Mobile home with land finance

Social enterprises live in a kind of no man's land. They operate in the market, selling their services and products, but they do so out of a sense of social purpose. They recognise we live in a culture that prizes choice and individuality, but they believe that we can nevertheless summon a sense of civic purpose and obligation to one another.

Social enterprises start from the insight that much of what provides us with quality of life -- health, a clean environment, and opportunities to learn, take leisure and enjoy culture -- depends on civic spaces and public goods. In this respect, Britain faces daunting problems. In 1997, when Labour came to power, the social security budget was [pounds sterling]l00bn, and yet poverty was rising: a third of children lived in families earning less than half the average income. About 36 per cent of those on state benefits cannot read and write properly. After more than a century of universal primary education, over seven million adults, a fifth of the working-age population, are functionally illiterate.

If we are to have equality of opportunity, in an age when most jobs are in services and most well-paid jobs are in knowledge-intensive activities, we need a welfare and education system that attacks these chronic social problems at their root in families and communities.

That is why our ability to innovate in public services, particularly in education and family policy, childcare and welfare, is so vital. An adaptive, problem-solving welfare system is not a drain on a knowledge-intensive economy: in many respects, it is a precondition for such an economy.

So, no matter which party is in power, social enterprises are likely to play an important role in renewing civic values and a sense of community. Privatisation of services may offer the prospects of greater efficiency and customer care. But often they fail to deliver even on that limited promise.

Equally, you cannot renew a community, create culture or revitalise public space by issuing a set of instructions from Whitehall. Education is useless without avid learners. People recover from operations only by taking exercise and eating properly. The tax system increasingly works thanks to self-assessment. Neighbourhood safety depends on neighbours who look after one another. The public goods we most value are largely produced in communities, not delivered by the state. About 80 per cent of health incidents -- from a cut finger to a heart attack -- are dealt with in the home, for example.

We need to create a new generation of civic services that can serve a mobile society, in which the nuclear family is in a minority, jobs are rarely for life, most people work flexible hours in the service sector, firms compete in global markets, life expectancy is increasing, education and learning last far longer, consumers are better informed, values are more diverse and people expect a say in what is going on. If you started from scratch to design services for such a public, you would not come up with the public organisations that we have today -- too many of them are hierarchical, command-and-control style, mass producers of standardised services.

We need a well-managed state machine. But we also need to reconfigure public services: how they are owned, funded, managed and delivered so they generate greater social value in the communities where they operate. That is where the social enterprise comes in.

It is perhaps a strength of social enterprise that it is so difficult to define. Social enterprises are hybrids mixing social values and goals with commercial practices, operating in the market. They are constitutionally uncomfortable; there is always a tension between their social goals and their commitment to commercial operation. For precisely that reason, they have to question how they operate, and that is what makes them innovative.

Social enterprises are driven by social goals -- to provide education, childcare, family support -- but they often deliver most of that through the market by selling services and products. A classic example is the Furniture Resource Centre in Liverpool, which employs 150 people -- often written off by other employers -- to restore and sell second-hand furniture. The business sells a product but, in so doing, creates a social good: better-trained, more confident and capable people.

But that definition alone will not do: it could be stretched to cover private schools. So we need two other criteria. First, while social enterprises operate commercially and use commercial yardsticks, profit is not the sole goal. Social enterprises want to be commercial because they want to stand on their own feet, to provide a sense of independence and achievement, and often to operate free from the bureaucracy of government. Their commercial operations are usually a means of achieving this, not an end in itself. Second, social enterprises do not distribute their activities entirely according to ability to pay; they enshrine a commitment to equality of opportunity and access. So they give priority to clients, communities and employees who have often been written off or let down by the state and the private sector.

Some critics see social enterprise as a government device to open avenues for local authorities to contract out services such as childcare, leisure and transport. Yet, in many ways, the social enterprise movement shows how innovation often proceeds by going backwards to old but undervalued ideas. Social enterprises are modern incarnations of the 19th-century tradition of community self-help and co-operation which was based on the intuition that the solution to the most pressing problems we face is in our own hands, in our own localities and neighbourhoods.

Corporations that practise social responsibility cannot themselves be called social enterprises; but the growth of the corporate social responsibility movement has provided social enterprises with vital new partners and funding, from groups such as the Lattice Foundation. Meanwhile, new social venture investment foundations such as Foursome Investments, based in the City, have sprung up.

Social enterprises come in many shapes and forms. Some are co-operatives (which have a mixed record of business success). Others are community-based, such as community development trusts and recycling schemes. Others, such as the Furniture Resource Centre, the Bromley-by-Bow Centre in London's East End and the Big Life group in Manchester, are being created by a new generation of social entrepreneurs. Many charities have trading arms and commercial operations that count as social enterprises. Innovative social enterprises in the developing world, such as Grameen Bank, have provided models for social entrepreneurs in the UK.

Other sources of funding are emerging. For example, the Charities Aid Foundation is to launch a Charity Bank, which will offer investors lower rates of interest than high street banks and pass on the benefits to social enterprise borrowers. Meanwhile, the Community Development Finance Association has started with funding from the government's Phoenix Fund and from Nat West/Royal Bank of Scotland, and investors will earn tax credits.

So the conditions are in place for the social enterprise sect or to grow. But if it is to become a significant provider of social programmes, rather than occupying just a niche in provision that is dominated by the state, some issues need to be resolved.

The first is scale. Social and community enterprises often work best when they are small and enjoy an intimate connection with their locality. Spreading successful models is extremely difficult, although the Community Action Network is exploring how to create a social enterprise franchise system. To create social enterprises with national scale and reach will require more time, money and managerial skill.

The second issue is about value. Social enterprises thrive because they do not take their purpose from traditional measures of value, whether those are performance targets from the state, job creation measures or profitability. Social enterprises are guided, usually informally, by a balanced scorecard in which financial performance has to be assessed alongside their role in boosting human and social capital. To some extent, an investment in social enterprise is like an investment in any entrepreneurial venture: it has to be an act of faith. Many of the benefits from success can be seen even if they cannot be measured. However, if social enterprises want to play a much larger role in creating education, health and welfare programmes, then they have to be able to explain more clearly and systematically why they deliver better value for money than traditional public providers.

The third issue is the sector's relationship with government. Some in the sector believe it would be stronger and more creative if it retains its independence, and keeps its distance from government.