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.

1. The role of Government in the social economy
Kelly Glaser
February 2016

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. 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. 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. 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. 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. 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. 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. 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. Thank you
Kelly.Glaser@cabinetoffice.gov.uk