Local hero?

At the same time, he announced a major policy review, with hints of a key role for the sector. In advance of his keynote speech to the national social enterprise conference on 24 January, Rt Hon Oliver Letwin, MP for Dorset West and chair of the Conservative Party's ongoing policy review, spoke to Social Enterprise's editor, Tim West, about where Conservative thinking has got to and what we might expect in policy terms when the review concludes later this year

Tim West: What do you understand by the term ‘social enterprise'?

Oliver Letwin: Clearly there are at least two ideas. There's the idea of a business and the idea of a business with a social purpose. And I suppose somewhere lurking within it there's also the idea of not for profit. The point is it's not there to make people who are shareholders of it rich, it's there to perform a social service. But at the same time it's a business and not just an activity.

Tim West: Why is the Conservative Party interested in social enterprise?

Oliver Letwin: We've taken a very great interest in social enterprise as a way of delivering services and as a way of liberating ourselves from a sort of bureaucratic approach to service delivery, with a more human, more localist flavour. Various policy reviews, of which I am in overall charge, have been looking really very closely at the question of how you can best deliver services and how social enterprises fit into that model of service delivery and also how they can help to address problems of social justice…

I think that in ‘Cameron's Conservatives' there's a particular emphasis on this because we are trying to find ways of sharing responsibility - trusting people to get on with their own lives and to make their communities better, encouraging people to take civic responsibility and professional responsibility more into their own hands… You naturally look not just to the public sector - which has its place, of course - and not just to the commercial sector, but to this third world, betwixt the two, which can involve a contribution from government, but also a contribution from the people on the ground.

That very much connects with our idea that things should be more locally provided. For example, at the moment we are sponsoring the Sustainable Communities Bill, which I have been involved in drafting, because we want to try to transfer more power down to local communities. Very often it's by finding ways for the social enterprises to deliver services locally that you can actually get the power - real decision-making, real choice - down into the local community, rather than just having it organised on the basis of national bureaucracies.

Tim West: The local side of things is an area where Conservatives could put some pressure on the government - for example, if you look at the Gershon review, which emphasises biggest bidder, lowest price, rather than best value or any kind of social added value.

Oliver Letwin: That's right. We've been spending a lot of time speaking about general wellbeing and quality of life. In the last couple of days David Cameron, at the Oxford farming conference, was talking about local food - and that isn't necessarily always the cheapest food but it may nevertheless be the best value food. Part of what we are aiming at is exactly to move away from a sort of monomaniac obsession with gross domestic product - which is, of course, important, but it's not the whole truth about life - into a rather larger perception about general wellbeing that includes prosperity, but also looks at the question of quality of life and social justice as components of what we are trying to achieve. Once you shift the focus that way you are bound to think in local terms because local terms often mean human terms instead of the cheapest, most abstractly efficient thing.

Tim West: How is that different from the current government?

Oliver Letwin: I don't think we are facing a huge ideological divide here but the fact is that the good intentions have not been reflected in any serious delivery. When you start looking at how much easier or more difficult it's got for the third sector as a whole or social enterprise in particular to operate in Britain over the last ten years, the answer has to be that it really hasn't got much easier. So I don't think this is so much a matter of big argument as in working out ways in which you can actually deliver on what I suspect the government would say it wants to deliver on but hasn't.

Tim West: For example, on full cost recovery?

Oliver Letwin: Yes… There is no doubt that there is still a gap between the admirable ambition to ensure that there's full cost recovery and the truth of the matter.

Tim West: And also on long-term contracts?

Oliver Letwin: Yes, the truth is as you go around the third sector, as a whole, what you endlessly hear are people who tell you that they are very, very occupied scheme-hopping - and trying to work out a way to make what they actually do sound as if it's enough like the latest annual scheme… to qualify for funding or a contract or whatever it may be. And an awful lot of time is wasted. This is all part of the state responsibility versus shared responsibility/social responsibility theme, in the sense that if you trust people to decide more for themselves what is necessary in a particular place at a particular time, and you are willing to take risk, and you are willing to try to set up arrangements that allow the public sector to take risk, without the civil servants and the ministers being clobbered if something goes wrong, then you may get to the point where you actually deliver results that are wanted locally rather than results that look good on a national plan but as a matter of fact don't suit local circumstance. So it's actually a real shift that we want to achieve.

Tim West: What would that extend to in terms of policy? What would you allow a local procurement officer to do that they can't do now?

Oliver Letwin: One strand is trying to find ways of facilitating a growth of social enterprise in localities. So we are working with the concept of social enterprise zones. I have got a task force which is looking at how you could promote them, what are the elements you need to build in to make it easier for social enterprises in the areas where there is most social need to flourish.

The second strand is the Sustainable Communities Bill, and I really hope we may actually get it through and into law. It's a revolutionary document because it, for the first time, would identify all the money that central government is spending in a particular place and give to local government - and through extensive consultation, maybe even referendum locally, give local people - a real say in how that central government money should be spent locally.

The third strand is that in each of the major areas our working parties are looking at how social enterprises can play a larger role in a range of what have been regarded as purely public sector activities where, yes, we see the public sector as the way to fund these activities but it doesn't have to be in every case the provider. I expect to see recommendations precisely on things like long-term contracting and on not having endless schemes and on full cost recovery. All the policy groups will be reporting in the middle of this year and we will be reflecting on their conclusions and coming forward with our own programmes.

Tim West: What, specifically, do you think would help in a social enterprise zone?

Oliver Letwin: I don't want to give the game away but the broad idea is to find a way, probably ending up with something that is self-identifying, for a place which feels a need - it may have to qualify according to some objective criteria as well - but I think the important idea here is not to have some minister select a zone but to have the zones able to select themselves. It might be a housing estate, a village, a ward - but it isn't a unit of local government… We have to find a way of keeping it flexible so that we have a place that feels like a place - but it feels like a place where there's something wrong. And people locally come up with an idea about what they think they need to do to cure this. How can we then ensure that there's the greatest possible risk-taking social capital - and, indeed, financial capital - available to them, and how can we relax restrictions that may currently impede them? This is based on the idea of the old enterprise zones, which said that if you've got a problem of not having commercial activity flourishing in a place, can you find means of relieving it of obstacles? We came up with a range of measures in the last Conservative government that could apply to such places and they helped to attract investment capital. This is the same idea but in the social enterprise sector.

Tim West: What sort of things are you looking to relax?

Oliver Letwin: Well, for example, we are looking at planning rules, we are looking at questions of how tax regimes operate, we are looking at how you could build on existing mechanisms to make it easier for bigger amounts of money to be available on a risk basis.

Tim West: On the tax question, David Cameron said there would be more detail to come soon on tax incentives.

Oliver Letwin: We are very keen to come up with something that is practical and coherent with everything else we are suggesting… something that we can put into practice if we are elected to government, so this is very important - it is one of our flagship ideas and we are determined that it should work.

Tim West: Are tax breaks right? Might they undermine claims by some social enterprises that they are able to compete with the private sector on a level playing field?

Oliver Letwin: When we are talking about social enterprise zones, what we are saying is there are some patches in the country that the commercial sector and the public sector and, to date, the third sector, have not managed to lift out of the problems people locally feel they have. You can try to tackle these problem in various ways, and one of the ways has been to wheel in the bulldozers and agencies and find a public sector solution, and I think that we have all seen that very often when the bulldozers move out, when the agencies move onto the next thing, there isn't anything very sustainable left.

Another approach is to say, don't worry, let's just hope that the commercial sector will move in - but it tends not to because there are riper, juicier, more profitable opportunities somewhere else... I don't think it's a question of tax breaks for social enterprise - that's not the issue, to my mind. The issue is: how do you encourage capital that might be seeking a social return rather than just an economic return?

The great advantage, if you could find a means of getting risk-taking, social return-based capital into social enterprise in those places, is that you wouldn't have a scheme that had been developed by somebody at a desk in Whitehall, you would have a funding stream that was long-term and… was enabling some social enterprise that's locally based to respond to the local need in a local way. That's a very different model. As I see it, therefore, the question of tax advantage arises in answer to the very specific question: how do you attract capitalists into what, by definition, is not going to earn us a commercial return? I would distinguish between these special cases, where there is a strong argument for looking at fiscal incentives for the capital, to try and get the capital into the social enterprise; and with the other side, where a social enterprise is operating a service in competition with the public sector, and, indeed, perhaps, with some commercial operators, where if you ask should it benefit from certain tax advantages, I would answer, on the whole, no. Where we are dealing with service delivery, if social enterprises have advantages in service delivery, if they can do it better, if they can deliver better value for money, then they should do that on those terms.

Tim West: Can I ask what happens outside the zones? Who might get left out? What happens if you get lots of people saying they should be zones? What happens after the zones?

Oliver Letwin: I think it's important that the zones should not be time-limited, but what is set up within them should be as permanent as possible. Of course they may change in character and become places that are much more self-confident and better to live in, but the very last thing we want is an in-and-out approach. We want something which is in and in for the long term, that becomes part of the fabric of the community. I can see why people get concerned any time you say, here is a place which needs special help, and they say: ‘Well, hold on, what about us?' But the fact is that there are places that are in more trouble than other places. If you live in a place that's in trouble, it's very difficult to get out of it. If you read the Social Justice Group's mid-term report, what comes through in hundreds of pages of analysis is how true this point about traps of multiple deprivation is. Poverty, poor educational outcomes, drug and alcohol dependencies, indebtedness, family breakdown - all these things reinforce each other. There's no point in pretending that everywhere is the same as everywhere else. I'm pretty unembarrassed, therefore, about trying to find a sustainable, long-term way of helping those places escape from traps of multiple deprivation.

Tim West: In terms of limiting the number of zones, what happens if you have people banging down the door to set one up?

Oliver Letwin: We will have to have this as a sort of competition, so to speak. There's not an unlimited amount of money. But what we are keen not to do is to get to the point - which the present government would be all too inclined to do - of saying that because we have to limit this, we will decide. What we want is to try and find a means of enabling people locally to come forward with their ideas and then, yes, there's a kind of competition. This has got to be locally based or it's nothing - it won't be sustainable.

Tim West: Although there is enthusiasm for the zones idea, people in the social enterprise sector say they want to be a powerful force across the economy.

Oliver Letwin: I agree. I see these as two parallel strands of thinking. One is, how do we use the energies and particular skills and attributes of social enterprise in a wide range of public service delivery across the country? Secondly, and separately, how do you use social enterprise to lift people out of traps of multiple deprivation in the places where that is at its worst? I don't see those as incompatible with one another but they are separate things and they are each important. It's a point that Jonathan Bland, the chief executive of the Social Enterprise Coalition, often makes to me - and I agree absolutely.

Tim West: It's interesting that you've written a book called Privatising the World, albeit in the late '80s. David Cameron describes social enterprise explicitly not as privatisation but as ‘a revolution in the social economy'. How has your thinking on privatisation developed?

Oliver Letwin: That book was written at a time when the world was still trapped in the idea that industrial and commercial activity had very often somehow to be nationalised. Now we've all seen, in the Labour Party too, that if we have a commercial activity, it is, on the whole, better conducted commercially. I think that's been a huge advance for the world. But it leaves a huge question unanswered, which is: how do we achieve the kind of transformation of quality of service that was achieved in British commercial activity in the '80s, in the social side?

We are committed to the idea that these social services, fundamentally, have to be tax-funded, because we have to deliver them to people who can't afford it for themselves. We don't see those problems as being able to be solved by pretending that our public services are somehow commercial - they are not. But we also don't need to assume that we need to be locked into a particular delivery mode. And that's where social enterprise can play such an enormous role. It offers the prospect of being able to provide the flexibilities and the entrepreneurial flair that one associates with the commercial sector.

Tim West: Just how commercial do you think the third sector can be?

Oliver Letwin: I think it's important for government not to be trying to make decisions about that, but to allow this sector to find its own way and to try to ensure that where government does come into the picture, it deals fairly and sensibly and constructively with the public sector, with the social enterprise sector and with the commercial sector.

Government shouldn't be trying to create a playing field which is tilted in one way or the other. I think part of the point is not to have a man in Whitehall deciding social enterprises are things up to ‘n million' and if they get bigger than that we cut off their heads. That's ridiculous. It's equally ridiculous to assume they will be better because they are bigger. Maybe some of the very best things that will ever be done will be done at a very, very local level. Scale may be the great ambition of British Petroleum but there's no reason to assume that's the right model for every social enterprise. So I am saying, let them come in all shapes and sizes - try not to make judgements about those things.

Tim West: What is the fundamental difference between your approach and Labour's approach to social enterprise?

Oliver Letwin: It's not an ideological difference. We both agree that in principle social enterprise is a good thing. But we take the view that our idea of social responsibility implies trying to support and foster social enterprise but not control it, whereas I see that the temptation of the government has been to try to ring social enterprise within the net of targets, directives, plans, schemes, initiatives that are basically centralist. I would put it in terms of a centralist approach and a localist approach.

Tim West: Is there a key message you would like to communicate to social enterprises?

Oliver Letwin: For us, the dominating theme is social responsibility. As we see it, social enterprise has a colossal role to play in a government agenda that is dominated by social responsibility. It's central - not peripheral - to the social economy, to the public services and to our whole programme of government.