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Name of the game

Name of the game
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Name of the game

Finance | Gareth Jones | 1 Apr 2006

Social enterprise (SE) isn't a new concept but is enjoying increased profile. What's in a name? Charity vs. social enterprise, acevo's recent event, was an intriguing day exploring this complex area. Charities were challenged to take a leaf out of the social enterprise book by demonstrating business skills and acumen, and building enterprise into the ethos of their organisation. Or what Alun Michael, the minister with responsibility for SE, called a shift "from the collection tin to the catalogue".

Social entrepreneur Liam Black, director of the Fifteen Foundation, gave a virtuoso performance in response, drawing on the transformation of the Liverpool-based Furniture Resource Centre from a small charity supplying second-hand furniture into a £5.5 million business group giving work to hundreds of people and providing thousands of low income families with the chance to buy quality recycled furniture. He described the way the sector is funded as "bizarre and disabling in the extreme" and said there is a sense that some charities see themselves as the end. Their survival becomes more important than those they are trying to help. Becoming more enterprising is one route out of this.

But Black also wisely cautioned that there has been too much hype around SE and there was no moral obligation on charities to turn into social enterprises. He highlighted the collapse of Sheffield Rebuild, a "vibrant example of social enterprise which went belly up because bad management and governance was exposed when the cash ran out". SE is high risk and high reward, not for the faint hearted and shouldn't be compulsory, especially when policy makers such as Michael have dangerously high expectations.

Clearly government sees charities as only part of a much wider picture and charities should be aware of that. But ultimately, it isn't about what charities, or social enterprises call themselves. It's about being good at what they do, and having strong governance structures in place if they want to successfully embed an enterprising culture.

Second hand arguments

But this continued focus on enterprise and a contract culture is also increasingly irritating some existing sore spots, for example the sensitive and poorly understood interface between for profit and not--for-profit businesses. Here one thing is clear, if charities and social enterprises want to hack off an ever bigger slice of the economic pie, then small business is going to get more and more vocal in its demands for a level playing field.

For example, the Forum of Private Business now tells us that the high street retail slump is being caused by the unfair tax advantage that charity shops have over other struggling retail outlets. It would appear that charity shops are being attacked because they are an easy target, despite the fact that only 0.2 per cent of retail spending goes through them (not 2 per cent as reported in another sector publication). Compare this to the fact that £1 in every £8 is spent at Tesco and it is obvious that the real problems for small businesses on the high street are the big supermarkets, as well as out of town shopping centres.

In this example, losing rates relief has always been a concern for charity shops, which would take a significant hit to profits if this were to happen. In fact, it would probably make life worse rather than better for other small retailers as there would no longer be any reason for charity shops to concentrate heavily on selling donated goods as they now do. But this is not the point. With small business struggling to survive, is it acceptable to give significant operating advantages to charities or other social enterprises? Even more, is it fair to levy ever higher taxes on businesses and the staff working in them while handing that tax on to their not for profit competitors? If we're not careful, charities that really do things no sensible commercial enterprise would ever consider will find themselves taxed just like services that can as easily be wrapped in a for profit or nonprofit jacket. We blur that distinction at our peril.

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