Government should not force charities into financing themselves through social investment in order to deliver government contracts because this distorts the market, according to the commercial director of Barnardo's.
Liam Duffy was speaking yesterday during a panel discussion at an event in London hosted by the consulting firm Aleron. He said that Barnardo's had had a positive experience working with the It's All About Me social impact bond, which funded the adoptions of hard-to-place children, but it was wrong for charities to be compelled by the public sector to sign up to social investment schemes to ensure their involvement in contracts or programmes.
"Compulsory use of social investment to finance projects should stop," he said. "I think it distorts the credit market and the investor market."
Duffy said social investment should not replace public funding of services. "This should be about what's new, what's additional; not what's replacing current funding," he said. When social investment was pushed too hard by governments, he said, it could give the impression that the schemes were designed to benefit investors, not charities.
Kieron Boyle, head of social investment at the Cabinet Office, speaking on the same panel, challenged Duffy's assertion that forcing charities into social investment was widespread. "To say that's a reflection of government policy is wrong," he said. It was mandatory for only a "tiny, tiny" number of government programmes, Boyle said.
He said the social investment market would continue to grow and there should be more focus on retail investors – or low-net-worth individuals, as he put it – and on the experience of the organisations that were seeking investment. "There's very definitely a social investment market out there," said Boyle. "One can feel at the same time very excited but that you're only just scratching the surface."
Travis Hollingsworth, strategy and market development director at Big Society Capital, said the market was diverse and involved more than just social impact bonds – he pointed to crowdfunding, Charity Bank and several newly created funds and ventures as examples.
He said it was hard to foresee what would happen in the market, with predictions ranging widely. "I asked some people what they thought the social investment market would look like in five years," he said. "The range of answers was all over the map."
Also on the panel was Marta Garcia, a member of Aleron’s advisory board who is exploring the Latin American social investment market for Social Finance UK. She described some of the differences between the markets in Latin America and the UK – in Latin America, she said, there was often less opposition to or concern about the impact of bringing corporate money into a project.