Economic optimism may be in short supply in government circles, but Kevin Brennan, the Minister for the Third Sector, believes that despite the current fiscal turmoil, social enterprise is an idea whose time has arrived.

“People are looking around for a more ethical and environmental context for the goods and services they consume, not least following the credit crunch, the banking crisis and the kind of things that have emerged about banking practices. What social enterprise has got to offer — making a profit to make a difference — at this point is quite an appealing and appropriate thing,” he says.

Mr Brennan believes that as purse strings tighten and traditional funding streams come under pressure, the role of social enterprise in delivering public services will become increasingly significant. The problem that has dogged social enterprise is that there are no regulations governing it and it is difficult to measure just how social an enterprise is.

Cynics have claimed it can be used as little more than a marketing tool to capitalise on our social consciences. With this in mind Mr Brennan has thrown his weight behind the Social Return on Investment (SROI) project. The SROI project aims to provide a method of quantifying the social value a business creates by 2011.

A measurement would be invaluable in persuading wary private sector organisations to invest in social enterprise - vital if social enterprises are going to be able to compete for public sector contracts.

There are 55,000 social enterprises in the UK, employing 650,000 people and contributing £8.4 billion to the economy annually. However, with some notable exceptions such as Turning Point - a social care organisation that provides a range of health and social services to more than 100,000 people with learning disabilities and those with drug, alcohol and mental health problems each year - the vast majority of social enterprises are small businesses which are ill-equipped to take on the role of an important public service provider.

“What's going to happen in the years to come, and something we are keen to encourage, is that as some of these businesses grow they become able take on significant public sector contracts,” Mr Brennan says.

This is something that Hackney Community Transport (HCT) has done since it was formed in 1982 by local community groups. It was created to provide affordable transport for local voluntary organisations and charities. HCT now delivers a range of innovative public and community transport services across London, has successfully bid for and runs a number of Transport for London red bus routes, is an NVQ accredited centre for passenger transport training and is a leading training centre for women bus drivers.

It also runs more than 30 MyBus services in West Yorkshire and the dial-a-ride AccessBus service in Leeds. There are government programmes that can provide funding and loan finance to social enterprises and other third sector organisations that are sufficiently developed to bid successfully for some sizeable public sector contracts, but smaller social enterprises looking to take a slice of public commissions face an uphill battle.

Mr Brennan said: “It's lift-off finance where there is a potential gap in the market. That's why we are exploring the idea of creating a social investment wholesaler, possibly using some of the funds from the Unclaimed Assets Bill (this allows banks to release unclaimed assets for reinvestment in social projects, while protecting the owner's rights) to provide that kind of lift-off finance to social enterprise.”

If all goes to plan, social enterprise may well gain the credibility and contracts that it's supporters have always craved.

CV

Who: Kevin Brennan has been the MP for Cardiff West since 2001. After spells in the Government Whips Office and the Department for Children, Schools and Families, he was appointed to the Cabinet Office as Minister for the Third Sector in 2008.

What: The Social Return on Investment project (SROI) aims to standardise the measuring of social value, allow social enterprises and other third sector organisations to articulate the value they create through their activities, and enable social investors and commissioners of public services to make more intelligent investment or purchasing decisions.

When: The Office of the Third Sector and a consortium of charitable and voluntary organisations will be working with investors, grant makers and commissioners on the SROI project, which runs until 2011.

Why: “It [SROI] can be a metric that is considered when awarding public sector service contracts and will help create the sensible level playing field that social enterprises are looking for when they are bidding against traditional private sector providers,” the minister says.