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Assistance to Communities

I welcome the comments that hon. Members have made, and it is a pleasure to sit under your chairmanship, Mr. Illsley. Like my right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael) and the Minister, I am a Labour and Co-operative Member of Parliament. I have had a long association with and commitment to the co-operative and mutual sector. Although that informs my basic philosophical position, I will extend my comments to the wider remit of the community and voluntary sector. The Minister's opening speech referred to the enormous growth in the third sector's impact on the economy. We could not have had such a debate 15 years ago because it could not have been couched in the same terms. We could not have spoken about the significant impact the third sector was having on the delivery of services, nor the contribution it was making to the country's economy. She gave figures showing an increase from £5 billion to £12 billion. In my Government office region of the west midlands, the contribution is assessed to be £3.3 billion and the sector has between 44,000 and 50,000 employees. Notwithstanding the huge social benefits that the sector brings to the area, there are also considerable economic benefits. That is the case for a number of reasons, one of which is the public recoil from the privatisation excesses of the '80s and '90s, and the gradual realisation that the propriety form of companies delivering services, or the alternative of public sector organisations providing services, did not sensitively and specifically meet the whole range of needs within the wider community. Although there were models of mutuality and co-operation for people to exploit, they were often not well understood and under-utilised. There was no driving philosophy within the Government or the civil service to give the support necessary to enable those models to reach their full potential. I do not for one moment think that, more than 10 years after the Government came to power, we have reached that full potential, but huge strides have been made. The Minister has outlined some of the initiatives that have taken place to help development. However, it is also important to note hon. Members' contributions through private Members' Bills. Many of those were introduced by Labour and Co-operative Members, but there were others, including at least one from a Conservative Member. Those people pioneered private Members' legislation that has helped the development of different corporate models that, in turn, have helped the third sector. I would particularly like to mention the community interest company and, of course, the asset lock, both of which have enhanced the legislative framework necessary to assist the development of third-sector organisations. I did some research into the economic impact of third-sector organisations on my local authority. Although that impact is almost impossible to quantify, it is interesting to note that, in my local authority of Sandwell, there are 478 third-sector organisations, of which 312 are registered charities. In our representative roles as Members of Parliament, as we carry out our daily constituency tasks, I think we all see the incredible work that is carried out by not just volunteers but professionals within the sector to meet the needs of the local community. At this time of economic problems and recession—the Minister referred to this—third-sector organisations have a hugely strategic role to play. Two particular difficulties—it is the classic double whammy—for third-sector organisations have resulted from the recession. The rise in unemployment and the associated problems that go with it put an additional strain on voluntary and charitable organisations within an area and, over and above that, many such organisations are dependent on contracts from public sector organisations, which are having to squeeze their expenditure to meet tougher spending regimes in order to reduce public spending and the so-called financial deficit. Third-sector organisations are suffering in both ways, as a possible source of income is diminishing, but they have to meet increased demand on their services. The Minister outlined the measures that the Government have taken, which clearly show that they recognise the difficulties faced by such organisations. Those measures are, of course, very welcome. This is not a special plea but, as the West Midlands Regional Committee's report highlighted, we have suffered disproportionately in my area of the west midlands, largely because of our historical dependence on the motor industry, which has been badly hit. We have also suffered because we have comparatively low skill levels. Unemployment has been higher in the west midlands than in other regions, and we have had all the associated problems that go with that. The west midlands is at the forefront of facing such pressures. May I make a few comments about the Compact and the issues outlined by my right hon. Friend the Member for Cardiff, South and Penarth and my hon. Friend the Member for High Peak (Tom Levitt)? Many of those issues have been covered already. Obviously, there has to be a balance between value for money and the ability of small third-sector organisations to provide a service. The Compact was considered to be a good way of raising awareness of the issues and providing the right sort of framework and culture that would benefit both sides of the equation. However, there is a feeling—and perhaps a fear—within the third sector that, under pressure, there might be a process of resiling from the sort of principles under which the Compact was devised. Hon. Members have mentioned the difficulties that small third-sector providers face when they try to meet the requirements of large contracts and there is a short time for tendering. However, there is also a fear, which is supported by evidence, that third-sector providers are disadvantaged in the tendering process by an approach that puts cost ahead of value. Some of us who were in local government 20 years ago remember the difficulties that compulsory competitive tendering brought, when the only criterion for awarding a contract was cost. That relates to the old question of how to balance the cost and value of something. The most cost-effective contract often does not provide for the best value. There is a feeling that such contracts are now being negotiated purely on the basis of cost, and that the third sector is being disadvantaged by a private sector that can sometimes use the contract as a loss leader, and can then either change the terms or simply not deliver on the necessary quality to do the particular service adequately. The Government need to consider that in the development of this particular Compact. There is also a fear—or a robust complaint—that there is an unequal partnership. The statutory provider can renege on a contract, whereas the voluntary sector would be in trouble if it did so—that issue should be looked at. Regional Action West Midlands has told me that it is developing a regional procurement framework to be implemented by public sector organisations that would provide a standard framework for that particular tendering process throughout the area. That would provide a template that would be easily understood by the third sector and would remove some of the disadvantages of working within a time frame so that it can compete effectively. I ask the Minister to look at that as a way of taking the agenda forward. In conclusion, the third sector has come an enormously long way in the past 10 to 15 years. It is no longer regarded as an amateurish add-on to the services provided by the public sector, but seen as a more effective, sensitive and specific way of delivering services that the public sector is not always best placed to provide. It is thought of as infinitely better at providing services in many areas than the private sector. However, the third sector still suffers from some disadvantages. We still need to monitor and work with it to ensure that, over the coming years, its full potential is realised for the benefit of not only the economy, but the services that people need in our local communities.