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Expanding the Role of Social Enterprises Beyond Public Contracts

In a report published by Labour’s Business, released this month, our CEO Jake Hayman has written an article (titled Social Enterprise: a movement not an entity) that outlines a number of practical ways in which governments can help further the social enterprise movement.

Firstly, while public contracts should be awarded to the most competent bidder agnostic of whether it’s a private business or social enterprise, the government should also help drive up the competitiveness of social enterprises. This could include a matching service to encourage joint-bids between social enterprises and private firms, as well as free advisory session for failed bidders so that social enterprises can learn from unsuccessful tenders.

Secondly, the pool of early stage risk capital is too small and the risk of starting a social enterprise is simply too high for many individuals – it often involves sacrificing the life savings of the entrepreneur (and their family and friends) as well as forgoing several years of salary. At the same time, trusts and foundations, which hold £63 billion in assets, are discouraged from investing into social enterprises due to prohibitive tax requirements. The government should reform the tax code to encourage trusts and foundations to invest in social enterprises.

Lastly, existing schemes such as the Enterprise Investment Scheme offers hugely compelling tax incentives for high-net-worth individuals to invest in early-stage enterprises. This successful scheme should be further leveraged for social enterprises through a matching grant (alongside the private investment) and a mass public awareness campaign to help drive investors’ interest and private financing into the social sector.

To end with a direct quote from the article “We have a generous generation of people who are better versed in business than they are at charity. It’s time we make better use of them.”