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The role of Government in the Social Economy

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The capacity building seminar will gather the main stakeholders who are concerned with building conducive ecosystems for social enterprises: policy makers and administrators, networks of social enterprises and social economy actors, social finance players.

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The role of Government in the Social Economy

  1. 1. The role of Government in the social economy Kelly Glaser February 2016
  2. 2. Agenda • Social enterprise and social investment: What is it and why is the UK Government interested? • The UK Approach Since 2010 • Examples: – Big Society Capital – Investment Readiness Programme – The Social Value Act – Social Impact Bonds • Conclusions
  3. 3. Social businesses and charities contribute to the strength of society, public services, and the economy In this parliament, government is focusing on these three areas Transforming public services Growing the social economy Getting social investment flowing • Social ventures can drive public service reform and innovation. • A strong social enterprise markets helps commissioners access diversified, specialist supply chains. • More localised service providers bring focused knowledge and solutions. • We are working with central and local government to increase take up of social investment and outcomes based commissioning. • Social ventures report that the biggest barrier to growth is access to finance – around 15% less likely to receive repayable capital than other SMEs • Getting the regulatory environment right is crucial for social investment to flow through the system at scale. • We are clarifying the rules. For example, legislation is being introduced to provide more clarity to charities about how they can invest. • This work will increase by take up by retail investors, foundations, institutional investors, and high net worth “angels”. • Social ventures drive economic growth and create employment in deprived communities. • There are 180,000 social ventures in the UK that contribute £55bn to the economy and employ 2 million people. • 1 in 5 SMEs has a social mission • There are 3 times the proportion of start-ups as traditional SMEs. Source: Social Enterprise Market Trends report, 2013
  4. 4. Government has demonstrated sustained commitment to supporting social enterprise and social investment – and the results are paying off Government plays a key role In the last parliament, we focused on these three things Market builder Market steward Market advocate • Social investment bank and Foundation • World-leading capacity building • Social investment tax relief • Social value act • G8 social investment taskforce • Centre for Social Impact Bonds • Arts Impact Fund • Campaigns: Buy Social and GREAT • Trade missions • Engaging investors INCREASIN G THE SUPPLY OF CAPITAL INTO THE MARKET SUPPORTING DEMAND FOR CAPITAL BY GROWING THE INVESTMENT ‘PIPELINE’ CREATING AN ENABLING ENVIRONMENT FOR ACCESSING CAPITAL BSC investments drawn down by frontline: 150 2014: 100 2015: 125 2012: 20 Which is beginning to have real effects Number of SIBs 2010 2015
  5. 5. Example: Big Society Capital BSC has invested over £350m since April 2012, with over £140m reaching frontline organisations BSC is a wholesale fund, set up in April 2012. It is independent of government. Invests directly in social finance intermediaries rather than social ventures, to catalyse growth of the market. Capitalised with £600m of funds: £400m from dormant bank accounts, and £200m from the UK’s largest High Street banks Acts as cornerstone investor, developing financial products and funds that aim to provide risk and working capital to the sector.
  6. 6. Example: Investment Readiness Programme We ran a £30m capacity building programme supporting social ventures Social Incubator Fund Business support Grant funding Impact Readiness Fund Investment and Contract Readiness Fund Social Investment Enablers • £11m Fund supported 300+ start ups via 10 social incubators • Up to £15k of investment and other support • Impact: Over £2.5m follow on investment leveraged • £5m Fund to supported 80+ ventures • Grants pay for specialist support in data collection, analysis, and performance management • £14m Fund to 251 ventures at growth stage • Ventures jointly apply with a support provider • Grants of £50k - £150k for capacity building • Impact: Over £230m raised in investment and contracts Access: The Foundation for Social Investment will now run capacity building programmes that build on these pilots. It was set up in 2015 as an independent foundation. Pilots:2012-2016
  7. 7. Example: Social Value Act The Lord Young Review found that the Act made a positive difference The Social Value came in to force in 2013. It requires commissioners to consider the social and environmental aspects of a procurement, alongside the financial picture. Lord Young Review (2015) found that the Act had a positive impact amongst those actively using it. It also made recommendations to: - Increase take up - Ensure the proper contract threshold when the OJEU threshold raises from €134k to €750k
  8. 8. Example: social impact bonds SIBs are a tool that bring in preventative ‘risk’ capital to test innovative solutions to social issues The provider only gets paid on outcomes (Payment by Results). This makes it hard for smaller organisations which may not have access to up front finance This can be overcome if investors provide working capital, receiving any outcome payments that are achieved Therefore, in a SIB all financial risk is transferred to investors, and new sources of capital have been made available Cabinet Office support includes a Centre for SIBs and a £20m Social Outcomes Fund
  9. 9. Conclusions: Government plays an important role, especially: 1. When market is still nascent 1. When there are market failures 1. To establish infrastructure 1. To provide public goods 1. Working with others - steward the market, not be the market
  10. 10. Thank you Kelly.Glaser@cabinetoffice.gov.uk

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