Hung Suet-lin 17/10/2005

1. Discussion Forum on “Combating Poverty – Policies and Strategies” Lessons Learnt from Overseas Experiences Hung Suet-lin 17/10/2005

2. WORK-RELATED SUPPORT Creating Jobs and Enterprises in Deprived Areas

3. The ProblemConcentration of workless • Greatest variation in terms of unemployment and economic inactivity rates at the smallest levels of geography – between districts and wards • “postcode poverty” • Social Exclusion Unit (SEnU) adopted a street-by-street approach to analyse the situation • Areas with high concentration of workless, for example, North West, North East, Yorkshire and the Humber

4. Concentration of workless • A quarter of concentrations cluster into 3% of England’s 8,005 wards • In the worst affected 1% areas, more than half of all adults are out of work and on benefits • Self-employment in concentrations is half the national average (4% compared with 8%) • Four out of 10 of the concentrations are also concentrations of workless lone parents

5. Characteristics of the concentrations • around half the working-age population have no qualifications • half the households have at least one person with limiting long-term illness • proportion of black twice the national average. • multiple disadvantages such as substance misuse and a disability • many have two or three generations out of work • One fifth of workless households have dependent children • one third of workless people provide over 50 hours of caring work per week

6. Enterprise gap • significant disparities in level of enterprise at a regional level • a wide variation in both business start-up rates and business density • lack of joint working at local level

7. Explaining the Problem • Changes in the nature and location of jobs • “Residential sorting” • Area effects • Place effects - the lack of infrastructure, transport, competition for job opportunities and variation in the quality of local services • People effects - the damaging effect of living with many other workless peoples such as area-based discrimination by some employers

8. Explaining the problem • Barriers to develop local enterprises in deprived areas • Access to finance • Access to business support services • lack of experience, skills or training of potential employees • a weak enterprise culture • institutional or administrative barriers • a poor business environment

9. Government approach • Basic Value Nobody should be disadvantaged by where they live. Local solution for local problems

10. Government approach • reducing barriers to employment in the three crucial areas of childcare, skills and transport • to increase economic performance in every region as well as narrowing the gap in growth rates between regions • to promote jobs and enterprise in deprived areas • give greater freedom to local and regional managers and to frontline workers

11. Local Strategic Partnerships (LSPs) and Local Area Agreements (LAAs) • Neighborhood Renewal • reversing the spiral of decline • Neighbourhood Renewal Unit’s (NRU) work cuts across all government departments • LSPs are central to the delivery of the Neighbourhood Renewal National Strategy Action Plan • in 88 most deprived local authority areas • receiving additional resources through Neighbourhood Renewal Fund (NRF)

12. LSPs • a single non-statutory, multi-agency body matching local authority boundaries • to identify local problems and provide solutions • to develop and deliver a Local Neighbourhood Renewal Strategy to tackle deprivation • to promote better joining-up of agencies and initiatives in the public, private, business, community and voluntary sectors • went through a process of accreditation by Government Offices for the Regions in 2002 • Community Empowerment Fund – involving people in how public services are provided

13. LSPs • Core tasks of LSPs • prepare and implement a Community Strategy • explore the scope for bringing together and rationalizing exiting plans, partnerships and initiatives • work with local authorities in working out a Local Public Service Agreements

14. LAAs • all relevant organizations are parties • specify the targets and funds available to spend in the pursuit of the targets

15. Local enterprise growth initiatives (LEGI) • a funding worth ￡50 million in 2006-07, rising to 150 million per year by 2008-09 • to provide support to locally developed proposals to promote enterprise in the most deprived areas of England

16. Local enterprise growth initiatives (LEGI) • The Government has designated 1997 Enterprise Areas in 2002. • In England and Scotland, the areas selected are the most deprived 15% of wards/areas. • In Wales and Northern Ireland, they are the most deprived 42% of wards. • In England, 73% of them lie within the 88 local authorities which receive support from the Neighbourhood Renewal Fund.

17. Local enterprise growth initiatives (LEGI) • Six Key Principles • effective targeting • effective solutions • significant commitment • strong local partnerships • integration with broader regeneration efforts • evaluation and evidence building

18. Local enterprise growth initiatives (LEGI) • Three outcomes targeted • increasing total entrepreneurial activity • supporting the sustainable growth • attracting investment and franchising into deprived areas

19. Neighbourhood Renewal Fund • ￡3 billion to be spent over 10 years • can be spent in any way that will tackle deprivation – health, education, jobs, housing, local environment, crime • targeting at job creation • providing support to small and medium size companies and room for informal economy • some successful cases such as providing special services, usually personal services • partnership with transport trust to provide free transport on buses/trains to job-seekers

20. Phoenix Fund • launched in Nov 1999, a 30m Fund • to support enterprise in deprived areas and promote the creation of social enterprises • provided around 20m to support the Community Development Funding Initiatives (CDFI) sector providing lending and loan guarantee support to enterprises

21. Small Business Service (SBS) • an agency of the Department of Trade and Industry • seven strategic themes • Building an enterprise culture • Encouraging a more dynamic start-up market • Building the capability for small business growth • Improving access to finance for small businesses • Encouraging more enterprise in disadvantaged communities and under represented groups • Improving small businesses' experience of government services • Developing better regulation and policy

22. Social Enterprises • A Social Enterprise Unit (SEnU) has been set up in Small Business Service of the dti. • Definition of social enterprise: “A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximize profit for shareholders and owners.” (Department of Trade and Industry, 2002, pp. 8)

23. Defining features of social enterprises • a kind of social economy; to support a social purpose • tackle a wide range of social and environmental issues • using business solutions to achieve public good • a combination of enterprise, social purpose and customer focus • social purposes: creating wealth for the disadvantaged, neighbourhood and urban regeneration, public service delivery, social and financial inclusion • part of the broader third sector

24. Defining features of social enterprises • a great diversity in size, strength and operates at many levels including local community enterprises, social firms, cooperatives and large national or international organizations • some start off as businesses, most are in transition from voluntary sector organizations • no single legal model for social enterprise, can be companies limited by guarantee, shares, industrial societies, unincorporated, charities • social enterprises “clustering” together to benefit from support networks and greater economies of scale

25. Social Enterprise Unit • set up within the Department of Trade and Industry (dti) in Autumn 2001 • 8 major areas of concern: • legal and regulatory issues • public procurement • business support and training • finance and funding • promotion • research/mapping • impact evaluation/social and economic indicators • learning from experiences

26. Social Enterprise Unit • Seven roles • help to change the business culture • to ensure that the legal and administrative framework should not hinder the development and growth of social enterprise by providing a leveling play field • the local authorities in particular have an important role in opening up public procurement • working closely with training providers, both public and private • to ensure appropriate finance and funding is available • active promotion of social enterprise by recognizing and rewarding success • to develop minimum standards of behaviour or an accreditation system of social enterprises

27. development of cooperatives • supported under the policy of developing social enterprises • The cooperative principles: “that the very act of working together can bring social and economic benefits have been recognised. It is believed that through working in this way, people can develop a sense of their own power to change things, recognition of the importance of collective action, and better understanding of wider concepts of citizenship” (dti, 2002, p.25).

28. development of cooperatives • Cooperative Action is a new foundation established to support the development of new forms of cooperatives and mutual enterprise; giving grants and making loans of between ￡5000 and ￡200,000. • Intermediaries, e.g. Cooperative Movement, Social Enterprise London

29. National Minimum Wage

30. The Problem • September 2004, around 25.6 million workforce with 17.6 million full time and eight million part-time • low-paying sectors accounted for some 6.1 million jobs – around 24% of all employee jobs • 46% of employee jobs in the low paying sector are full time • April 2004,1.1% of total number of jobs paid below the October 2003 NMW (272,000 jobs)

31. Concentration of low pay jobs • Women • part-time workers • home workers • some minority ethic groups • young people • those who have a work-limiting health problem

32. The Low Pay Commission • set up in 1997 • National Minimum Wage introduced in 1999 • an independent advisory commission • 10 appointed commissioners, on voluntary basis • to produce a report to the government every two years • for the discussion of the parliament • become statutory after parliament endorsement

33. The NMW • set two years ahead • taking reference from the average earning growth • to make it as evidenced-based much as possible • also through a process of negotiation with employers • principle behind - “fair pay fair job”, not meeting “needs” • 1.1 million jobs have directly benefited from the 2004 upratings

34. National Minimum Wage Hourly Rates, April 1999- October 2004

35. Impact of the NMW • no significant negative impact on the labour market or inflation • no evidence that unemployment increases • not much adverse effect on profitability of firms • gender pay gap has been narrowed

36. Impact of the NMW Nine sectors providing around 6 million jobs, nearly a quarter of total, have been mostly affected: • retail • hospitality • cleaning • security • childcare • social care • agriculture • textiles, clothing and footwear • hairdressing

37. Compliance and enforcement • Self-enforcement is the approach • Inland Revenue’s minimum wage team has completed over 5500 investigations in 2003-04 • arrears are identified in 36% of the cases • no prosecution cases for non-compliance • non-payment of the minimum wage in the informal sector, e.g. hospitality, business services, hairdressing and horticulture sectors

38. Compliance and enforcement • Reasons for non-compliance include • low awareness resulting in careless mistakes, • workers crossed age thresholds and became eligible for the adult minimum wage rate were not identified • some worked longer hours than they were paid

39. Compliance and enforcement • Recommendation of the Low pay Commission: • interest charges payable on arrears arising from minimum wage underpayment • financial penalties for seriously non-compliant employers

40. Recommendations for Hong Kong Creating Jobs and Enterprises Local strategic partnership Local Area Agreement Developing social enterprises Setting up Minimum Wage

41. Recommendations for Hong Kong Local Strategic Partnership Local Area Agreement • developing indices of deprivation • identifying deprived areas • allocating special funds to tackle deprivation • promoting better joining up of public, private agencies and NGOs in deprived areas • developing local strategic plans • determining specific targets of change

42. Recommendations for Hong Kong Developing social enterprises • Legislation of a new legal form for social enterprise • to establish a dominant mentality that social enterprise is for social purposes • cooperatives not to be treated as a form of job-related training expecting members to move on to higher-paid jobs

43. Recommendations for Hong Kong Developing social enterprises • opportunities be open to all individuals, groups and organizations of both NGOs and private • well built-in system of monitoring such as board and management structure • statutory requirement or other measures are to be explored • public procurement to be committed

44. Recommendations for Hong Kong Developing social enterprises • setting up intermediaries • In the long run, minimum standards of behaviour or an accreditation system of social enterprises to be developed • grants to support start up capital • change of government accounting rules • service to support business development

45. Recommendations for Hong Kong Setting up minimum wage • a strong government will • establishing a commission • appointing respectable persons committed to the course

46. THANK YOU