Murky world of social enterprise

“Social enterprises” are the future of business in Wales, or so you might think from the plethora of funding schemes to help them to grow. But there’s a grey area about the definition of a social enterprise, that leaves the door wide-open for scurrilous grant-gobblers who are effectively small private entrepreneurs.

The Welsh Government’s web-site defines a social enterprise as “a business with social objectives”. Since most businesses claim at least some social benefits (whether it’s the milkman delivering a daily pinta or a multinational flogging vitamins), this isn’t exactly a clincher.  The Welsh Government goes on to say that “their left-over profits are reinvested for that purpose in the business or the community, instead of raising profit for shareholders and owner”.  The idea of “left-over” profits is strange – many businesses reinvest a large part of their profits back into the business, and recently shareholders have seen little if any pay-out despite profits. It’s seems all that has to be done to be a social enterprise is claim a woolly social purpose and either make no profit or have no shareholders. A business owner can pay him or herself whatever they like, there are no requirements to prove a social or community benefit.

Where ever there’s a chance of cash there will always be some dodgy entrepreneurs, and sniffing the chance of grants it seems a few have come out of the wood-work. Here’s an example – I could have chosen others.

Company G claims to be a ‘not for profit’.  It was set up in 2010 and now has two directors. It operates from what appears to be a private address. It had a turnover up to 2011 of £1.88 million, on which it made a profit of £3,419.  Its business, according to its website, is to “deliver high quality training and employment for participants of initiatives like Future Jobs Fund and Intermediate Labour Market provision” and it goes on to say “trainees form a team of temporary staff that offer free staffing solutions to public sector, third sector and sole trader organisations”.

In other words, it accesses various government grants to pay the wages of unemployed people, which it then places (at a fee) with assorted small business people in the area, doing their decorating, gardening and food prep for nothing.

Its latest foray has been into the Jobs Growth Wales fund, from which at least two young people have been placed with Company G, I suspect adding to its ‘team’ of other free labour to be farmed out doubtless for a fee to other employers.

Not what most people think is a ‘social purpose’ and as for ‘not-for-profit’.

There are many more businesses like this who claim to be not-for-profit but are in fact bog-standard enterprises. There are others in which a not-for-profit is in fact owned by a parent company who, one suspects, creams off the surplus.  Not only are these kinds of wheezes an utter rip-off of the tax-payer and the community they claim to help, they also bring the thousands of genuine social enterprises into disrepute.

The Welsh Government and the various social enterprise support bodies need to get wise to the scams out here and tighten up big time.

Victoria Winckler is Director of the Bevan Foundation.