Felly, chydnopod, wnaeth i gyd yn gwybod ni'n gwybod i gyfan gyd yn 2016. O'r eu cymdeithasfer am leisig a gwaith a phobl bedwydol gwyddwch, gyd yn gwybod i'r bywydwch chi'n gwybod i'ch ffordd am gyffredinol ar gyfer gwasanaethon o'r rhywbeth, i'n gweithio i'n gweithio i gyffredinol i'n gwrth apod gwybod i'r gweithfeydd yn gweithfeydd nhw'n ei mwylo oedd ychydig iawn, ond yn dweud â gweithio'r ganeslu gyda'r cymhag? Wrth gwrs, rwy'n meddwl i'n meddwl i'r Mwneil Paartrick Harvie, wrth gwrs, ond y bydd yw'r lleol. Iein, 1, rwy'n meddwl i'n meddwl i'r cyfnodd yn llawer o'r cyfnodd ar gyfer y cyfrifwyr yn cael ei ysgrifennu i'r cyfrifwyr i'r cyfrifwyr i'r cyfrifwyr i'r cyfrifwyr i'r cyfrifwyr. I can do the agenda. We are taking evidence this morning on social enterprises, and I would like to welcome all our witnesses and thank them for attending. This is a follow-up session to a session that we had last year when we skimmed the surface on some of the issues around social enterprise. The purpose of today's session and indeed the next week's session is to look at some of those issues in more detail. It will be useful just before we start and we went round the table and we introduced ourselves and said who we were and which organisation we were from. I'll start and then I'll move to Dennis, so my name is Emerdo Fraser. I am MSP for Mid Scotland and Fife and I am the committee convener. Hi Dennis, I'm Dennis Holotson, MSP for Aberdeenshire West and I'm the deputy convener for the committee. Gwys Deolys, GTS Solutions, CIC and Social Enterprise are here to give evidence. Jake Glory is one of the MSPs of the south of Scotland and happily the convener of the cross-party group on social enterprises. Ken Milroy is the chief executive of Aberdeen Foy and is here to give evidence to the committee. Gordon MacDonald is the MSP for Edinburgh Painlands. I am Brian Weaver and I am the chief executive of High Sets, which is Highlands and Highlands Social Enterprise Zone. Rhaid i'r leol MSP, central of Scotland. My name is Fraser Kelly, I am chief executive of Social Enterprise Scotland. I am Audrey Carlin, I am senior executive director of WASP, which stands for Workshop and Artists Studio Provisions Scotland. Lewis MacDonald, MSP, northeast Scotland. Simon T. Zell, Professor of Public Policy at the Unicenter Glasgow Caledonian University. John Lamont, MSP for Glasgow Pollock. My name is Lorna Baird, I am the social enterprise adviser with Business Gateway Edinburgh. Joan McAlpine, MSP for the south of Scotland. James McElroy, chief executive of Eurobiotics CIC. We have the official reporters who are noting down everything that you say. We have our clerks here to assist us. We have about 12 noon for this, so we have a degree of time, but I can ask everybody who is making a contribution if they would keep their remarks as short and to the point as possible. That would be quite helpful to allow as many voices to be heard as we can. I think what I will ask members to do perhaps is chip in from time to time with questions or points they want to make, and then if people want to respond to that, if they can just catch my eye and I will bring you in as best I can as time allows. It would be helpful if somebody makes a point that you are either strongly in agreement with or perhaps more interestingly strongly in disagreement with. That is when we really want to hear from you, so don't be shy about trying to catch my attention and jump in. I think that what we are trying to do this morning is look at a number of areas. We had the presentation in private session earlier on, an informal session in relation to work that has been done in terms of the social enterprise census 2015, which has been very interesting in terms of looking at the scale of the sector. I think that we are interested in that and some of the trends in terms of sector growth. We are interested in looking at how social enterprises contribute to innovation. We are interested in issues around funding, if there are issues in accessing funding and finally what support is available from public bodies and what more needs to be done from a policy point of view to support the growth of social enterprises. I might direct the question to Fraser Kelly to allow you to get your thoughts and gear, Fraser, before I fire this at you. We have heard a bit in terms of the census about the scale of social enterprise in Scotland. Anecdotally, it would certainly seem to be a story of quite rapid growth in the sector over the last few years. I am just wondering if you could give us your take on what the reasons are for driving that growth in social enterprise and whether you expect this trend to continue to become a more important part of the business and social and economic scene in Scotland over the coming years. We will start with Fraser and get some other views around the table. I am not fair because I have not been promoted to minister. The census data that I mentioned earlier on in my opening remarks was something that we have not had previously and it has set a baseline for us in terms of where we take social enterprise in the future. Jonathan mentioned that the likelihood was that we would repeat the census in two years' time. I think that if we repeat the census in two years' time and assume that the landscape will have changed without us putting policies in place that will make that growth tangible, then simply we will have another census that will say that either it has gone up by a couple of thousand or it has gone down by four or five hundred or a couple of thousand because the market place has changed and the conditions in which social enterprises are operating has changed either for the better or for the worse. For our part, we think that there needs to be a promotion of the policy interventions that are already in place. It is things around the procurement act. We could be doing more with that. In our members' view, I think that the procurement act was an important piece of legislation but it was almost like we were through on goal and we managed to hit the post because I think that it could have gone further. I think that the implementation of that in terms of the question for what public bodies could be doing and should be doing to encourage those business models is about creating opportunities through contracting and commissioning processes. It is about driving the pace of health and social care integration which in terms of some of our members again appears to them to be moving at the pace of glacial contraction. We could be doing more to create that market opportunity. We have a question there about assessing the sources of funding and support that are available. You heard this morning a number of comments around grant funding and I think that we need to move away from the language of funding and talk about funding and investment in social enterprise because there are a number of emerging models, a number of emerging resources. I do not think that it is an absolute usage of money but there are organisations that are now entering the market in terms of social investment rather than simply around the grant funding. Yes, I mentioned earlier my remarks before Jonathan Coburn came that I think that social enterprise is in a reasonably robust condition. That said, there are some challenges, there are some pressures as the demand for public services grows, the resources are declining. How do we bridge that gap? The more encouraging data that we are included in the census is around consumer facing social enterprise. Those people are providing goods and services to a public demand and I think that there is perhaps a greater opportunity for us to influence the decision making of 5.3 million people in the street than there is perhaps the commissioning process of 32 local authorities. Yes, I think that in the round it is reasonably robust but it needs policy intervention and active implementation of those policies to make it grow. Okay, thank you for that. A lot of issues that you touched on there that I think we will want to explore over the next little while. I should just say for the record when Jonathan you referred to with Jonathan Coburn who gave us a presentation when we were in informal session earlier from what's the name of his organisation, social value lab that was it on the census. So when you were referring to Jonathan that was the Jonathan we were talking about. I want to just stick on this point for the moment now in terms of the growth of the sector and what the future opportunities are and interested to get any other thoughts around the table from any of our witnesses who might like to contribute to that. Brian. The interesting thing again about that research that Jonathan showed was that the Highlands and Islands area has 22 per cent of the social enterprises that are operating and I don't think there's any there's no magic reason for this and Ms Lamont came up earlier on with a question in the pre-session as well about how things were changing. The reality for the number of social enterprises in the Highlands and Islands is simply because if you are living in a very small community nobody else is going to do it for you. If you've only got one autistic boy in the last 25 years nobody is going to parachute in and deal with that problem for your community. Your community is going to find a way of dealing with it for itself and I suspect that the rest of Scotland as the budgets are cut or as funding goes down or indeed as funding arrives in different ways. I think we'll see more and more social enterprises starting simply because people see there is a way that we can solve this problem here or there's a way that we can deliver to our community in the way that the Highlands has been now doing for about the last 40 or 50 years. A very good point Brian, I was in Glenell last summer and travelled on the Glenell Calry ferry which of course is a community interest company formed by local people to save a vital public transport like which otherwise would have disappeared. I'd like to make that point as well and the Highlands and Islands it's not just about social care. There's everything from your petrol station to the ferry to the post office to the forest. There's loads and loads of things that communities in the Highlands say actually that's what we need and that's what makes our job really interesting is that those folk are just running businesses. Kind of like yours James. Okay, check. I just want to ask any of the guests from the table. It's clear that Highlands and Islands is an exemplar of what can happen but why is the growth in Glasgow and social enterprises so great? Part of it? I don't know many of the guests of any idea or any suggestion isn't it? I know in terms of the foys. Sorry Ken, can I just say you don't need to touch any of the buttons. It all operates remotely. I know in terms of the foys origins the local authority was critical in helping to bring together the public sector about interests and where the starting point for the organisation. So I do think that local authorities have a key point to play in trying to bring together. That may not be directly local authority now maybe through the community planning partnership. I think that some of the structures have changed but the local authority for us was critical in establishing the organisation. I think that here in Edinburgh we have similar growth to Glasgow and I think that one of the reasons in Edinburgh and I'm speaking specifically about Edinburgh is that we've got a very much joined up approach in terms of the local authority business gateway and all the other support agencies. We're definitely working very closely together. We have a strategy that's in place and we have strategy implementation meetings and to progress that. What that means is that we're all pulling in the one direction rather than operating individually. I think that there's more that can be done but I certainly think that in terms of having a strategy having a very strong social enterprise network which leads the way and coordinates a lot of activity is essential in terms of that. In terms of my own role I think that what I aim to do is provide that bridge between mainstream support and also specialist social enterprise support just to ensure that social enterprises who are starting or growing have access to all the resources that are available not just the very specialist social enterprise ones because at the end of the day a social enterprise is a business after all and we need to be mindful of that and really it's about pulling all those resources together but I think that key to it is absolutely partnership working I think that that's absolutely critical and I think that pulling those resources together is essential. Thank you. I'll go. I would echo what Lorna has said. What operates across all of Scotland we work with a large number of local authorities and in the main it's not just in response to demand for services that are not provided by the local authority but doing something that the local authority perhaps doesn't have the resource or the capacity to do it for the expertise in that specialist field so in our situation it's bringing old buildings back into use quite often listed buildings or buildings of significant heritage interest but also ensuring that it's about economic regeneration as well but we very much rely on working in partnership with those authorities or those other public bodies including some of the ones that Lorna mentioned to achieve what we achieve and I think that the partnership thing is critical and it's something that a lot of social enterprises can't work in isolation they really have to work to help to achieve the objectives of the authorities that they're working in and I think it's a critical role going forward to make sure that local authorities recognise the impact that social enterprise can have and that they are working in partnership with them and they can achieve things that they aspire to achieve themselves and to achieve those outputs we're working with Highlands and Islands Enterprise we're a county managed by Scottish Enterprise as well so there's a lot of business objectives we seek to achieve as well as social objectives and our social mission which is about providing affordable accommodation for artists to allow them to do what they want to do and create great pieces of work I'd be a bit careful about the assumption of growth and particularly rapid growth Johnathan's clear this is the first time that census has been conducted we don't know what the picture looked like before he said he knows from his own work that there's been some growth in Glasgow but I don't have the figures in front of me but it's around 5% of all social enterprises were created in the last year and that doesn't suggest a picture of rapid growth at all Thank you for putting that on the record Dennis I wonder maybe just to explore one aspect maybe with Ken Milroy here because of the FOIA operates within Aberdeen and Aberdeenshire and really I'm just wondering because that area is a perceived affluent area was there opportunities to set up social enterprises within the supply chain to the oil and gas sector and if they were are they currently under threat or is the current situation in that part of the world providing opportunities for additional social enterprise? Certainly working in what is a buoyant economy that has most certainly created opportunities that we've taken advantage of so a number of our trading activities have played to those markets our first business, FOIA Graphics many of our customers that we are delivering graphic design and marketing materials to have come from the oil and gas sector so we are beginning to see a decline in terms of that trading activity the other business that we operate is one that we acquired a driver training school a road-wise driver training and a large part of its business was with the commercial sector on a large part with oil and gas companies and that's about promoting a safe culture in terms of driving to work and supporting employees coming in from other countries again a large part of that trading activity we've seen a significant decline so we are being challenged because of that broader economic decline to look at diversifying those business activities having some success in doing so I would say but we've seen quite a steep decline in the trading figures for road-wise because of that oil and gas customer base so are there, I think you're alluding to there maybe possible opportunities for additional social enterprise opportunities within that supply chain or for them to look elsewhere at a different market in terms of the road-wise driver training and part of the FOIA's portfolio of activities but we are looking at how we can deliver on larger scale contracts so while we are regionally focused in our activity we need to form alliances with similar organisations elsewhere in the country if we want to compete in the markets so we have recently secured a national contract from a large commercial company but only because we have formed alliances with other organisations and individuals elsewhere in the UK so there is the potential for some kind of brokerage arrangement that would allow that to happen more easily many of the public sector contracts that we are involved in in aspects of our business they are through we are part of supply chains, complex supply chains so I think there are opportunities through those kind of bits of work but again, helping to broker those kind of arrangements is something that might be considerable I wonder if there are other witnesses in terms of looking at the local economy of the area for instance, whether it be Edinburgh or otherwise how that does impact on the growth of that social enterprise and Chris here to my right obviously very diverse in terms of what they are operating within this of Edinburgh and I'm just wondering if the local economy does impact on what you actually choose to set up as a social enterprise I don't know whether it's actual local economy that makes an impact I think it's a choice on what you want to do above anything else as to why you would set up a social enterprise if you kind of look back towards when you talk about supply chains and collaborations things like that and I think that should be explored a lot more when we're looking to public sector work and things like that supply chains and such forth we're quite successful in the public sector we win contracts to deliver our services on the back of delivering those services we have surplus funds which we can then reinvest which is fantastic and I think that's a good thing that's a good thing that's fantastic Collaboration deals it should be able to be done through public procurement and such forth for smaller social enterprises but first and foremost I think when we talk about public sector work and such forth we need to educate the people that are in the public sector unfortunately procurement officers don't really understand things like social benefits and such forth they think they do, they kind of hope they do they have no idea of what they are but it's not actually what they really are so there's a little bit of education place to be done on that That's a really quite interesting point you just raised Chris about procurement interested to get anybody else around the tables experience of the procurement process because a lot of social enterprises will be hoping to win public sector contracts so anybody else got any perspective on that? James? Hello, I have experience in trying well with NHS procurement it's going to be very disparate and very difficult indeed because each NHS trust Scotland seems to run independently and in general it's quite difficult to get to speak to the people you want to speak to I don't know if anyone else has had a similar experience around this table but I do believe that MSP involvement could make that process much easier especially when you have a highly scalable social innovation that could genuinely impact on thousands of people in Scotland and that should really be scaled out as quickly as possible Okay, thanks A large part of our business activity is through public sector contracts so something like 90 per cent of our work is through trading activity and 70 per cent of that is through public sector contract work so we've quite a diverse experience of dealing with different public bodies and some of the issues that we're facing and have continued to face are the short-term nature of procurement so we're still seeing one-year contracts for what are on-going and much-needed services most notably in employability and that activity won't be ceasing so I do think there is an issue around short-termism I think the other aspect is we've seen some social enterprises squeezed out of markets because of large-scale procurement and that I think becomes problematic Lorna mentioned the local strategies that can be put in place through local authorities and other organisations collaborating that can help smaller social enterprises enter into those markets so large-scale procurement has been problematic and I certainly have seen quite a shift over the years that we've been operating towards large-scale procurement the disadvantage of that is that it squeezes out some innovative players Chris, you want to come back in? When you say large-scale procurement what are you aiming at? Are you aiming at a million plus? So it's off The areas of work that we're involved in are DWP contracts so now generally we're part of the supply chain arrangements with large-scale contractors previously we had direct relationships with DWP I think given the devolution of that aspect of activities in Scotland there's opportunity to look at the procurement that will go alongside any new employability activity and I think to build on what we've got at a local level rather than take a top-down approach would be helpful Okay Lewis, first and then John It was really just to follow up that point and to ask whether that's an experience that is general because I've certainly come across that in relation to quite a range of different contracts and I wonder just how much it's impacting on the social enterprise sector so for example the hub model curing a significant infrastructure investment in Scotland is typically done on the basis of large-scale contracts is that something that's affected social enterprises around the table or others of which you know I know one or two of our guests may have an input on that There is an issue in terms of the where social enterprise can participate in that supply chain and whether they are employability I think is a slightly different part from the hub approach we know that in employability social enterprises can meet performance standards we know they meet quality thresholds we know they meet financial capability and viability assessments where we can't compete is on price and when contracts are simply driven by price and on discounts and if that's the large national framework contracts that you're talking about Ken social enterprise participating anywhere other than in the lower ends of the supply chain in terms of hub contracts and the large infrastructure projects we have over a long number of years worked on community benefit clauses many of them are implemented by larger contractors under a best endeavours approach some of them are more embedded those organisations like McAlpine's etc who have a more creative approach to building their supply chain with social enterprises are certainly very good examples but I think there is a challenge in terms of applying or obliging those contracts to include community benefit clauses which are in some ways arbitrary rather than asking the owners of those contracts to include social enterprises as part of the supply chain and in actual fact put targets within that whether it be by value or whether it be by scale in terms of social enterprise participation rather than the traditional CBCs that we've seen previously so at the moment I think what you're saying is that the best of the large contractors will choose or will implement a community benefit that's meaningful and that creates business opportunities but they're not obliged to and the way that the contracts are procured is too permissive in that sense and allows them not to do so if they don't want to in terms of the scoring of the social impact element of those contracts it's a very very small part of the contract assessment process and again whether the contract actually is whether the costs of the community benefit clauses are then reintroduced to the contract in another way or indeed whether those community benefits are actually delivered upon over time and I wonder if Ken Meroy would want to add in relation to the DWP model given the importance of that for its future devolution whether the same point supply there in other words you're taking part as part of the supply chain but is the way that those contracts are being let now supportive or unsupportive of engagement with social enterprises like yourself for us it's very problematic that we run a number of contracts in that area they will come to an end at the end of March and at this point in time I'm not sure what is going to fill that gap for our area we've seen unemployment statistics soar for the north-east and in terms of the mainstream programmes through DWP and indeed through Skills Development Scotland to what extent will they take into account the very sharp rise in unemployment that we are currently seeing on the stats six months ago or a year but it's certainly showing now sorry, Joe Fraser mentioned the procurement bill is there enough use being made of the measures in the procurement bill like procurement officers in local authorities confident enough to use the legislation that's there I think you'll find absolutely not is the answer they don't really understand what's going on they don't understand things like community benefits such that they would like to think to do they would like to think they have a way with all of it but the majority of the procurement officers up and down the 32 local authorities believe that community benefit are the things that larger companies can do for free that won't cost them anything on top of the actual cost so do you think more could be done with the legislation that's already been passed more could be done with the legislation that's already been passed more could be done to educate the people that are actually procuring the contracts so that they have an understanding of what's out there and what value can be added Fraser I think there's another side to the equation the procurement legislation I mentioned I think we hit the post rather than scored the goal yes it could be better implemented but there is still a challenge and the commissioning officers are one part of the equation the directors of finance and legal services within public bodies are another part of the equation and they do find it difficult to equate the social impact which social enterprise is delivering with a positive net present value that equates to a price consideration and I think there's a difficulty in getting that understanding through to the commissioners in a way that they can describe this will be achieved and the preventative spend outcome is that and we can actually apply it to a contract value which is that and it's a we need to find better within the social enterprise arena a way of describing what the social impact is in terms of a net present value that the financial modelling understands the disparity there people are all money drives behaviour we can discuss in your experience of the public sector in Scotland where is that lack of education most acutely noticed is it in local authorities are there public bodies that are doing it better than others for example we don't have empirical evidence or data that suggests or I think there's a general feeling that the legislation could be in some cases it may be self-selected not to pursue the legislation in others it's just simply a poor understanding of it that I suppose the challenges are for us to make sure that there is a when we talk about consortia when we talk about joint ventures when we talk about that contracting model it's very difficult when sometimes I've described what they would like in terms of the framework contracts they've glibly described things like we would like to see the third sector and social enterprise delivering more of the employability arena they describe special purpose vehicles but they don't actually know what that means and when you test these approaches it very very quickly falls apart so you spend an inordinate amount of time designing the programme of work that you think will fit the qualifying questionnaire and then the invitation to tender processes simply to get to hurdle where it's a price-based contract so there's a big challenge for us to understand better does that rhetoric of having social enterprise in the third sector delivering more of the public service arena equate to the reality of this is how the process will work and engage you in it right can you see how irrelevant this is a 22% of the social enterprises in Scotland or in the Highlands and Highlands Enterprise in that area they have no idea of how any of these big contracts work they are small local social enterprises and they cannot get involved in these multimillion pound contracts every now and again the suggestion is that the way forward is for us to get into consortia to bid for those contracts and then you have this really very specific problem of how do you decide which is going to be the winning consortium and we found ourselves in that we were in a contract once which when it came to an end was replaced effectively by a Scottish Government contract so instead of us being able to high-sized, being able to bid for this particular piece of work we had to decide to join a consortium and in 10 minutes we had to decide which was the consortium that was going to win and put all our work into that one and then the Scottish Government took 10 or 12 months to decide that that was going to be the winning consortium it creates a real problem for people who are trying to run ordinary small businesses all the time and the answer is to make it simple give the power to the procurement officers to procure small amounts actually force them if you get a million pound contract have 100,000 pound contracts and have a hundred 10,000 pound contracts that's how you'll get your centralised money down otherwise, if your contracts continue to get bigger and bigger you will just get more PA consultings and more M's you'll get all the multinationals coming into it go for small contracts you'll get it right down to the routes where you want it to be and you'll get local people delivering the services that the locality needs thank you for nodding Lorna you know what it's like just to take that point you've raised Brian about obviously giving more trading opportunities to social enterprises I was wanting to ask you about some of your written evidence this morning we heard that grant funding is important to social enterprise organisations and the stats say that 31.5% excluding housing associations and credit unions are dependent on grant funding and in your written evidence you said there's no shortage of funds available to the sector grants themselves lead to problems and grants also have a direct effect on the application process and you referred to something called the binbecular principle so I'm just wondering if you could expand on some of that we've been going out into the community for seven, eight years now giving business advice and helping a local folk to run their social enterprises and I come from a commercial background so I can understand how people do it commercially and yet when you're talking to people and there's grants in the background it kind of distorts the way that they think so we did this experiment and it was done in an event in binbecular where we came up with the costs to actually deliver a particular output and we separated them in two groups and we said to one group here's an opportunity for you to get into a business you can apply for some money and it will be a contract and you'll be able to make money out of that in the future given that your costs are going to be £9,000 how much cash do you think you'll need in order to get going in this business and in the other one we said you need £9,000 there's grants available how much would you apply for it's all grants in this one it's all business there's a bit of competition from other places and we did it kind of light heartedly and the figures came back straight away in one case they came up with £13,000 that they needed for the £9,000 grant they were asking for £13,000 and in the other one where they knew it was going to be a business they only asked for £6,000 so because there had been a grant available they had asked for more and we kept running this and we keep running it and everything we ask and the figures getting wider and wider apart when you tell them that it's a business that they're going or a contract they're going for they will ask for less when they know there's a grant on the stage decided that we would build on the University of Highlands and Islands new campus we were interested in building a centre for social enterprise practice and we went to our board and said we can do this from scratch we can borrow the money we've already borrowed money from the Royal Bank we can do this again and our board said oh no this needs you to go out there and investigate grants so we started looking for grants to grant funders they all wanted it to be bigger we wanted a £400,000 building we could maybe go to £500,000 the funders without exception said oh you should be far more ambitious than that so grants enable social enterprises to have somebody else's ambition and that's a scary direction to go in I'm just wondering is that because they generally give links to what you asked for because they've got this mindset that if you're applying for say £13,000 you're only going to get nine absolutely the whole thing and I'm sure that the researchers have looked at this it develops a whole mindset that becomes self-defeating I mean this might be slightly controversial but I think this grant dependency culture that we have within the social enterprise network and is pretty toxic because one has to ask themselves what happens when the grants go away the whole thing collapses we should be promoting investment and sustainable businesses that are profitable and that's a very important point that I'd like to open to the floor John, you're coming on this point Does that mean therefore that there are some services that should not be social enterprises? I'm interested in this question of substitution something that's delivered as a service a support to somebody with a learned disability, somebody with autism should that really be something that we have to find a way of making a profit out of or we simply recognise there are some things for which the state should pay and I actually am very much in favour of the third sector delivering some of these because if you get a family with a child with a learned disability they know better what that service should look like than somebody sitting 100 miles away but it shouldn't be those are different and I think that two things are getting conflated which is on one hand services which because local authorities have no money the way they can get the best bang for their gut is to get people to fight over the bit of money or there are social enterprises I'm very much in favour of the co-operative model the co-operative model says there has to be democratic accountability and it has to work financially and it shouldn't rely on grant at all and I wonder if your question means that these two things are being brought together when in fact we should maybe be looking at how we take them apart a bit because I am concerned you're seeing some organisations being expected to go out to create social enterprise for a service which simply in a decent society should be provided I'm going to think about how best that can be done closest to those that need it Chris I think when we're talking about that is it not important to say that the social engine objective should be that service and that social engine objective that is that service that should be delivered from the profit made by the enterprise not the enterprise delivers that service We don't apply that rule in the national health service we don't apply that rule what we start with in the national health service is providing for need and I think there are some things from which you can make a surplus housing is a good example and I'm very much in favour of community based housing associations and I'm not sure if the idea of investment and so on really applies to meeting the needs of a family with a children and their disability I don't think I don't think these things are comparable That's not essentially what I'm saying what I'm saying is and I think that Gems will probably agree here when we talk about investment and such that's for the enterprise the profit that is made from the enterprise should fulfil the social engine objective and the social engine objective and that's the whole idea make the money then spend it on those social engine objectives not make those social engine objectives the way you make the money I'd like to make the point that social enterprises working in that health and social care sector actually bring innovation to services and I agree there are certain services that should be a standard that should be provided but I was involved in a social enterprise called My Enterprise who provided support for people who had learning disabilities to set up their own small micro enterprise now how they operated was very much in a membership model but it was to use or to access self-directed support that allowed that enterprise to be sustained so it wasn't the profit or the generating of income profit was to sustain and grow that enterprise so that it can reach more individuals and I think that that's the key too in terms of social enterprise profit is not a bad word it actually allows you to achieve greater scale and greater scope and innovation in a local authority would never have provided that type of support it actually came from an innovation of a social entrepreneur I agree absolutely with that the best examples of change have come from the voluntary sector, the third sector from families, from communities Ireland and rural communities have been doing it for hundreds of years and simply ask the question that there is some evidence for example that social enterprises are quitting the field in care because the costs have been driven down and there is x amount of money available to support and how is the model for delivering it it is actually people saying no we are getting out of here because the costs are prohibitive and the private sector is stepping in with a far poorer quality as I would argue in some of these and I just wonder whether we are expecting well it's like the very nature of the sector if you try to define it too much you lose what its energy is and I wonder if we are trying to get too broad a scope for example in one community a very good community transport service and it's self-starting and it gets bits of grants and monies but what's at the heart of it is a community that says we want to get elderly people to the hospital to visit their relatives and it's as simple as that but if you analyse it too much you lose it and I think that's very different from some of the big social enterprise models who are doing fantastic they're doing business better and there's no margin between them otherwise I think I'd agree with a lot of that so yeah the social enterprise covers a wide variety of organisations some will always require grants other types of organisations will be able to be profitable and plough the surplus back but if we start worrying about grant dependency there's a worry that organisations only do things that are profitable and there's some things in life that we just can't make a profit out of it I wanted to come back to James on his point because we've met and spoken before and I know a little bit about the project but that underlies the social enterprise he's involved in but can he tell us what the rationale or the basis for decision making was in his case to go down the social enterprise route where clearly many other university spin-outs go down a much more directly commercial route and perhaps understand a bit better the motivation or the direction and travel of his firm yeah I mean this is a question we get asked all the time most often by investors actually it's the first thing they say but it's a really interesting business proposition you have it could be quite profitable why USCIC is the first question we get asked every time and the reason primarily is for the founders of this company and as a future healthcare professional we wanted to deliver this service to the NHS at as close to their cost recovery basis as possible to not be a financial burden and to support the organisation that I would argue is probably the greatest social innovation in the history of the UK and if I was to ever lose control of this organisation i.e. not be the CEO or not be a director then whoever was the director would have to maintain those community interests and that is regulated by the CIC regulator for dividend cap which brings me on quite nicely to the next thing which is a voluntary code for social enterprises and I made a point of this in my written evidence and there are some people that don't believe that a CIC limited by shares is a social enterprise because it's limited by shares but I would argue that inherently it has to be because it's regulated by the CIC regulator it has community objectives and there is a dividend cap and an asset lock furthermore it can also be for investors and we need to as a collective promote that because it's a really interesting business model and I'm determined to be the first biotechnology CIC that I'm aware of to make it a first sale and to scale so there we go and it's the attractiveness of the business to investors is do you think enhanced rather than limited by the fact that it's not a conventional commercial business I think that it is slightly hindered of course because of the dividend cap but the transfer of business they still retain full value so in the event of an acquisition they would still make a return on investment however it's incomparable to a company limited by guarantee that it can't take on any equity investment whatsoever and I don't think it would go anywhere especially in the biotechnology and healthcare sectors because a significant part of these companies is research and development and it takes a long time to get to market because we are committed investors not people that are going to commit to a company without any shares so I think it is and also I'd say that when we approach healthcare professionals being a social enterprise really has helped us because we can see eye to eye and if we were a purely for profit entity I think it would be much more difficult to us if we were to have received the sort of support we have received which has been fantastic I'd like to take up James's point about the voluntary code of practice and the fact that community interest companies by shares aren't recognised in my experience working with start-up social enterprises or social entrepreneurs there's a much more leaning towards community interest companies by shares and it's not led by profit let me assure you it is not about profit that these individuals are setting up kicks by shares they are setting up kick by shares because it allows them control over their organisation that they've set up and invested their time, their energy and often their own personal money in the organisation so what I'd say is that social entrepreneurs who are setting up community interest companies are 100% committed to that social impact that they are trying to achieve and that really what they're trying to do is secure their position within their own company a longer term because if they adopted a limited by guarantee model technically if they fell out with the board they could be kicked out their own company and why social entrepreneurs and that is the majority in Edinburgh and it's individuals who are setting up businesses to address a particular social need and they are driven to address that and they are adopting different models and very innovative new models as well again the kick by shares is something that's been adopted in England but certainly in Scotland but I've certainly seen over the last two years a much more focus on that and again from an investment point of view there are certain organisations that yes are very much limited by guarantee and I would say a community based social enterprise that may be applicable or a social enterprise that's been developed by a charity an arm of a charity absolutely but when you're talking about individuals who are setting up social enterprises they want control and if they want to scale and have ambition they also need to look for investment and it's interesting that social investment Scotland are now investing in kicks by shares so there is change in the scene which is really encouraging because we won't get the scale and the growth in social enterprise without the investment then we really need to be thinking well it's investment that we need to go for and it's in every form of investment because there are individuals out there in the angels sector who are very interested in social impact and achieving social benefits and they want ways of being able to invest and that can be done through a shares model Joan, you were keen to come in a moment ago on the same point it was just kind of to go back to the point that Joan was making I think it's an important question that a lot of people will ask how can you deliver services and also take a profit and certain services and I just wondered whether this question is partly being answered but in my experience sometimes public bodies there is quite a lot of top heavy bureaucracy and is there any evidence that's been taken that you can actually deliver the same service plus the redistributed profits probably for less money so that you can actually deliver a better service because of that kind of top heavy bureaucracy that you see in some public sector organisations? Really interesting comments just to hear a bit more about the business model I guess I would just caution that there is merit in us being a broad church there is merit in the diversity and having a policy framework that goes down a particular route I think would be flawed I think it needs to be broad based if it's going to keep everybody in the tent and I think it should be trying to keep everybody in the tent so I do think we need to be careful that we don't put all our eggs in one basket I think that is a fantastic business model and we'd want to encourage it but I would also want to encourage those very small community based enterprises because that may not be the right model for them To square the circle of this a little bit if you look at page 15 of the census if you don't all have it there's one of the pieces of data that 82 per cent of our social enterprise and community enterprise activity is operating outside of the worst 20 per cent of enumeration districts in Scotland when you look at the Scottish index of multiple deprivation that suggests that only 20 per cent are operating inside those areas The rationale of social enterprise and many of our members that we speak with will tell us that they are working with the people who are hardest to reach and working in the most disadvantaged communities in fragile communities which I think Brian describes very well in Highlands Islands and disadvantaged communities which are in the urban areas John has mentioned this morning the role of housing associations and RSLs there's a really strong Jonathan made a comment about let's take housing associations out of the equation because it distorts the picture a little bit Housing associations are fundamentally asset led the assets that they have were transferred they're locally owned and locally controlled and they're governed they have deals to die for when it comes to investment led processes and they operate in our most disadvantaged communities what we should be trying to aspire to is to have the rest of the social enterprise scene and economy brought up to that scale we've asked again what can public bodies do more to facilitate that the community empowerment bill asset transfer organisations have an asset on their balance sheet it makes them much more capable of bidding for a public service contract or doing any other form of business as Brian has described because it's investable the investment flows to it much more quickly if it has an asset if it has a contracting framework and Lorna's right we're seeing much more social investment coming to the table these things need to be squared and the pieces of the jigsaw are there I think we just don't have the lid at the moment for me the housing association model and the route that that has gone down is part of that lid what James has described is the other part of it and this is an inclusive and broad based approach but there are ways that we need to put in place the things that we've already established to make this work more effectively conversation stopper I agree with what Fraser said clearly there's already dynamics in the whole landscape of social enterprise that can formulate the production of more and more social enterprise in the development of existing ones I think one of the things that I like and I was listening to James about the large companies that chase profits unlimited eventually I believe die they fall on their own swords on their own profits and many of the social enterprise and those that lead them that I've met certainly have the motive as an intent but interestingly the characteristic is the dedication primarily to the social involvement of their enterprise I think one of the other things that we need to consider because of the involvement of the participation of people who work in the social enterprises is the change in productivity is quite marked and that comes back to the public procurement issue in terms of looking at that the value add generally through social enterprise is substantially greater than saying we have to do it internally that partnership between the public enterprise and the social enterprise can be very productive both to the customers and to the employees and to the enterprises Richard, can you make a point? Actually, two can be there thanks very much Chris Thullison, your submission and maybe we can get other comments from people and I quote it's unfair to say that the Scottish Government isn't doing enough to encourage social enterprise but we can say that the Scottish Government isn't doing the right things to encourage the growth and sustainability of social enterprise business models so what should the Scottish Government be doing? I think if you move a bit further down the paper it goes into that a little bit more but there is such forth we talk a lot about getting into public procurement we don't educate the buyers within public procurement to understand what happens within social enterprise and we don't do that to the point that I've come across procurement officers that don't understand what a cake is at all that's not a formation of a company so we've refused your tender there's a big piece about educating these people within these sectors there's a big piece about joining people within the public areas within local authorities together so you have a piece there's a big employability piece within every local authority there's people that do procurement do these people speak to these people? probably not so do these people see that there is a value in that contract with the social enterprise that also delivers employability from profitability which could be passed across which could help local authority at this point definitely not it's more about education than anything else we're doing good things but I think there's more that can be done internally so that more local authorities understand a little bit more of what social enterprise is trying to achieve I totally agree with you I was very boring when I was a councillor for 36 years and dealt with officers and the point that Brian made earlier about smaller contracts I actually introduced a company to the officer and it saved the councillor a quarter of a million pounds because they've done something different and I agree with the points that you're making if no one has any other the other one that's jumping out at me is that among the many things that you're going to have to face you're going to have to face we're all in the pension situation everybody has to have a pension so are companies gearing up for that will small companies be able to to gear it and I believe that one of the submissions again says that the Scottish Government should investigate the central provision of pensions for everyone in the sector and also to ensure that everybody is getting a pension so what do you think about the we're all in situation that you'll have to be in this year to give your workers pensions I think we're all already in the majority has already paid the living wage hopefully more become accredited to prove that they have paid the living wage and on top of that the pension is a minimal extra cost I think I think we are all in but I think it's quite important that if we're going to commit to all of these things that perhaps it should be noted that we are committing to these things because that is quite a downfall when it comes to competing for costs and such forth in contracts because you're paying the living wage your margins have to be a little bit tighter a little bit smaller we're all in the pension margins are going to get a bit tighter again so I think maybe potentially possibly a monarchy coming back to public procurement and all that great example for these sort of things there should be some form of point scoring and a tender process that says yes we pay the living wage yeah we do, yeah we pay this pension but maybe we don't just pay the basic pension maybe we pay a little bit more and that gets a few more points and maybe that will force private sector to follow suit and just to finish off convener James McElroy earlier on you made a comment that get your local MSP behind you when you want the point is that there are politicians who do have you can speak to officials to get the one problem that used to annoy me intensely was the fact that small companies couldn't get to see someone and just couldn't get by the door and it was the same old companies all we've dealt we've dealt with you for years so we'll just keep dealing but they were charging the council a fortune whereas the other people who came in were prepared to be more innovative of the point that Johann Lamont made earlier on in order to ensure that it was a local situation and a company or organisation I also dealt with ACSE the Association of Public Service Excellence who were based in Manchester who run for companies for councils a number of years ago that for every pound we spent locally actually generated £1.60 in the local economy so I'd be more than happy if you have any problems in my area to give you a hand and I'm sure if companies want to talk to sometimes I feel you don't talk to politicians enough round tables yes but you don't locally go and visit they have surgeries, they have offices you see them, talk to them get involved and then we'll all work together so I'll be more than happy to help you if you're out mother will way OK, George Fraser Kelly made about only 20% of social enterprises operating in the poorest and most disadvantaged communities I understand you can correct me if I'm wrong there is some evidence that in poorer communities I came from people didn't expect to run their own businesses but in fact they're more likely to be involved in a social enterprise than setting up their own business so there's an economic argument both in terms of stimulating economic activity locally and within disadvantaged communities of creating social enterprise or how should those who have got the responsibility for this direct some energy towards creating social enterprises where again the impact in terms of employment more likely to set up business on is most evident what needs to be done to support that Fraser I think there's something very clear that we can shift our emphasis John and it's to put the individual in all of our communities at the heart of every decision that we make there have been a number of activities over a long number of years of trying to spatially target all the lumps of money when I arrived in Castlemilk I came at the end of the new life for urban Scotland money's 280 million pounds pumped into the housing did a lot with the housing but didn't do anything with the people we've gone through enterprise zones urban regeneration companies business improvement districts we're now on city region deals we've gone through areas of priority treatment priority partnership areas social inclusion partnership areas now in community planning partnership areas about the individual people and when people challenge me about that they say but the characteristics of each individual is so different it's very difficult to design a universal service our services should not be designed on a universal basis they should be designed on the basis of the needs of the individual and that that individual can come into a service provision at whatever stage they are in their requirement and that we measure the distance that they travel and the outcome is what change has actually happened and it's not necessarily that the outcome is a job which is usually the payment by results model that is designed and delivered within the public sector that's why we're seeing so many more social enterprises actually delivering goods and services to consumers and using then the resources that they generate from that to work with a group of individuals if I were to ask everybody in here to go for a coffee with me now how many people would like to go to Costa where they have said that they will transfer the cost of the living wage on to the price of your coffee or how many people would like to come round the corner to Serenity cafe where they're repatriating every piece of their profits back into working with people who are on a recovery journey from addictions that's the choice that we have to make it's about putting the individual at the heart of every decision we make whether it be ourselves or whether it be public bodies or whether it be the private sector that we have to do to make that happen I mean, I actually am not sure if I agree with you on social inclusion partnerships I think that as time has moved on we've moved away from it we have social enterprise which doesn't have any responsibility for people or place any longer which the HIE does and we've moved from a very locally based social inclusion partnership to community planning which is for everybody and is much more centralised and the community and individual involvement is much more limited by that aspiration to actually policy decisions round stimulating social enterprise development within poorer communities I agree with you I wasn't suggesting that community planning was a better part of the process of just suggesting that each every three years or five years we seem to get to a stage where they were all rubbish in terms of dealing with individuals now they might not be massively effective but one of them did actually in particular around social inclusion had a big focus on individuals and communities in working with and putting them into the structures and the whole bend to spend money around budgets and so on probably was never properly delivered but at least it was a policy aspiration which I think we've shifted from now I agree with you but the difficulty is that we change them every three years and there is an assumption that that's not working because we haven't got an evidence base we could potentially have a situation where if you're working in employability you have a reduction in the number of people who are employment deprived but an increase in the number of people who are income deprived the policy makers can't seem to understand that and they can't make sense of it so they move the things again for me there are ways to do this and it's about giving that accountability back to local people I come back to the issue about housing associations they are anchor organisations they understand what the needs are of their local communities we're seeing a number of housing associations becoming more active in social enterprise activity we're seeing a number who are stepping away from it and some of that's about the regulatory framework because any subsidiary activity that is the potential to impact negatively on the core housing business is seen as quite risky but I think that's the areas where we need to develop locally owned, locally controlled organisations to develop local capacity within some of the most disadvantaged areas that we have from our experience in the Highlands I think it's impossible to come up with a blanket solution here it's people that make a difference and you can't even choose you can't say oh you have to make the difference what we are finding is that in a community if somebody comes up and says you know what here's what we can do it's that person who says you know what you've got them in this room it's those individuals you have to find a way of backing those individuals I made the comment about the pensions because my concern in our small social enterprises is that we've got those individuals and they invariably have a board round about them who are very supportive but we are expecting inexperienced, unpaid people to actively become the operators of fairly substantial businesses in a fairly short time so you can have somebody who says there's no post office or the petrol station is about to be shut we better do something about it and that person drives the way through gets the money, buys the petrol station gets the staff in, trains the staff delivers the petrol, makes the profit and everything else and you've got a volunteer director standing beside them who have never done this before and we expect them to go from nowhere and run a million pound business and then we expect them to know that you're not a charity anymore so your business stream water is going to cost you a lot more than you ever thought it was going to cost you and have you realised that you're going to have to deal with pensions this year where the enterprise is about running a business the social part will be right down the forehand and you deliver on a yearly basis but the enterprise thing is the day to day how do you run the business because you don't run businesses individuals like James and Isabel and Ingrid and Duncan and Christine all people I've seen in the last month those are the people who run the businesses those are the people who run the enterprises those are the people who run the social enterprises find those folk find those folk and support those folk rather than trying to support an institution Dennis Thank you very much, convener It's really kind of fallen on for what Brian's just touched on and some other one it says but what I'm interested in is where's the information at the beginning the start-up if I decided to set up a social enterprise who do I speak to who do I go to who's got the right information who can guide me who can actually put all the factors that you've just mentioned Brian in place for me in how to take my idea my proposal forward how is that information actually gained are the right people providing that information I'm wondering maybe from Simon's perspective as well what do we need in terms of information for the future we've got a snapshot in time here but what do we actually need to collate to make it meaningful so we understand not just where we are but where we should be For the information we need to repeat the survey in pretty much exactly the same way every two years for the next 10 years there needs to be commitment to the investment and that is expensive and from that to be able to understand not just the overall growth but different changes within the sector how more types of certain organisations are coming through, other types of organisations are disappearing and begin to get a picture that way James Richard, I have had support from Morning What and Lewis MacDonald in my area thought it would be good to get that in there Dennis, you asked about who you would seek advice from if you were a social entrepreneur wanting to start a social enterprise so 14 months ago I started a social enterprise so I think I'm reasonably well placed to answer that question and the answer depends on where you live and that this is true because there's a number of different organisations that deliver different kinds of advice we've been very lucky in the sense that some people deem our social enterprise to have the potential to be very financially successful so we've had support from Scottish Enterprise through a unit called the high-growth startup unit which has been excellent I must add we've also had support from Firstport Scotland we've also had support from an enterprise campus initiative at Aberdeen University which Lewis knows about and I've had support from all the business competitions that we've entered and subsequently won so I suppose it kind of depends on how successful you are in business competitions and it depends on where you're located I've also had support from Lorna even though we're not based in Edinburgh and she's very good so we need more Lornas in business gateways no, this is true I'm not just saying that because she's here she's been excellent and we do need more people like Lorna who have expertise in starting up social enterprises in Aberdeen I don't know if there really are many people who have expertise in starting up social enterprises in the advice centres that we have for example Elevator I also know that the university support centres that we have enterprisecampuslaunch.ed don't have specialist people to give advice to social enterprises so maybe we need a social enterprise MSP that organises a group of experts and that can be transferred to organisations that I've spoken about so people like myself who want to start social enterprises and people who genuinely want to make a difference to society can get the advice that they need when they start Does that provide an opportunity to set up a social enterprise maybe look at Ken, maybe in the fire to provide that initially because the young people I suspect that no school in terms of career advice offers even a hint towards setting up social enterprise I agree with you and I think that there's a lot of people my age that I've spoken to whose business model would have worked as a social enterprise haven't set up a social enterprise because they don't know anything about them Maybe I can ask Lorna because in Edinburgh and you're dedicated about how many other Lornas are there around the country There's another social enterprise it depends very much on the local authority's commitment to social enterprise and how important they see it in terms of their overall economic strategy In Edinburgh we have a huge commitment to that and two years ago they employed me as a dedicated social enterprise growth adviser although I do see everyone from pre-start right up to growth stage we have we've got social enterprise huge social enterprise commitment in the south and north Lanarkshire and we also have commitment in Fife and also in the Scottish border so again it very much is driven by a local authority and how important they see that in terms of the overall structure of the economy or support to that but certainly in Edinburgh context I I see, as I said about 100 110 social enterprises each year and really my role is to have a foot in both mainstream business support and also social enterprise support and that gives social enterprise is the best of both worlds and I think that that's what we need to work towards more of is that integration of the support that's out there and certainly I liaise my key to success in Edinburgh we have I work very closely with Edinburgh University and the competitions like Scottish Edge and Converse Challenge where they're now focusing very much on social enterprise angle which wasn't there previously so there's a much more interest particularly in from the university sector graduates and students are passionate about social enterprise I've found that that's where the real growth will come from in terms very much like James, individuals who see an opportunity to set up a social enterprise in the area of expertise that they have so that's very important what I would like to see I think where there is a weakness in terms of how we approach it is how do we support communities that are very disadvantaged to grow those individuals that Joanne was talking about how do we support those individuals because what Brian is saying is absolutely right it's an individual that's passionate that wants to change the world that wants to make a difference that drives social enterprise it's not like someone saying oh there's a need I'm going to set up a social enterprise to address that market opportunity they're there to address a social need and it is all about individuals so I would like to see more support for communities and to build more social enterprises in more disadvantaged areas and I think that's where maybe the gap is but we need to we need to be much more joined up in terms of the support because there's lots of support out there but we do need to work more closely together Brian there is lots of support out there for anybody who wants to start social enterprise simply google it, they'll all come up Scottish Government funds Just Enterprise and in the Highlands and Islands HighSys delivers that and effectively enables any organisation who's out there to come to Just Enterprise to ask for any kind of business advice connected to either starting or growing or developing their business one way or another and I accept it will vary from one area to another and business advisers vary from one area to another sometimes you like them, sometimes you don't but we've got it's there but the big thing about it is if you're keen about starting something you'll find out how to do it and if you ask yourself how do I do it, you're probably the last person to actually start it because the kind of person who's going to start things just gets ahead and gets them done and you will see them coming in every day in HighSys as well we've been talking about education we've been into a dozen secondary schools in this last year Social Enterprise Academy runs a scheme for developing social enterprises inside schools HighSys again is sponsored within the catalyst programme in the UHI which is all about giving mentoring to people who want to start social enterprises and want to start businesses and so on so there's loads of us who are out there supporting the great thing is just to get yourself in the right mood for going out and doing it Audrey and then Chris I'd also echo that there is a lot of support out there for social enterprises and we as an organisation have been able to operate as a business and being recognised as that and get the support that exists there as well as being able to take advantage of Social Enterprise support network what we also do is we accommodate a lot of people who are cultural social enterprises and starting off quite often as individuals and what they really value not just having firstly someone to signpost them to where the support is and we have the cultural enterprise has presence in some of our buildings across Scotland which is a great support film but also that mentoring from other social enterprises is something that shouldn't be undervalued to understand how do you do it there are models out there that exist in other parts of Scotland to run these services in local areas and I think what was an amazing part of coming into the social enterprise scene is that there are amazing networks all over Scotland and they are completely invaluable people share their time very freely the advice is there and people are quite happy to share that more so than you would find probably in the slightly commercial business sector and I think it's that just signposting giving support to funding mentoring and we are looking at graduate support all over Scotland at the moment for people who have trained in creative industries to come out of university don't know where the first place to go where supporting end up just working on a coffee shop or going down to London or wherever and I think it's signposting the legitimacy of social enterprise is now there in the census and I think that's been a fantastic element of the census we were able to put that page across and say well this is what the sector is about this is who we are don't underestimate our role in the Scottish economy and people can be a part of that and I think it's signposting providing that support and mentoring you mentioned graduates university that also apply to colleges yes absolutely we've been funded by the Scottish Cities Alliance to look at Perth, Stirling and Inverness and look at retaining creative talent in all of those cities because they are finding that the talent comes through the colleges and universities and leaves because there isn't a collaborative support to enable them to learn from other people who've been through the process set up their own whether social enterprise or business and they tend to gravitate to where the majority of their sector is which is other centre belt or London just to take it back just a step I don't think the question is where is the support to do this I think the real question is at what point when somebody says you know what I'm going to set up a business and I want to do this and I want this to happen from that what's the first thing you do maybe they ask the next door neighbour that's already got a business and the next door neighbour says okay you need to go to a business gateway and you can set up a limited company you can do this and that how many next door neighbours do you think in the world will say actually you know what there's about 7 different models of businesses you can set up and if you go to a business gateway then when you go to a business gateway what's the first thing the business gateway advisor might say probably not have you thought about source enterprise to get to where you want to be have you thought about a kick type 3 limited by shares where you can pull in a bit of investment and it's all possible or have you thought about this model or that model no there's a piece where there needs to be people need to realise that that is an option not that the option is we set up a limited company or I'm a sole trader because within that conversation at the moment you won't hear social enterprise mentioned that's where you need to be because there are people out there that want to do it but a lot of them just don't actually realise the camp or know that it's available or know that that's actually how they want to do it so lots more learners and a bit more push at the front end for learners as well I mean we've got about 20 minutes left I want to raise another issue that we haven't touched on really which is the question of funding and you just mentioned this in passing Chris but I mean how difficult is it in the current climate for social enterprises to access external funding sources what type of funding source would you like to I mean equity funding bank funding crowdfunding the landscape is changing a little bit I can certainly tell you about my experiences as a cake limited by shares when we formulated in 2012 we went and asked the bank for a bit of money they laughed at us and said no thanks how are we going to secure anything against anything at all no chance not whatsoever you've got an asset out you've got this disillusion clause you've got all the rest of it we don't understand what that is but we think what that means is whatever happens we will never get our money back if something goes wrong so no there's the answer so then we went and tried some other people at the other end of the scale all kind of looked at us and looked down the nose and said you've got a real social enterprise here you know what the real deal you might get some money from us and you'll steal it so we're not going to give it to you because you're going to put it out of shares et cetera I think now there's a bit of a sea change there are funding bodies out there that do great work some of them are limited to where they can do great work by just that is well actually I don't know how but there and I think that there's an opportunity to open that up I think there are now private investors coming into the realm and for private investors it is quite an appealing proposition to have a cake and sit there as tax relief sat together it gives them a great opportunity to put money into things and the benefits are great for them there I think it's important when we look at external investment we move away from this grant funding stuff definitely there's a definite need for loan funding that's great because that loan funding when it gets recycled and it grows slightly but yeah it's shifting it is moving but we could do with pushing it a bit more okay Emery also want to comment on sorry, Audrey again our organisation's been around for a long time it's 39 years old 40 next year which will be a big milestone but it started as a trust and you know developed into a social enterprise model but you know relied very much on grant funding to get it to where it is today it's at a position where again we had to form a kech to be able to borrow and I think just developing an asset base and looking at what your strengths are we've been able to borrow and to support what we do but we do rely for anything you really do any new buildings or any expansion of what we do and we have to very much rely on other sources of funding and we understand that public sector grants are drying up quite quickly you know we do rely on trusts and foundations being very successful and there are a good number of foundations and trusts that do support social enterprise specifically Robertson trust for example is one Paul Hamlin another but we're now having to look at how we change our model how we change our business model and how we structure ourselves and put into the business in terms of sourcing other funding and that's everything from sponsorship to philanthropic giving to private investors and those are very time consuming in particular the latter two but there's something that we know it's important to move to and probably we have something that some investors are interested in and we can sell but it's a mind shift to think that you have to go out and sell your organisation that Brian mentioned about being a slave to grants absolutely some of the public grants we've had to write three different business plans for the same project to meet three different types of funders requirements and it's time consuming it's costly smaller organisations we're not a scale that but it still takes away a lot of core time from your core business but for smaller organisations grant fundraising is costly and it's time consuming and it's frustrating and if there's other ways of doing it having an asset base to move forward with is something to be strove to achieve and now 98 per cent of our income is from our asset base Adam, check Just to support that before I came to this progress place I got involved in company turnarounds and started small businesses and also social enterprises there has been a quite significant shift in some of the funding sources I think that the phrase ethical investment is becoming more and more dominant in discussions that you have with funders there's also you have Social Investment Scotland which of course falls into that category I would suggest but there is no question that in terms of the investment regime whether it's angels or banks now consider not in all cases but in some cases the efficacy of their investment and I think that phrase we have to keep promoting that as what we mean by investment particularly in the social enterprise and third sector areas I think that we have to be careful again I mentioned earlier about confusing funding investment is the same amorphous blob of money there are some clear things that we need to be focused on if there is a programme of grant funding it needs to be very specifically targeted it cannot be a general fund and we've had general funds over the last few years because what we've actually started to develop was a very creative and innovative social investment scene in Scotland if we simply put in a very blanket grant programme such as the enterprise ready fund without it being specifically targeted and there was an element of that with the previous part but perhaps not specific enough it then destroys the social investment capacity because no one will go near social investment whilst there's free money available that free money should certainly be part of the journey it should not be part of the sustainability but there are some other issues that come into the social investment arena state aids legislation becomes a problem for organisations when seeking social investment and Chick has mentioned that there are a whole range of people whether it be Treados Bank, Unity Trust Bank Co-op Bank or Charity Bank all of them offer funds but none of them will go under 250,000 quid if social investment Scotland have got to get involved in the arena when they're lending between 10 and 50,000 pounds they've got to do it at 8% Resilient Scotland is 6.5% when you're crowding out that investment by not creating a competitive arena there is an assumption that there's an absolute market failure in money it's not, it's the price of money it's the availability of money it's the terms under which that money is available so we need to get clear about what the horse is required for the course and make sure that the things actually fit with each other rather than crowd each other out Brian I was involved in the finance industry for 15 years before I came into a social enterprise and the interesting thing is that I understand the language and we found ourselves in a position that a building came up that we were interested in buying, we'd never borrowed anywhere before we hadn't had grants before but we had a history of being able to produce a set of accounts that looked respectable we were able to phone the Royal Bank the world's biggest social enterprise we were able to we were able to phone them up about 10 o'clock on a Monday morning he came at 20 to 5 and by 20 past 5 he said I think we'll probably lend you this money the money is there it's about knowing how to speak to the lenders it's about knowing the products that are there do I use short term borrowing for a building? No I don't do I use an overdraft for a building? No I don't do I buy cars and pay cash? No I don't it's about knowing all those things again we're in that position of running really small social enterprises who suddenly get a pile of cash and they don't know that you actually don't spend the cash buying a van you lease your van it's about knowledge it's about the sort of thing that Lorna can tell you if you know that Lorna is the person to go and speak to so I don't think there's any shortage of money out there but there is a shortage of knowledge on the part of those directors and managers of organisations Chris so I keep them to buy shares and sit down and such forth you're absolutely right I would challenge anybody to pull up a raft of social enterprises that sit in that remake that are looking for investment and get them to stand in front of somebody that is willing to invest and there are people out there that are willing to invest on that level and say this is what you're going to put in this is how the system works this is what you're going to get out and this is where we're going to take it most social enterprises are in a position to do that keep them to buy shares with a sit-out option if that's what they are and that's where they're looking they need to be able to do that they need to be able to stand up and say here it is and there needs to be again keep coming back to it but again it's a piece of education to teach these people along the timeline if that brand says this is how these things are done this is where you need to do quite well within the private business sector all that sort of stuff comes very well within the private business sector but we don't do it very well throughout social enterprise James, on a prayer point something that's interesting is that Jonathan from social value labs this morning said that he thinks social enterprise startups are more successful than your traditional private limited companies and that sort of sparked a question on my head is that because these social enterprises are more risk averse and aren't attempting as advanced technological innovation than the private limited companies and if so, I believe that's the case and if so, is that because they're not able to raise the funds to do that kind of research and development for these really, really innovative social solutions so there's, I think it comes back again to this voluntary code for social enterprises which I've mentioned a few times today and a CIC limited by shares by definition is not part of that code unless I've interpreted it wrong I just wonder if there's consensus around the room that perhaps there needs to be a revision of the code can you make decisions around table discussions like this? Well, we're not here to make decisions we have no particular authority to do that but I'd be interested to get people's views around the table of whether there was a consensus view Brian, it goes you for this HiSense was the first community interest company in Scotland and it was the first one that was limited by shares and I would agree with you it's really horrible to feel that we're excluded we just don't fit that model at all and yet I think and I think the three of us are fairly obvious that we actually understand how enterprise works and if you're going to use the word enterprise then use all of the other things that come along with it so I think we should be discussing it Chris I won't worry about the code it's voluntary it's not compulsory his grant making organisations do subscribe to the code and do not give money to companies that are limited by shares regardless of the social purpose I think when you look at a company and you want to decide where it's a social enterprise the first thing you should look at is the business model and the social impact the legal structure should come secondary in my opinion I mean it's just my opinion and it's up for debate of course but I think that's what we need to be doing Totally in agreement I think it is worth doing these kind of things because I think what I've seen over the last 10, 20 years is the visibility of social enterprise soar and I think through increased visibility whether that's through the code whether that's through the awards that social enterprise Scotland do whether that's through targets within procurement arrangements if we can find ways to increase the visibility of social enterprise that will go some way to increase the amount of people that are aware of it Simon About the voluntary code of practice I mean if the grant giving organisations are giving grants to organisations that describe themselves as social enterprises and you don't want grants anyway it's not a massive problem What's your point? Well you were saying that the grant giving organisations are giving grants to social enterprises under the Scentscott code but you're also saying you don't want grants Is that right? Oh we could definitely do with grants I just think that these grants need to be targeted to enterprises that potentially have high growth potential and I would classify ours as one of them You know Sorry I misunderstood you earlier Okay On the grant thing I think really everybody would like a grant I just think that it's where does the grant go so I think really if you're going to hand out grants let's make sure they're targeted to something that creates growth that creates something that moves along you know not something that sustains something that's just faltering along but when we come back and just shifting back to James's point you were talking about the social enterprises and how they are established and such forth I think the census has been great I think there's a lot of extra questions that need to be asked and I think on that point one of the questions is how many of these social enterprise startups are a spin out of a charity or another organisation or such forth and that sustains them Okay Fraser The volunteer code of practice is as Chris has mentioned it's voluntary it's a set of values and a set of behaviours Social Enterprise Scotland are supporters of the code because we ourselves are not a social enterprise in the definition of the code we have Chris sorry, you were a board member of SES but we have three or four board members of Social Enterprise Scotland who are community interest companies limited by shares the intention is not to build a fortress around the code it's intended to be a benchmark by which we build bridges out from the code to try and make sure that anyone who wishes to participate in the social enterprise arena can do so in a way that allows them to do that the code is not Simon if I understand it rightly the code is not Sen Scot's code I understand that the code is owned by the subscribers to the code and that's a group of social enterprise it sits on the Sen Scot website and there is a review group who looks at that on a regular basis and I think every year they look at it in March of each year but I'm happy James to have dialogue with them around that on the basis of the comments that you've made we are not part of that review process but I'm happy to pick up on that just to reboot Simon's comment again, I was talking about a grant culture like dependency we just need a grant to start up and then we will be financially sustainable and we will not need to take on any further grants once we're financially sustainable and I think that's perhaps a difference where the misunderstanding arose partly to report my own but I think organisations that will never make money from trading are great as well and I think that there needs to be a blended funding arrangement that seeks all organisations I think that there's fantastic support for graduates coming from different universities to set up really interesting social enterprises than there might have been private companies in the past but I also think that it needs targeted support for deprived areas in the east of Glasgow where they will never go to university that's been a very interesting part of the discussion and I'm just interested to hear from some of the longer established social enterprises which are not following we've heard from the kick model and some of the issues around that is there anything else before we close for the longer established model company limited by guarantee and other types where there's a change in legislation or regulation that would be particularly helpful in the next period I'm just thinking about this looking at we've got the business pledge which covers business on many parameters but we've had the procurement act we've had the community empowerment act and coming back to the point that Simon made having been involved in this area for too many years but if you go into some of the deprived areas great ideas some young people with great ideas that you can't because of funding in the past or what have you and there might be an argument for saying there should be an incorporation of something in the business pledge particularly in the public sector in terms of procurement to say you have to give a consideration to the community impact of the issues of contracts I don't like prescribing too many ideas for any enterprise in social enterprise but to really kick things off that might be a solution and I'll probably have John Swinney to do on a minute at the point that Ken Milroy made earlier in terms of sustainability of some of the work programmes that actually go on at Provider Service that's based on a year-on-year contract because maybe it's a local authority or saying well actually we can do this for a year would it not be more sensible to have something like a minimum three years because if it's year-on-year surely coming towards the end of that year you're looking at maybe submitting another application to say we need the funding to continue this work and all that sort of stuff whereas if you've got a three-year contract you're actually concentrating more on the delivery of service I couldn't agree more that we need knowledge about what the curators' plans are what the commissioning arrangements are so as we get towards the end of any contract to be honest we need positive engagement with the commissioners I fully understand the constraints that could be on the public purse but it's important that we have dialogue in terms of managing that change and we will manage the change short-term contracts do present us with real problems in terms of securing staff and retaining staff if all you're guaranteeing is a one-year contract so I do think there's something that could happen there in terms of the comment that Lewis made about the structures that perhaps more established social enterprises have adopted I think it served us well I do think it has presented us with some particular issues and those issues have been where things aren't working out I've said in my evidence we've run some business activities that weren't successful we've had to close businesses and making some of those difficult business decisions which we have to make can cause problems in terms of governance they have tax implications so I'm not sure if there's legal changes that would need to be made but there is necessary that legal and financial expertise is available where you are facing those particular challenges and they leave you with some constraints I would say so in terms of a successful organisation I think in terms of activity it does present us with some financial constraints because we had lost making businesses that we had to close so we have to carry the loss within our overall accounts we're effectively at the end of our time so I'm just going to say to people if there are any points you're keen to make either on this issue or any other issue now is the time because we're going to close very soon, Audrey I just want to make some comments on what Lewis raised there firstly, if you're looking at what the committee can achieve firstly the visibility of the sector when you're in the sector you know that all the support is there but if you're not in the sector and you're just the person in that deprived community with an idea you don't really know where to go so I think the visibility of the sector is important we get brought in quite a lot to local authorities to say we've got this idea, we've had someone try it but if not maybe had the right model can you come and advise us mentoring and giving that support and looking at the models that have been tried and tested and rolling those out into other communities not necessarily for us to do but for others to learn from and adopt is an important thing I think that grants have had their place and I think that they're still important in some of the most deprived communities they are essential to get target attention and so don't underplay that they will always have a role in some form or another we should be thinking about again as the investment and social investment bonds or something that's been investigated down south and I think perhaps is something that we could consider up here OK, good, excellent any other final points anyone wants to make we covered the ground OK, well that's been excellent thank you all very much for coming along this morning helping the committee we have another evidence session next week on employee engagement and at this point I think we will suspend and go into private session thank you