The Social Economy in Northern Ireland A Policy Review in association with Dr. Brendan Murtagh Queen’s University Belfast & Professor Mike Campbell Leeds Metropolitan University June 2001 Table of Contents Table of Contents ............................................................................................................... i 1. Introduction ........................................................................................................... 1 1.1 Terms of Reference, Timing of Review & Approach ..................................... 3 1.2 Nature & Structure of Report............................................................................ 4 2. The Scope & Scale of the Social Economy in Northern Ireland .......................... 6 2.1 Definitions of the Social Economy ................................................................... 6 2.2 Components of the Social Economy................................................................. 8 2.3 What Do Social Economy Organisations Do? .................................................. 9 2.4 The Social Economy & Social Capital ........................................................... 11 2.5 The Scale of the Social Economy ................................................................... 14 2.5.1 The Scale of the Social Economy Elsewhere ............................................. 15 2.5.2 The Scale of the Social Economy in Northern Ireland ............................... 16 2.6 Factors Influencing Social Economy Growth & Development ...................... 18 2.7 Social Economy Impacts & Sustainability ..................................................... 20 2.7.1 The Sustainable Livelihoods Approach ...................................................... 20 2.7.2 Sustainability of the Northern Ireland Social Economy ............................. 21 3. Current Policies & Programmes for the Social Economy . Error! Bookmark not defined. 3.1 Departmental Review ......................................Error! Bookmark not defined. 3.1.1 The International Fund for Ireland...............Error! Bookmark not defined. 3.2 The EU & The Social Economy ..................Error! Bookmark not defined. 3.3 Developments at the UK Level ........................Error! Bookmark not defined. 3.4.1 Community Investment Tax Credit .............Error! Bookmark not defined. 3.5 Assessment of the Overall Social Economy Support System.................. Error! Bookmark not defined. 3.6 Gaps & Shortcomings ......................................Error! Bookmark not defined. 4. Recommended Process for Social Economy Development ...... Error! Bookmark not defined. 4.1 Principles of Good Practice .............................Error! Bookmark not defined. 4.2 Overview of Recommended Processes & Actions ........ Error! Bookmark not defined. 4.2.1 Action by the Public Sector .........................Error! Bookmark not defined. 4.2.2 Action by the Social Economy Sector .........Error! Bookmark not defined. 4.2.3 Joint Actions ................................................Error! Bookmark not defined. 4.3 Action by the Public Sector .............................Error! Bookmark not defined. 4.3.1 Locus for Social Economy Policy ...............Error! Bookmark not defined. 4.3.2 Action by All Departments ..........................Error! Bookmark not defined. 4.3.3 Actions by Specific Departments ................Error! Bookmark not defined. 4.3.3 Agenda for EU Support to the Social Economy at the Local Level in Northern Ireland ...........................................Error! Bookmark not defined. 4.4 Actions by the Social Economy Sector............Error! Bookmark not defined. 4.4.1 Developing a Coherent Vision.....................Error! Bookmark not defined. 4.4.2 Role of the Social Economy Agency ...........Error! Bookmark not defined. 4.5 Joint Actions .................................................... Error! Bookmark not defined. 4.6 Resource Implications ..................................... Error! Bookmark not defined. 4.7 Monitoring & Evaluation ................................ Error! Bookmark not defined. 4.7.1 Monitoring & Evaluating the Development Process ..Error! Bookmark not defined. 4.7.2 Monitoring & Evaluating the Social Economy ..........Error! Bookmark not defined. Appendix 1: Resource Papers ...................................... Error! Bookmark not defined. Appendix 2: Current Policies & Programmes for the Social Economy Error! Bookmark not defined. Error! Bookmark not defined. © Colin Stutt Consulting, 2001 ii 1. Introduction The social economy is large and diverse and it has a long history. In many areas Northern Ireland already represents best practice in social economy development, but there is scope for a fuller and more integrated approach particularly in the context of the new arrangements for government in Northern Ireland. Much of the social economy has developed independently of government support and policies. Other social economy organisations are important delivery agents for government policies and programmes. Government policies and programmes are one important element in maximising the potential of the social economy in Northern Ireland. On the one hand, government sets the fiscal, regulatory, legal and economic environments in which social economy organisations operate. On the other hand, government schemes and programmes provide a market, important sources of revenue and a focus of activity for many social economy organisations. Viewed from a government perspective, social economy organisations are important providers of goods and services. Many social economy organisations compete successfully with the private sector in meeting public sector needs. In such cases the main concern is to ensure that there is a level playing field for such social economy organisations. The review was undertaken by Colin Stutt, of Colin Stutt Consulting Dr Brendan Murtagh of the School of Environmental Planning, Queen’s University Belfast, & Professor Mike Campbell, Policy Research Institute, Leeds Metropolitan University with inputs from a very wide range of people & organisations in the social economy and the public sector in Northern Ireland. We would like to acknowledge and thank all those people who helped us in our work. In very many cases, however, the services provided by social economy organisations are distinctive; they cannot easily be supplied by private or public sector organisations. In these cases the very fact that the service is being supplied by a social economy organisation changes the nature of that service, for example by involving local people in a disadvantaged area in determining priorities for that area through structures which they can control. For all these reasons there is a mutual interest in the social economy and in government in ensuring the full and successful development of the Northern Ireland social economy. This policy review was undertaken as a step towards fulfilling the commitment in the Programme for Government to complete a review of the social economy in Northern Ireland by July 2001 – that commitment was in itself a recognition of the mutual interest of the social economy and of government in providing an appropriate regime for social economy development in Northern Ireland. The Social Economy in Northern Ireland The following exhibit provides an overview of our findings. Overview The Social Economy is a distinctive sector in Northern Ireland which n n n n n Has a scale which has not been measured But which we have reason to believe is at least 30,000 jobs or 5% of employment (& may be considerably more) Operates largely on a cross-community basis Creates employment & incomes particularly in disadvantaged areas But for which there exists w No public policies w No support mechanism, & w No forum for discussing its development & challenges The social economy is distinctive – it has characteristics and faces challenges and opportunities which are unlike other sectors. However, its scale is unknown. Based on in-depth research which has been undertaken in other regions, we believe that at a minimum it accounts for 5% of employment in Northern Ireland – 30,000 jobs. This would make the scale of the social economy comparable to that of the construction industry or the tourism sector in Northern Ireland, or twice the scale of the textiles and clothing, food, drink and tobacco or agriculture, forestry and fisheries sectors. Despite this scale there are no public policies for the social economy, no coherent support mechanisms and no forum exists for discussing the development of the sector and the challenges it faces. This is all the more remarkable because the social economy operates largely on a cross-community basis and creates employment and income, particularly in disadvantaged and often divided communities. Our policy recommendations are directed to remedying these gaps. 2 A Policy Review 1.1 Terms of Reference, Timing of Review & Approach The Terms of Reference for our work are set out in the exhibit below. Terms of Reference 1. 2. 3. 4. 5. Agree a working definition of the social economy Review scope & main components of social economy Profile existing measures & instruments, inputs & outputs Highlight policies & measures which can be developed Identify best practice in Northern Ireland and elsewhere 6. Identify gaps in the approach & programmes in Northern Ireland 7. Advise on the most appropriate means of managing & administering social economy policy in Northern Ireland 8. Report on the present role & potential of the SEA 9. Recommend a range of actions & programmes which are particularly suited to implementation at local level 10. Develop a monitoring & evaluation framework The review is timely because of the recognition which has been given to the social economy in the new round of Structural Funds support to Northern Ireland covering the period to 2006. In addition, at UK level, there have been important developments in fiscal, regulatory and other policies which affect the social economy in Northern Ireland as well in the rest of the UK. There is a need to integrate those national developments into thinking and actions relating to the social economy in Northern Ireland. The review was also timely because it enables the issue of the sustainability of the Northern Ireland social economy to be addressed. Given that much of the support for the social economy has been from EU Programmes, there is a need to take a view on how far the existing Northern Ireland social economy can be sustained when the current round of EU programmes end in 5 years time and a need to consider how far such support can and should be mainstreamed into Northern Ireland mainstream public expenditure programmes. 3 The Social Economy in Northern Ireland At the same time, many voluntary and community organisations are now seeing the development of social economy operations as offering them a route to longer term sustainability – there is a need to ensure that the environment for such organisations is appropriate. Our terms of reference required the review to be open inclusive, and pragmatic. Open and inclusive in the sense that all or any relevant organisations were invited to participate in our work and contribute to the debate and that our work should be available to those who wished to scrutinise it, challenge it and add to it. At the same time, a limited period was allowed for our work and we had to be pragmatic in our overall approach; it was not always possible to pursue each subject to its definitive conclusion. To achieve an open, inclusive and yet pragmatic approach a website was developed1 to set out our terms of reference and our work programme and to provide access to key documents, presentations etc. During the course of our work this website was receiving up to 1500 visits per month and a considerable number of those who visited the website contributed comments, case study material or other information either by email or phone call or by contributing to the social economy discussion forum which formed part of the overall social economy website. In addition, NICVA hosted a major conference on the social economy in Northern Ireland during the course of our work. That conference provided us with the opportunity to test our thinking with a wide cross-section of social economy organisations. 1.2 Nature & Structure of Report This report is policy – and action-oriented. It does not pretend to provide a definitive study of each and every aspect of the social economy in Northern Ireland – that would be a life’s work. Instead we concentrate on the issues essential for moving ahead with the development of the social economy in Northern Ireland. 1 www.colinstutt.com/social_economy.htm 4 A Policy Review Our central recommendation is that a rolling process of social economy development should be put in place on an agreed basis between the social economy sector and government. During that process many of the complex, longer term issues which we have identified can be tackled and resolved. However, if that process is not put in place the best that can be achieved by the review of the social economy is a once-off fix of particular issues. Our Resource Papers are available from www.colinstutt.com/social_eco nomy.htm. The Resource Papers cover the following topics The report is also intended to be, itself, open, inclusive and approachable. There is an extensive and, at times, obscure academic literature on the overall social economy, its development at national and international levels and its various component parts. We have not included any significant analysis of these issues in our report. Instead, we have made available a series of Resource Papers which provide a summary of some of the key issues arising in the academic reviews and of national and international best practice in social economy development, together with a number of case studies of Northern Ireland social economy organisations. The Resource Papers are listed in Appendix 1 and are available from the social economy website www.colinstutt.com/social_economy.htm. The rest of this report is structured as follows 1. Defining the Sector 2. Comparative Practice 3. Key Strategy Issues 4. Case Studies 5. Developing the Social Economy at a Local Level in Northern Ireland Section 2 deals with issues relating to the definition, scope, scale and activities of the social economy. It also distinguishes social economy actions from other activities in terms of their contribution to social capital and discusses the impact of the social economy and the sustainability of the sector Section 3 describes existing social economy policies and programmes in Northern Ireland. This Section identifies the strengths of the Northern Ireland social economy but also certain gaps & deficiencies in current arrangements Section 4 contains our recommendations for bringing Northern Ireland arrangements for the social economy into line with principles of national and international good practice. In many ways Northern Ireland already represents best practice in many dimensions but there is considerable scope for further development and integration of the sector in a wider policy framework. 5 The Social Economy in Northern Ireland 2. The Scope & Scale of the Social Economy in Northern Ireland This Section of the Report gets to grips with a number of important questions relating to the social economy in Northern Ireland, including What is the social economy? What is it made up of? What does the social economy do? How big is it? What are the factors affecting its scale and impact?, & What are the impacts which the social economy has and how do these relate to the debate about the sustainability of the social economy in Northern Ireland? 2.1 Definitions of the Social Economy There is an extensive literature on the definition of the social economy. This Report is not the place for a full discussion of the issues. Our Resource Papers provide a wide-ranging analysis of these issues, in particular Resource Paper 1 – Defining the Social Economy – examines issues relating to the definition of the social economy and identifies key components of the social economy Resource Paper 2 – Comparative Practice – provides a national and international perspective Resource Paper 3 – Key Strategy Issues – identifies barriers to a successful social economy and policies which might be used to overcome those barriers. The terms ‘social economy’, third sector, and ‘third system’ are often used interchangeably but this does not recognise the very considerable institutional and other differences between arrangements in different countries. There are, for example, distinct institutional and evolutionary differences between the meaning applied to the social economy in Southern European, Scandinavian and UK contexts. 6 A Policy Review The Partnership 2000 Social Economy Working Group led directly to the creation of an overall Social Economy Framework for Ireland and to the announcement by the Tanaiste in 2000 of a national Social Economy Programme with the objective of creating 2,500 additional jobs, mostly focused on those excluded from the labour market In the Republic of Ireland a July 1998 report by the Partnership 2000 Social Economy Working Group defined the social economy as "that part of the economy between the private and public sectors, which engages in economic activity in order to meet social objectives". More generally, the social economy is often seen, in the words of the EU White Paper on Growth, Competitiveness and Employment as “the continuum of possibilities ranging from supply totally protected by public subsidies to totally competitive supply”. But the social economy is more than just the space between the private sector and the public sector; it is a distinct sector in its own right with distinctive development needs and opportunities. It is perhaps more helpful to focus on the distinctive characteristics of the social economy, rather than focusing on the details of alternative definitions. Abstracting from the detailed debate about the social economy, it is clear that there are certain key characteristics or features which distinguish, and thereby define, social economy organisations. Those essential characteristics are shown in the following exhibit. Essential Characteristics Purpose Social objective Activity Provide goods or services Business model Principle of exchange Form Stakeholder ownership 7 The Social Economy in Northern Ireland Many social economy organisations go beyond the legal requirements and enshrine principles of democratic and participative management in their constitutions. Social economy organisations have a distinctive and clear purpose. They exist as a means of serving a social, community or ethical end, not for the sake of private profit. They also have a distinct activity, the provision of goods or service in a market place using an explicit business model based around the principle of exchange. Finally, social economy organisations have distinctive legal form, stakeholder ownership of a legal form which protects the organisation’s not-for-personal-profit status. Hence, a social economy organisation will have each of the following features a social, community or ethical purpose an explicit, market-based, business model, & a legal form appropriate to its not-for-personal-profit status. It should be noted that there are many organisations which have a social, community or ethical purpose and a not-for-personal-profit status. These, however, are not social economy organisations because they do not an explicit, market-based, business model. The essence of the social economy, therefore, lies in the application of an explicit business model to not-for-personal-profit organisations with a social, community or ethical purpose. 2.2 Components of the Social Economy The legal forms which social economy organisations adopt are very varied. This is a reflection of particular legal and regulatory circumstances and can change as those circumstances change. Common forms of organisation include companies limited by guarantee, co-operatives and industrial and provident societies. Equally, social economy enterprises can concentrate on a wide range of ‘sectoral’ activities, such as urban or rural regeneration, tackling unemployment, environmental improvement, the arts and culture, business growth or working with defined disadvantaged groups in society. Some of the forms of social economy organisations which meet the essential criteria set out above include Employee Owned Businesses ~ creating jobs, maintaining and rescuing jobs as part of local economic development activity Credit Unions ~ providing access to community finance 8 A Policy Review This categorisation of social economy organisations draws on a paper prepared for this review by the Social Economy Agency. The paper ‘Understanding Social Economy Definitions 2001’ is available from www.colinstutt.com/social_ economy.htm Housing Associations ~ providing social housing Local Enterprise Agencies ~ stimulating business and economic growth across Northern Ireland Co-operatives ~ associations of persons united to meet common economic and social needs through jointly owned enterprises Urban or Rural Regeneration Groups ~ key community structure in community-based renewal and revival, sometimes established as development trusts for particular areas Social Firms ~ providing employment and training to people with disabilities and other disadvantaged groups Intermediate Labour Market Companies ~ providing training and work experience for the long-term unemployed Community Businesses ~ enterprises which have a strong geographical definition and focus on local markets and local services Social Investment Funds ~ such as Ulster Community Investment Trust and Aspire which use investment funds to achieve social economy objectives Charities’ Trading Arms ~ enabling charities to meet their objectives in innovative ways, as trade companies. These examples illustrate the diversity and flexibility of the social economy. 2.3 What Do Social Economy Organisations Do? The diversity of the social economy means that different social economy organisations do very different things. However, it is possible to abstract from the particulars of individual organisations and identify certain generic activities which social economy organisations can and do undertake. Most social economy organisations will do most of the things which private companies do. They will develop new products, undertake production of existing products, undertake sales and marketing, implement human resource strategies, hold board meetings etc. However, some of the activities which social economy organisations undertake are highly distinctive and arise from the distinctive social, community or ethical purposes which social economy organisations have. 9 The Social Economy in Northern Ireland Some of the distinctive activities of social economy organisations are summarised in the following exhibit. These activities are clearly very different from those undertaken by private companies and many of them have clear relationships with key government policies and priorities. It is for this reason that in many policy areas there is a symbiotic relationship between government, its agencies and the social economy. Yet the social economy also remains distinct from government and the public sector and should not be seen as a sector dependent on public funds. The social economy is a distinct sector and many of its major components remain independent of public funds. However, the social economy provides an appropriate ‘partner’ to the public sector in many policy areas, offering the benefits of Resource Paper 3 – Key Strategy Issues – provides a fuller treatment of these issues 10 Significant externalities in programme delivery, for example through the use of participative delivery mechanisms, being close to local communities, employment of disadvantaged people etc., which enable social economy organisations to tackle market failure in distinctive ways An ability to innovate, be creative and flexible in response to needs and opportunities, which is much more difficult to achieve in centrally directed public sector organisations A Policy Review 2.4 An ability to draw on volunteers, donations and private funds to advance public policy, which are not available to public sector organisations, and A high degree of commitment to the organisation’s mission, evidenced both in the voluntary directors of social economy organisations and their paid employees. The Social Economy & Social Capital Social capital can be described as the glue which holds societies and communities together and help them to cope with change, realise opportunities and to handle adversity. More formally, the Cabinet Office describes the concept of social capital in the following terms ‘the interdependence between economic efficiency and distributional equity is one element of what is referred to as ‘social capital’ – a growing area of theory building on the work of Robert Putnam and others. Social capital consists of all those institutional arrangements, networks and relationships which promote understanding, trust and mutual respect; allow communities to pursue shared goals more effectively; improve information flows; and generally improve the quality of life.’2 Robert Putnam, a Professor at the Kennedy School of Government at Harvard University defines social capital as ‘social networks & the norms of reciprocity & trustworthiness which arise from them’. Putnam’s major work is ‘Bowling Alone’, a major study of the social capital endowment of the USA. He argues that building social capital contributes to better integrated, more active, capable and cohesive communities and proposes four principles of public policy in relation to social capital, which are summarised in the following exhibit. An accessible form of his arguments is made in the Bettertogether report, available from www.bettertogether.org 2 Cabinet Office Performance and Innovation Unit, Report on Rural Economies, 1999, Annex 3. 11 The Social Economy in Northern Ireland In the first place, Putnam argues that policies should be assessed to establish whether they build up or deplete social capital. Those which deplete social capital should be avoided, this might occur, for example, as a result of a reduction in local involvement in decision-making and control through the introduction of a new policy. Those which build up social capital should be favoured Secondly, Putnam notes that social capital is a recyclable resource. The more social capital is used in a community the stronger it becomes and the more capable that community becomes in realising opportunities and handling adversity. Thirdly, Putnam argues that the best form of social capital is ‘bridging’ social capital which is outward looking and inclusive by contrast with ‘bonding’ social capital which is inward looking and exclusive. The Northern Ireland Economic Council has described the difference between these forms of social capital and commented on the role of the social economy in building up social capital as follows ‘Bridging social capital is outward looking and encompasses people across diverse cleavages while bonding social capital is inward looking and tends to reinforce exclusive identities and homogenous groups. 12 A Policy Review One area which invests heavily in social capital is the social economy. The social economy . . . is seen increasingly as a major source of jobs and an effective means of addressing issues such as long term unemployment and social deprivation. It offers an important vehicle by which government can invest in building up social capital, particularly bridging social capital 3’. One of the remarkable features of the social economy in Northern Ireland is that it is very largely organised on a cross-community basis, i.e., on the basis of bridging rather than bonding social capital. As the social economy works to a large extent in the most deprived, marginalized and divided communities in Northern Ireland, this is a remarkable achievement in a divided society. Finally, Putnam argues that there is a need for horizontal communication between social economy organisations instead of a largely vertical communication between government agencies and their experts and individual social economy organisations on a one-by-one basis. The social capital building benefits of the social economy are, in general, additional to the specific action or initiative being undertaken by a social economy organisation – these benefits arise not from the specific activity or initiative but from the distinctive characteristics of social economic organisations. Our conclusion from this is that the ability of the social economy to build up social capital and to operate largely on a cross-community (or bridging social capital) basis are strong grounds for making it a crossDepartmental policy of the Northern Ireland Executive that, where feasible, 3 social economy delivery mechanisms are to be preferred to direct drive delivery by the public sector or contract based delivery by the private sector, that policies and policies and programmes should be systematically examined to ensure that they - contribute to building social capital, do not erode existing social capital and - use social economy delivery mechanisms wherever it is feasible to do so. Northern Ireland Economic Council, Occasional Paper 13, ‘Local Development: A Turning Point’, December 2000 13 The Social Economy in Northern Ireland Implementation of this conclusion will pose challenges to both the public sector and the social economy. Later in this report we identify mechanisms for identifying those challenges and responding to them. 2.5 Studies of the social economy across the EU and internationally have noted the difficulty of measuring the scale and impact of the sector using conventional statistical techniques. They have also commented on the ‘low visibility’ of the social economy, which has often meant that the sector has not received the public policy attention it deserves on the basis of its scale and its impact on disadvantage and social exclusion In a survey undertaken in 2000 the value of voluntary directors’ inputs to 31 local enterprise agencies was estimated at £600,000 per annum. Social economy organisations are uniquely placed to draw upon these voluntary inputs. The Scale of the Social Economy The social economy eludes conventional statistical definition for example based on Standard Industrial Classification codes. As a result, it is not possible to turn to an existing statistical source and determine the scale of the social economy in Northern Ireland. Instead, it is necessary to piece together information from a variety of sources to produce a broad estimate of the scale of the social economy. This situation is unsatisfactory because it makes it difficult to grasp the size of the social economy. In Section 4 we recommend research to address this and other information gaps relating to the social economy. For the purposes of this Report we have reviewed estimates of the scale of the social economy elsewhere in the UK and internationally and have examined a number of sources of information about the size of components of the social economy in Northern Ireland. However, this information is based on a variety of information sources which do not always relate to the same time period or use the same definitions and is incomplete. As a result we have not been able to provide more than an illustration of the likely scale and impact of the social economy in Northern Ireland. In addition, it is not clear how the social economy should be measured. Its economic value-added is different from that of a private company and, by definition, is not fully captured by market valuation of activities. In this situation we have tried to build up a grid of different dimensions of scale including number of organisations, number of volunteers, number of employees, turnover, assets etc. However, in most cases the information available is patchy and incomplete. The difficulty which we have experienced in measuring the scale of the social economy in Northern Ireland is one indication of the ‘low visibility’ of the sector in public policy terms – a characteristic of the social economy which has been noted in other regions and across the EU. In Section 4 we recommend actions by which this issue might be addressed. 14 A Policy Review 2.5.1 The Scale of the Social Economy Elsewhere Resource Papers 1 and 2 describe a number of studies estimating the scale and impact of the social economy in other regions. Professor Mike Campbell analysed the impact of the social economy in 8 member states of the European Union and found that it employed around 7.2 million people, accounting for 6.6% of total employment and 7.7% of employees in employment. Employment is equivalent to 39% of the total numbers of the unemployed in the EU, more than the total of people employed in agriculture in the EU and one third of the numbers of people who are selfemployed in the EU. The social economy is well developed and researched in Scotland and there are important parallels with conditions in Northern Ireland. As peripheral economies that have both experienced the worst effects of deindustrialisation and are open to the possibilities offered by devolution the social economy will have a distinctive role to play in developing new and innovate approaches to economic, spatial and community renewal. ERM reviewed the scale of the social economy in the Highlands and Islands of Scotland and showed that 5,866 people were employed, that it generated £50.5m of income per annum and paid total wages of £4.35m every year. In their report Valuing the Social Economy, McGregor and Clark surveyed around 800 social economy organisations in lowland Scotland. Their results indicate that the social economy in lowland Scotland employs around 42,000 people and involves around 60,000 volunteers. They also showed that 79% of organisations spent at least half their income in disadvantaged areas and that 82% spent at least half their income on disadvantaged groups. In total, McGregor and Clark estimated that some £400m is spent on disadvantaged areas with a further £600m being spent on disadvantaged groups by social economy organisations. Sinclair, Grimes and Robb estimated that the total turnover of the social economy in Scotland was £1.6 billion from a combination of grants and revenue. Some 43% of social economy organisations generate revenue with housing associations and credit unions generate more than 70% of their revenue this way. In some areas the social economy can be particularly significant and the authors noted that in Drumchapel social economy organisations employ 410 people, in Craigmillar 390 people, in Motherwell 1,100 and in Greenock it employs 300 people (compared with the 350 jobs left in Shipbuilding). An audit of Leicester’s social economy showed that it employed 4,040 people representing 8.6% of jobs and its turnover was valued at £209m. 15 The Social Economy in Northern Ireland 2.5.2 The Scale of the Social Economy in Northern Ireland As we noted earlier, it is not easy to measure the social economy. We tried to compile an estimate of its scale in Northern Ireland by assembling material from a wide range of sources. That material is summarised in the table on the following page. It is important to recall that the information in the table is compiled from a variety of sources of varying degrees of accuracy and relates to different time periods and different definitions. It is also the case that the estimated totals for the social economy are considerable underestimates because data on substantial parts of the social economy is just not available. The figures in the table suggest a social economy with over 500 organisations, 2200 voluntary directors or other volunteers, under 5000 employees with a turnover of £50 million per annum and assets of £180 million. However, these figures are clearly incomplete and should not be regarded as a sensible estimate of the scale of the social economy in Northern Ireland. In the absence of other information the best guide to the scale of the social economy in Northern Ireland lies in the existing information about the scale of the social economy in comparable regions. Where researchers have had the resources to undertake detailed, in-depth reviews of the scale of social economies they have found, typically, that it accounts for employment equivalent to about 6% of total employment. In several EU countries employment in the social economy has been found to be larger. In addition, there is substantial anecdotal evidence that the social economy in Northern Ireland is larger and more important than in other regions of the UK. On this basis, our best estimate of the scale of employment in the social economy in Northern Ireland is based on a conservative, lower range estimate of 5% of total employment (equivalent to 30,000 jobs), and an upper range estimate of 8% of total employment (equivalent to 48,000 jobs). Further, in-depth research will be required to refine these very broad estimates. 16 A Policy Review Sector No. of Organisations No. of Voluntary Directors & Other Volunteers No. of Employees ? ? ? ? ? Credit Unions 183 4000 700 ? ? Housing Associations 41 500 1500 42 118 Local Enterprise Agencies 31 300 200 8 55 Co-operatives 31* ? 1350 ? ? Urban Regeneration ? ? ? ? ? Rural Regeneration 54 ? ? ? ? Social Firms 5 40 30 ? ? 196 939 1089 ? ? Intermediate Labour Market Organisations - - - - - Social Investment Funds 2 28 6 ? 7 Trading Arms of Charities ? ? ? ? ? 533 2199 4875 50 180 Employee Owned Businesses Community Businesses Incomplete Totals * Retail Co-ops Only 17 Turnover £m Assets £m The Social Economy in Northern Ireland According to the Quarterly Employment Survey in June 2000 there were 626,000 employee jobs in Northern Ireland. The following table sets out the absolute and percentage of employment in some key sectors, to provide a point of comparison with the estimate of social economy employment. Sector 2.6 Employment June 2000 % of Total Agriculture, Forestry & Fishing 15,400 2.5 Food Drink & Tobacco Manufacturing 18,710 3.0 Textiles & Apparel 16,500 2.6 Manufacture of Vehicles & Other Transport Equipment 13,030 2.1 Construction 31,840 5.1 Retail Trade 64,210 10.3 Hotels & Restaurants 35,050 5.6 Public Administration & Defence 59,090 9.4 Education 65,940 10.5 Health & Social Work 94,260 15.1 Recreation, Culture & Sport 13,580 2.2 Social Economy Minimum Estimate 30,000 5.0 Social Economy Upper Estimate 48,000 8.0 Factors Influencing Social Economy Growth & Development It is helpful to think of social economy organisations as being akin to small businesses. Like small businesses, social economy organisations vary. Some are highly ambitious and innovative, others are modest in their anticipated scale and merely replicate at local level what has been done elsewhere. Some exceed expectations and others fall short, some survive but never really prosper and others fail and close down. This is a normal, healthy and efficient feature of the market economy in which social economy organisations operate. However, there are specific factors which affect social economy organisations going beyond the broad factors which affect small businesses. 18 A Policy Review Several commentators have noted that managing social economy organisations is more complex and demanding than managing comparable private businesses because social economy organisations typically have multiple objectives and management processes which are more open and participative than in typical private businesses. In the first place, social economy organisations are seldom, if ever, started with a strong equity investment. Indeed, the legal form of most social economy organisations rules out the existence of a share capital. As a result, social economy organisations generally start with a balance sheet which shows loans, rather than equity, as the main source of finance. This makes the organisation more vulnerable to unexpected fluctuations, it also makes it more difficult for social economy organisations to gain commercial funding from banks. The only way in which a new social economy organisation can, in effect, develop equity is by way of a grant from government or from a philanthropic organisation. Specialist social lenders, such as Ulster Community Investment Trust, can provide an alternative method of development for some social economy organisations but this does not compensate for the absence of equity in the balance sheet and not all social economy organisations will have a cash flow or balance sheet which will sustain borrowings. In such situations a grant may be the only way in which a social economy organisation can become established. Social economy organisations are also less likely than typical small businesses to have high scores on key success factors. Small businesses that grow are likely to be based on specific expertise of an individual or group of individuals in a particular sector and with a strong business network. Other success factors include a distinctive product or service addressing a market sector in which the product or service can establish a niche position and the existence of sufficient equity finance for both fixed and working capital requirements. In broad terms, social economy organisations are likely to find it more difficult to put in place these success factors than would a typical small business. Small business policies are now well established. There is a broad consensus that a stable and favourable business environment is fundamental but that specific targeted assistance can be justified in areas such as small business finance and training and in functional areas such as marketing and product innovation. These initiatives complement the favourable and stable environment to produce, overall, a successful and growing small business economy. In addition, there is a recognition of the importance of entrepreneurship not only in small business development but more generally in the functioning of the overall economy and government supports entrepreneurship awareness and development because of the wider economic benefits which it generates for the economy. 19 The Social Economy in Northern Ireland The principles of policies for SME development can be applied to the social economy, but policies and programmes need to be adapted to take into account the distinctive role and ethos of social economy organisations and the differences between social economy organisations 2.7 By analogy, if we are seeking to develop a successful and effective social economy we might expect to have to make similar interventions in support of social economy organisation development by providing training, appropriate financial support where it is justified and stimulation of social entrepreneurship. In addition, such support and intervention must recognise the distinctive characteristics of individual components of the social economy, for example the development needs of an early stage community business are likely to be very different from those of a social firm, which often has access to the managerial and other resources of a parent charitable organisation. As with small business, interventions to stimulate the social economy can well be justified but they must be appropriately targeted at the needs of particular social economy organisation types and not provided on a ‘one size fits all’ basis. Social Economy Impacts & Sustainability In Northern Ireland the term ‘sustainability’ is used in relation to the social economy mainly to refer to the need for social economy organisations to replace the grant funding which they have received from EU and other programmes with market-based incomes. DFID defines livelihoods as sustainable when they Are resilient in the face of external shocks and stresses Are not dependent on external support (or, if they are, that support itself should be economically and institutionally sustainable) Maintain the long term productivity of natural resources, & - do not undermine the livelihoods of others. The sustainability debate, however, has wider dimensions. The Department for International Development (DFID) has developed a methodology for thinking about the objectives, scope and priorities for international development and for assessing its effectiveness called the sustainable livelihoods approach. 2.7.1 The Sustainable Livelihoods Approach This approach sees sustainable systems as those which accumulate a stock of assets , they increase the capital base over time. By contrast, unsustainable systems deplete or run down capital, spending assets as if they were income and so leaving less for future generations. The sustainable livelihoods approach specifically looks at the impact of development on the following aspects of capital endowment 20 human capital natural capital (natural resources etc.) financial capital (financial assets) social capital, & physical capital (physical assets). A Policy Review 2.7.2 Sustainability of the Northern Ireland Social Economy In this perspective the sustainability of the Northern Ireland social economy can be seen in wider terms. In particular the social economy is resilient in the face of external shocks and stresses and has contributed greatly to making Northern Ireland itself more resilient much of the social economy is not dependent on external support (for example credit unions) in other cases withdrawal of external support would require social economy organisations to restructure and downsize their operations but the organisation would continue to be able to trade (for example local enterprise agencies derive ½ of their income from the rental of property) in other cases, the organisations are not sustainable but the support they receive should be institutionally and economically sustainable (for example housing associations are the preferred method of provision of social housing in Northern Ireland) in yet other cases the social economy organisations are not themselves sustainable and there is uncertainty about whether the support they receive can itself be sustained. It is in relation to this, fifth, category that the greatest uncertainty exists. The question which needs to be answered is whether the overall contribution to the regional capital stock in Northern Ireland is positive or negative. The overall contribution to the capital stock can be positive even if the economic or financial impact is negative. This would occur when a social economy organisation is making a strong contribution to human or social capital but is not financially sustainable without continued external support. The ending of mainstream EU funding for Northern Ireland after 2005 will make existing spending patterns economically unsustainable. There will have to be changes. The difficulty lies in establishing whether particular social economy actions will continue to be supported by mainstream funds after that date. Such support is likely to be institutionally sustainable only if the social economy activities concerned can demonstrate that they make an effective and economical contribution to social and governmental aims. 21 The Social Economy in Northern Ireland Adapting the DFID approach, the social economy contributes principally to human capital (by the experience and knowledge gained by those involved in social economy organisations) social capital (by the establishment of the networks and relationships of trust referred to by Robert Putnam), & economic or financial capital (as a result of the economic activities of social economy organisations). However, different types of social economy organisations are likely to contribute to the these different forms of capital in different ways, as the following table illustrates. Illustrative Degree of Contribution to Building Capital Type of Social Economy Organisation Employee Owned Businesses Credit Unions Housing Associations Local Enterprise Agencies Co-operatives Urban Regeneration Rural Regeneration Social Firms Community Businesses Intermediate Labour Market Organisations Social Investment Funds Trading Arms of Charities Human Capital High Social Capital Economic Capital Low High Low Medium Medium High Medium Medium High High High High Medium Medium Medium Medium High High High Medium High High Low High High High Medium Low Low Low Medium High Medium High Low In this table an illustrative view has been taken of whether the contribution which the different forms of social economy organisations to human, economic and social capital is high, medium or low. Clearly, the descriptions in the table are impressionistic and could well be challenged, however, the point to be drawn from the table is that different types of social economy organisations make different contributions to the regional stock of capital. In general terms, present government support and other schemes really only consider the economic dimension of the work of social economy organisations. Other aspects are sometimes acknowledged but seldom given substantial weight in determining support priorities. 22 A Policy Review As a result, a social firm, for example, may well be highly effective in developing the individuals who work in it but will be assessed for support as if it were a community-business against essentially economic criteria. This creates confusion for the organisation, its funders and those who work in and for the organisation. An active debate about the sustainability of the social economy in Northern Ireland needs to be clear about the different impacts which different forms of social economy organisations can have. It will then be possible for particular forms of social economy organisations to argue their ground for continued support from mainstream funding on the basis of contributions to economic development, New Targeting Social Need, local needs, the equality agenda, human resource development or the provision of social, community, cultural or environmental services. Only when there is clarity about the anticipated benefits or outcomes of support to specific types of social economy organisations can the sustainability of support to those organisations be addressed realistically and the added value which social economy approaches can bring to particular policy areas properly be valued. Unlike a private business, the full value of a social economy organisations cannot be captured fully by the market value of its outputs; nor can its sustainability be properly assessed only by consideration of the financial returns. The DFID Sustainable Livelihoods Approach provides a wider perspective of the sustainability of the social economy in Northern Ireland. 23