounds of privately-funded public infrastructure contracts back under government control, the ruling Conservative party supports outsourcing to the private sector.
Lidington said that the government will increase the diversity of its suppliers and extend the requirement of the Social Value Act to ensure all major government procurements explicitly measure social value, not just consider it.
“One of the things that has come out … which I think will obviously be part of the strategy, was the announcement David Lidington made about the extension of the Social Value Act,” said Andrew O’Brien, a director at Social Enterprise UK.
About 250 billion pounds ($329 billion), or a third of total government spending is through external suppliers, according to National Audit Office estimates.
But social enterprises only win about 10 percent of public sector contracts, Social Enterprise UK estimates.
O’Brien is keen to hear the details of the new strategy, following Lidington’s commitment to train the government’s 4,000 commercial buyers to take account of social value and to procure from social enterprises.
“What is a major procurement? Is it a new rail line or a new aircraft carrier? Or are we talking about million-pound contracts – which are still major but they’re not billions of pounds? … It should be covering everything,” O’Brien said.
Montague, of Big Issue Invest, said resources would be needed to enact the new strategy.
“Has it got teeth and is the support structure there for people to deliver it?” he asked.
“Otherwise, it’s just another bit of paper.”