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A review of the Scottish Executive's Policies to promote the Social Economy

Executive Summary

1. The Scottish Executive is committed to improving service delivery across the public sector. Ministers have made it clear that they are interested in effective outcomes more than the means of delivery. Recent years have seen an increasing involvement in public service delivery of social economy organisations which combine a business-like approach to delivering services with one or more explicit social objectives. Organisations such as the Richmond Fellowship, the Wise Group, One Plus and the Glasgow Simon Community, and many others, have demonstrated a capacity to grow their organisations by finding and developing market opportunities and by acting in entrepreneurial and innovative ways, working with those responsible for commissioning public services to deliver new, effective and customer-orientated public services. And now, increasing numbers of voluntary sector bodies are playing an effective part in delivering on key Executive agendas in terms of service delivery and in contributing to the regeneration of disadvantaged communities.

2. But there is a growing recognition that the full potential of the sector is not yet being recognised. This is reflected by work being undertaken by the UK Government following the publication in 2002 of the Treasury's Review of the role of the Voluntary Sector in Service Delivery and the DTI's Social Enterprise Strategy. In order to address similar issues in Scotland, this review therefore:

• examines the arguments for encouraging and supporting an expansion in the social economy as part of the wider agenda to improve service delivery and tackle deprivation;
• considers the factors which have underpinned existing success stories within the social economy sector;
• examines the capacity and the potential of the sector generally to build on existing success and to contribute to the step change in the effectiveness of public services in Scotland that Ministers are seeking;
• identifies the obstacles which are perceived to inhibit organisations within the sector from fulfilling their potential to be effective players in the public service delivery market; and
• presents a plan of action for tackling those obstacles and promoting the further development of the sector.

3. Because the social economy agenda bears upon a wide range of Scottish Executive responsibilities, this review also relates to, and informs, the planned Strategic Review of Funding for the Voluntary Sector which the Executive will be undertaking jointly with the sector and with local government, starting early next year. It has also influenced the Executive's plans to change the way in which charities are regulated, which were announced in December 2002.

4. Its main findings are:

• that social economy organisations can bring added value to the delivery of public services in terms of their capacity to innovate, their closeness to and ability to engage effectively with and meet the needs of their customers/clients and the communities in which they operate, and their access to resources such as volunteer effort and charitable donations;
• that there is a case for the Executive to encourage the growth and sustainability of such organisations, so as to increase the range and supply of organisations able to effectively deliver public services;
• that the Executive's strategy should be one of
  • identifying where there is potential for the delivery of Executive priorities to be enhanced by greater involvement of social economy organisations in service delivery markets;
  • supporting the development of social economy organisations in these areas (both helping existing organisations to grow and supporting the development of new organisations);
  • removing obstacles that stand in the way of such organisations achieving their full potential;
  • ensuring that appropriate support mechanisms are in place; and
  • developing the intelligence base about the nature of the social economy and its social and economic impact and development needs and priorities;
• that ultimately it should be for individual social economy organisations to demonstrate their worth to bodies responsible for commissioning public services. Social economy organisations should not be given an inside track in comparison with other potential suppliers but should always have the opportunity to fully demonstrate their capabilities and particular advantages which their service delivery models can offer;
• on funding, the particular requirements are:
  • the need to develop further a wider market of financial products available to and appropriate for social economy organisations so as to allow them to adopt financial arrangements appropriate to their business needs and reduce their dependency on grant; (Action: Executive to work with UK Government, financial institutions, Enterprise Networks, Communities Scotland, Social Investment Scotland and relevant social economy organisations in developing a wider range of financial products available to social economy organisations; and to develop the capacity of social economy organisations to gain access to and to benefit from such products.)
  • the need to improve existing grant arrangements, by simplifying application requirements and improving the efficiency of payment structures; (Action: Executive to work with SCVO, local government and Communities Scotland to cover these issues in the joint Executive/SCVO strategic review of funding.)
  • explore the options for developing funding support mechanisms which encourage social economy organisations to accumulate reserves without undermining the requirements of public accounting; (Action: as above.)
  • the need to develop the asset base of organisations, particularly to increase their ability to access alternative funding sources such as loans; (Action: Executive to consider issue in the light of (1) recommendations of the Scottish Social Inclusion Network sub-group which is considering issues of empowering communities; and (2) work being undertaken on this issue by the Social Enterprise Unit in the Department of Trade and Industry.)
• The need to allow social economy organisations to include the relevant portion of overhead costs within their bids for service contracts and to identify any further financial obstacles to development; (Action: Scottish Executive to advise the sector on the implementation of full cost recovery for service contracts and with SCVO and CoSLA, to assess options for overcoming any further strategic obstacles to the development of social economy organisations (including the stability of current funding relationships) in its forthcoming strategic funding review of the voluntary sector.)
• that in relation to market access and capacity building, the main requirements are
  • under the requirements of Best Value, for those responsible for organising public services to be prepared to consider social economy solutions and for a code of practice to be produced to support this; (Action: Executive to take account of the recommendations of this review in preparing guidance to local authorities on Best Value.)
  • for those responsible for auditing public bodies' Best Value performance to establish procedures which will allow them to monitor the extent to which social economy organisations are given an equal opportunity with other potential suppliers to make their case to supply public services; (Action: Executive and local government to discuss with the Accounts Commission and Audit Scotland development of appropriate audit procedures.)
  • for social economy organisations to be given support to allow them to improve their capacity to market themselves and tackle misconceptions and ignorance about their capabilities; (Action: Enterprise Networks, Communities Scotland and other business support organisations to develop and provide support and training.)
  • for social economy organisations to be encouraged to develop a 'learning' culture that promotes leadership and management excellence; (Action: Enterprise Networks, Communities Scotland and other business support organisations to develop and provide support and training.)
• that in relation to support services for social economy organisations
  • the key objective needs to be a structure of support that is accessible, that provides the kind of support needed by organisations and that offers organisations choice;
  • the boundaries of responsibilities of support organisations should not be rigidly defined. There should be a range of accessible provision from which customer organisations can select the kind of support which best meets their needs. But there should be complementarity and co-ordination between providers and
    co-ordinators of support services (in particular the network of Councils for Voluntary Service, local authorities, the Enterprise Networks, Communities Scotland and Community Planning Partnerships but also specialist social economy development agencies). The main public sector organisations (the Enterprise Networks and Communities Scotland) should design the services they offer around their key strengths and core purpose. They should not provide services in a way which will inhibit support activity that may be offered by other organisations;
  • there should be a market for the support services available to social economy organisations. But within that market there should be some allocation of responsibilities to the main public sector providers of support services - the Enterprise Networks and Communities Scotland. That division should reflect both existing expertise and existing policy responsibilities.

Action:

• the role of Scottish Enterprise and its associated network should be to concentrate on the support and development of social economy businesses that are close to market sustainability. In doing so, Scottish Enterprise should ensure that the services it offers are appropriately shaped to meet the particular requirements of the social economy sector;
• the role of Highlands and Islands Enterprise and its associated network in developing the social economy in the Highlands and Islands area should continue along existing lines;
• the role of Communities Scotland should be
  • to monitor the market of support services available to social economy organisations
  • working with those organisations and with the providers of support services, to identify gaps, areas for improvement or opportunities for rationalisation in provision and to implement action to tackle issues identified, again working with relevant organisations
  • to develop and support mechanisms to improve the ability of social economy organisations to access support services which are appropriate to their particular needs
  • to work with other public sector organisations to increase opportunities for the social economy in delivering services
  • to ensure that Registered Social Landlords (RSLs) fulfil their potential as asset-owning organisations, to regenerate their communities. Communities Scotland will do this by improving the support it provides to RSLs to develop as businesses by providing direct funding for new initiatives, removing barriers to RSLs becoming effective regeneration organisations and identifying and disseminating good practice.
• The role of other support organisations, including the Councils for Voluntary Service and Community Planning Partnerships, should be to work together to identify local needs, develop local programmes of support for social economy organisations and agree local arrangements for delivery (which may differ from place to place).
• The role of Scottish Executive Departments should be to work with the Enterprise Networks, Communities Scotland or other development organisations, to develop strategies for supporting the growth of social economy organisations working in their policy areas, which they consider to have the potential to contribute to improved service delivery.
• The role of the Voluntary Issues Unit should be to
  • maintain an overview of all this activity through regular contact with all relevant organisations. The VIU should, on a regular basis, report to Ministers on the progress that is being made in developing the social economy and on areas where Ministerial intervention may be required
  • liaise with all the organisations mentioned above in order for them to produce more detailed proposals for turning this general indication of priorities and tasks into specific actions and programmes.

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