Social enterprise businesses are great in theory, but how do we avoid unnecessary complications and over-regulation in practice?
One of the policy sessions at the National Housing Federation's recent conference concerned the future relationship between social enterprises and housing associations.

Most of the audience seemed to be impressed with the social enterprise businesses discussed by Jonathan Black, chief executive of the Social Enterprise Coalition, and the impact they have had on communities and individuals.

But delegates had something to say about the comments made by Barbara Phillips, director of the Social Enterprise Unit at the Department of Trade and Industry, on the proposals for structural change currently working their way towards legislation.

As Phillips reiterated, the proposals in the strategy unit report of September 2002, Private Action, Public Benefit – most of which have been accepted by the Home Office – are to be the subject of early legislation. This means the community interest company and the charitable incorporated organisation will be available for use in the medium term, and hopefully will be accepted as suitable vehicles for registered social landlords before long.

The audience was concerned about two things: why were more vehicles necessary and what would be the implications of another regulator in a sector already monitored by the Charity Commission, the Housing Corporation and the Financial Services Authority?

On the first point, there is a good case for the need for vehicles that are simple in structure and constitution. These will be easier to understand than existing models for volunteers working in the community benefit and charitable sectors. Existing RSLs, particularly the larger ones, have learned to live with the current models, but the newer and, usually, smaller organisations involved in social enterprises often find them confusing. Hopefully, the Home Office and Charity Commission will make sure unnecessary complexity is avoided when these new models are constructed.

Not more regulators …
On the second point, it is not intended that existing organisations, including RSLs, will be forced to adopt the new models in lieu of their current constitutions. If the community interest company and the charitable incorporated organisation are to be attractive to RSLs and others, the regulatory framework must be clear and light-touch, and a multiplicity of regulators must be avoided.

The regulatory framework must be light-touch and a multiplicity of regulators must be avoided. So who will regulate the new-style bodies?

So who will regulate the new-style organisations? Given that the Housing Corporation's role in relation to RSLs seems to be assured for now, it is clear to me that the ideal situation would be to concentrate the regulation of other "community benefit" organisations, of whatever legal constitution, in one place.

Having said that, perhaps it would be wrong to burden those that are not charities with the Charity Commission; and it must be unlikely that the commission's role would be reduced for those that are charities. Perhaps the best we can hope for is that the regulation of community interest companies might be added to the system in place for industrial and provident societies, known as community benefit societies under the 2003 Co-operative and Community Benefit Societies Act. This includes many RSLs (but not housing co-ops) currently registered as such.

Just as one of the main regulatory aims of the Housing Corporation is to secure the social housing objectives of RSLs, so the main regulatory aims in relation to industrial and provident societies, community interest companies and charitable incorporated organisations will be to secure and preserve the concept of being in business for the benefit of the community, and to ensure that the assets generated are not used for any profit-making purpose.

The term for this is "asset lock" and the concept applies already to RSLs through provisions in Part 2 of Schedule 1 to the 1996 Housing Act. This common feature demands a common regulator.

The creation of such a regulator for community interest companies and charitable incorporated organisations might be the ideal opportunity to prise away from the Financial Services Authority regulation of community benefit societies, not a particularly satisfactory state of affairs. It would give the community enterprise and social housing sectors a common regulatory framework comprising the Housing Corporation (for RSLs) and the Charity Commission (for charities), plus the community benefit regulator in most cases.