Social Investment

Discussion of social investment developments are taking hold in the blogosphere. Weird and wonderful fiscal experiments are being proposed and reviewed, from Social Impact Bonds and Community Investment ISAs to the Big Society Bank and new tax-breaks for social investors. What does it all mean?

Research into the social investment market has been commissioned by City of London Corporation, City Bridge Trust and the Big Lottery Fund to examine what investment products would most likely bring greater levels of capital to the social enterprise sector. The research will be undertaken by ClearlySo who will interview leading investment professionals about the product preferences of their clients.

Apparently previous studies point to a large reserve of untapped capital. Potential investors increasingly express themselves open to the idea, but relatively few have actually committed any capital.

"There is, it seems, a chasm between potential and reality. If the sector is to make the leap, a huge part of the solution will be finding the right vehicles. We are, after all, in one of the financial epicentres of the world. Coupled with Britain’s leadership position in social enterprise, nowhere is better placed to marry the two." (Tom Cropper, ClearlySo, 09.03.11)

£300m is due to be made available through a new Big Society Bank that will offer loan finance to social enterprises. The Big Society Bank will be wholesale; it will not make direct investments but will rather lend to intermediaries, who will apparently offer a range of financial products.

Part of the rhetoric from the government is that this will help social enterprises and charities to compete for and manage public sector payment-by-results contracts. The Public Service Reform Bill is supposed to look at ways to create a level playing field when it comes to charities competing for public sector contracts.

However, for many charities like Red Kite Learning that have been delivering payment-by-results contracts successfuly for years, the rhetoric does not stack up because the government has put the relevant contracts out of reach, in a drive for 'efficiency'. The flagship skills and employment opportunities - the Work Programme and Apprenticeships - are now only available to large 'prime contractors' who are expected to manage 'supply chains' more effectively than the civil servants have previously. It remains to be seen whether viable sub-contracting opportunities will emerge from this approach to commissioning.

It also remains to be seen what value will be offered through social investment vehicles and loan finance. There is still an important question mark as to whether investors will be willing to forego some financial return in order to invest in a product that delivers social benefit.

James Allen of the National Council for Voluntary Organisation (NCVO) recently wrote a blog article 'Is social investment the future?' where he warns members of potential dangers, including an erosion of donations if social investment is seen as an alternative to charitable giving rather than being additional.

Like most charities, Red Kite Learning will be watching developments in the social investment market with keen interest and intrepidation.

2020 vision to double individual philanthropy to £20bn

Increasing individual giving to £20 billion by 2020 is one of the key objectives put forward by a new report which explores how to ensure charities financial sustainability over the next 10 years.

‘Funding the Future’ produced by the Funding Commission for the National Council for Voluntary Organisation (NCVO) offers a 10-year framework for how the voluntary and community sector can stay financially resilient when faced with depleted resources coupled with increasing demand for services.

It sets out clear recommendations for civil society organisations (CSOs), funders and commissioners, infrastructure bodies and the government to bolster all income streams for the sector, including individual giving, trading income, grants, public sector contracts and private investment.

It suggests that individual giving can be increased from £11.3 billion to £20 billion by 2020 through increased donor engagement, better fundraising approaches and via a 'Better Asking' Campaign, developed by NCVO in partnership with the Institute of Fundraising and other sector bodies.

The report says: “It is clear that getting more people to give more than £100 per month and getting more of the very rich to give millions are going to be an essential part of meeting the challenge of increasing giving to £20 billion per year by 2020.”

Yet, as Dr Beth Breeze, Kent University researcher, highlights in a paper for the Commission, as a nation, we are at best ambivalent, at worst hostile, in our attitudes to the rich. She argues for the need to reposition philanthropy as part of the solution to, rather than as part of the ‘problem’ of, being rich; suggesting it should be viewed as an essential part of the successful life in the 21st century.

The Big Society

The Coalition Government wants to build a ‘Big Society’. The Prime Minister says ‘we are all in this together’ and building it is the responsibility of every citizen as well as every Government department.

David Cameron has outlined three strands to his vision. First, he argued for social action, with the government sponsoring a new spirit of "voluntarism, philanthropy, social action". Second, he called for public services reform, criticising the "centralised bureaucracies" of government and enthusing instead about their replacement by "charities, social enterprises and private companies". Finally, he espoused the need for community empowerment, to create communities "in charge of their own destinies".

Francis Maude Minister for the Cabinet Office, said:

“Big Society is about creating a country in which people are in control. People giving time, money, assets, skills and knowledge all drive social action and help make life better for all….Talking about what we do for good causes is often seen as vulgar. But sharing experiences can inspire others.”

Deserving vs undeserving

Is anyone undeserving of support? Some people clearly think so.

For example, Melanie Phillips of the Daily Mail thinks that all of us, rich or poor, are equally capable of making choices. “The choice to be honest rather than fiddling the benefits system. To work, however demeaning the job, in preference to taking state charity. To bring children into the world only where there is a committed father to help bring them up.”
Mail Online 30th Dec 2010

Negative stereotyping is commonplace in the media, labelling people in poverty as ‘scroungers’, ‘feckless’ or ‘lazy’. Research from Joseph Rowntree Foundation suggests that media coverage tends to focus on extreme cases, highlighting the inherent ‘failings’ of undeserving people. On the whole coverage of poverty is peripheral in mainstream UK media.
Joseph Rowntree Foundation Research - Media Coverage of Poverty

There is a lot of mythology surrounding the notion of the ‘deserving and undeserving poor’. For example, at Red Kite Learning we have learned from experience that people who are not working are not necessarily lazy, and people who are working have not necessarily escaped poverty. It’s not as simple as that. It is easy to be dismissive about some of the problems faced by people but much harder to deliver practical solutions. Red Kite Learning delivers practical solutions every day.

Ms Phillips goes on to admit in the same article (link above) that “it is crucial to offer all poor people assistance which will give them a leg up and out of poverty rather than kick away the ladder of opportunity from beneath their feet.”

Precisely what our campaign is for.