The benefits of economic growth have been unevenly distributed and the costs disproportionately borne by particular groups.
As in other western countries, there are now, in the words of the Power Inquiry:
“ permanently marginalised groups in society… in permanent poverty, with low educational attainment, poor working and living conditions and a multiplicity of other conditions associated with life on very low incomes.”
The role of the “third sector” in combating disadvantage and building a more cohesive society is vital.
Its ability to respond to need and pioneer new approaches – beyond the reach of both the public and private sectors – is almost universally acknowledged.
It appears that funding is chronically insecure and often focused on revenue for current projects rather than investment in organisational capacity or infrastructure.
Many organisations are dependent on short-term funding from multiple sources that this provides little margin for growth and development.
Most contracting organisations have contracts that pay less than the cost of provision.
The Commission recommends that unclaimed assets be used for investment in the third sector – to develop new products or services, or to invest in systems, technology, infrastructure, management or other capacity.
Evidence suggests that better invested organisations are in a better position to negotiate effectively and advocate for those that use their services.
If the third sector is to continue to grow and meet its potential it urgently needs greater investment and professional support.
Suitable capital should become available for organisations at all stages of development, from charities with no trading revenue, to social enterprises that reinvest some or all of their profits in achieving their mission and to commercial businesses with a social purpose.
To maximise overall investment, private finance should be leveraged where available.
An independent Social Investment Bank is necessary to achieve this goal.
Role of the SIB Government Banks Private Sector Social Investment Bank Third Sector National and regional intermediaries
Social Investment Scotland
Social investment will be greatly increased by the SIB if private sector capital is brought to the market by intelligently blending it with incentives and expertise.
We have modelled a possible range of activities for the Social Investment Bank for the first five years in our report.
The model suggests that with a capital base of £250 million and £20 million per year for a further four years, over £800 million additional capital could be leveraged into the sector and the SIB would be sustainable.
This scale would be sufficient for the Social Investment Bank to attract high-quality professionals and to become a repository of experience in social investment in the UK.
It would also be sufficient to have credibility in the financial markets.
The Social Investment Bank should be small, adaptable, innovative, and able to take risks. It should bring together the best of the financial and social sectors. It should act as a “wholesaler of capital” working through existing and new financial intermediaries, assisting their development and encouraging their growth.
The Social Investment Bank should be an independent institution answerable to the third sector, with a governance framework that is effective, representative and compliant with best practice.