Speech on social value: a nudge in the right directionJanuary 29, 2012
I had the privilege of speaking in the Lords in a second reading debate on the Public Services (Social Value) Bill, which seeks to oblige commissioners of public services to take into account social value. The idea is to open up commissioning so more social enterprises and charities can get opportunities to provide services to local authorities and other government agencies, as well as socially minded businesses and even mutuals. As you will see from the speech, this is definitely a positive step forward and the news is that it should pass quickly into law, which will give a much needed boost to social organisations, many of which have had a tough time lately. I’m keen that we do more to make commissioning easier for smaller organisations, and highlighted a few ideas for the future to make it even more innovative and accountable. Do share any ideas you might have and let’s explore what else we can do.
Here is the speech I gave:
Lord Wei: I am grateful to my noble friend Lord Newby for sponsoring this Bill, and thank the Government for their generous support for it, which is most welcome. I speak as one with a passionate interest in the content of and context behind this Bill, which I wholeheartedly support, not least because of my prior and ongoing work in fostering scalable social enterprise, in which I declare an interest, as well as more specifically being an adviser to the Community Foundation Network, a movement that seeks to enable giving at the local level, often alongside local and national commissioners.
I welcome the intention behind the Bill to promote engagement with and support for social enterprise, and want to focus my remarks on the suggested amendments to the process of commissioning public services in it to ensure that social value is taken more into account.
Some might question, wrongly in my view, why this Bill is necessary, given that, as has already been mentioned, the law already technically provides the flexibility for the public commissioning of services on a holistic basis. Indeed, many public bodies and commissioners recognise that the value of work tendered out has to be about more than saving money in the short term or satisfying minimum statutory requirements, and must take into account the other forms of value without which society fragments and costs for all become greater.
Such smart commissioners recognise, particularly in light of what we have witnessed dramatically throughout the financial and social crises that have marked recent years, that we need to try to cultivate and live in at least three kinds of economy, each with their own kind of value. First, there is the global economy, based on financial transactions, which encompasses everything from tax and spending to trade and investment, and so on. Secondly, there is the reciprocal economy, or what Avner Offer, paraphrasing Adam Smith, calls the economy of regard—that sense of community, however configured, in which we derive mutual support based on principles of reciprocity. Thirdly, there is the gift economy, driven by who we are, what we believe is right and wrong, and what we feel our call and passion is that compels us to help others with no expectation of reward or even recognition.
If we exist only in one of these economies, we become vulnerable when hard times or sudden changes come along, like a wrecked ship with only one section in its hull. If we cultivate all three, we become resilient, like a ship whose hull has multiple sections, able to draw upon funded support from the state, jobs or savings, on the support of our community, and on the support of friends, partners and fellow believers in our hour of need.
Smart commissioners intuitively try to minimise the damage to each of these economies in the way they tender, while promoting their autonomy, sustainability, and the innovation that comes when such economies or spheres overlap and work together rather than apart. Smart commissioners recognise that value includes but extends beyond that which is purely financial today. However, despite the flexibility already enshrined in law to enable smart commissioning, and despite the best efforts of smart commissioners, there remain too many people, I am afraid, who tender out contracts that conform to a more narrow definition of value—a definition that is, to put it crudely, too often about who can apparently deliver the most output for the least money and/or who has the best financial backing, irrespective of their ethos or approach, or who has the best track record of supplying to the public sector.
This is a definition that too often unfairly favours the supplier most adept at writing loss-leading bids, which may be subsequently renegotiated after they have been awarded over those that provide good honest value; the supplier who often has the best private sector backing over those such as charities or mutuals, which have limited reserves financially, even though they have ample reserves from the community of time, networks and skill; or the supplier who is the incumbent over the new market entrant on the basis that one is easier to manage than the other.
This is a definition that may seem to save money in the short term, and that apparently lowers risk, but that costs us more in the longer term, financially and otherwise, and potentially increases long-term systemic risk, as witnessed in major public sector procurement scandals that have arisen from time to time, when risk aversion or fear creates itself over time risk and moral hazard on a large scale—for example when suppliers become too big to fail, to negotiate better prices with, or just to lose.
In many such cases, the answer is to not use commissioning at all but to co-produce solutions or foster citizen-led services without using any or much money, just its power to convene through, for example, matched grants; or to embark on joint ventures where other partners can share the risk of managing new, small, and local suppliers—John Lewis partnership style. However, when commissioning remains the best way forward, this Bill will provide a much welcome nudge to get commissioners to consult properly and to consider the social benefits or otherwise of services that they are about to procure, not generally then to ignore them, which would be unwise, or even automatically to favour the non-monetary over the monetary forms of value, which is equally unwise, given our urgent need to reduce the national deficit, but to try to seek out where possible the solution that is best value over the short and long term financially, and that also can bring benefits of a non-financial nature—the win-win rather than the either/or.
There are many areas of commissioning in which this opportunity for consideration would be of benefit. Central government procurement is a key area in health, work and pensions, and transport, to name but a few, where reductionism is rife and long-term value is not always taken into account. In an era of local authority spending restraint and de-ring-fencing, this Bill and its focus on the smart commissioner has heightened importance. Had it been in place earlier, perhaps we would have seen fewer or at least smarter reductions than those that have occurred in some local authorities, which have disproportionately targeted charities and social enterprises, as well as local sustainable businesses, and indeed much loved and valued local public services.
As an advocate of the big society, I have welcomed this Bill from the moment I first set eyes on it, and I am glad to see that it enjoys healthy cross-party support in both Houses. The direction of travel that the Bill exemplifies represents another example of the kind of shift that we need to see, putting more control into the hands of the community and those who are community minded and not just of vested interests, who have monopolised power for too long. It represents a crucial first step in making commissioning more citizen-orientated and less risk-minimisation orientated. I look forward to seeing other concrete future measures beyond this one, such as the power for citizens to recall suppliers in extreme cases, more commissioning that encourages collaborative work between suppliers and not just competition, and measures to make more joint commissioning the norm rather than the exception not just across the public sector but alongside the private and voluntary sectors. But for now, I can only recommend that we pass this Bill speedily.
Sometimes Conservatives are perceived unfairly not to care much about society, given our convictions about the importance of sound finances and their impact, good or otherwise, on future generations and our sustainability. But my honourable friend in the other place, Chris White, has shown how on the contrary Conservatives are actually on the whole socially responsible, caring, and innovative in thinking about how we use the scarce resources that we now have to maximise social value for the benefit of us all. For that, Chris deserves our thanks.