The government is currently consulting on its civil society strategy for the next ten years. Questions cover a range of areas, including: people, working in partnership, youth services, place, public service reform and mutuals. Unsurprisingly, I am most interested in the questions relating to the funding and financing environment. Here’s my two pennies’ worth on the key things for the government to think about when developing the strategy.
A clear priority for the government should be creating an environment that supports resilience in the sector through the diversity of income models. That means support right across the spectrum, from encouraging and facilitating more giving to being a better purchaser of services from the sector through reform to public service commissioning.
Given the strong desire from sector leaders to diversify income streams, and the fact that earned income now accounts for more than half of the sector’s income and is the main area of growth, supporting the sector to be more enterprising – where it can be – needs to be at the heart of this approach.
So what should this support look like?
First, I think it means working closely with the sector, funders, investors and support providers to help build a much stronger knowledge base around the revenue models that are working in different sub sectors and in different places. How are these "markets" changing, and what are the characteristics of organisations that are well placed to participate in them?
Second, it means continued long-term support for capacity-building, learning the lessons from past programmes and responding to the evolving needs of the sector. Initiatives should support peer learning and creating space for leaders and trustees in the sector to embed change. Incentives need to be aligned between those who are receiving and providing the support.
Third, it means using resources in a smart way to help encourage enterprising activity in markets that are not functioning, but where impact can be high and economic activity needs to be stimulated. The Match Trading model developed by the School for Social Entrepreneurs is an exciting example of this.
Fourth, it means government must support the resilience of charities and social enterprises when it is purchasing services from them through improved commissioning practices. The Public Services (Social Value) Act is a key tool to help achieve this.
Finally, it means ensuring that the capital needs of charities and social enterprises continue to be met. Government has done a huge amount to develop the social investment landscape in the UK, including though the creation of Big Society Capital and social investment tax relief.
Over recent years, approaches to blended finance have made further strides in increasing the range of social investment products that meet the needs of charities and social enterprises. The Growth Fund, for example, where grants from the Big Lottery Fund are blended with loans from Big Society Capital and made available to social investors to lend on, has already provided more than 100 loans with an average size of £70,000, and will provide around 700 more over the next three years. The median turnover of the organisations financed through those loans is more than £300,000, with an average of seven full-time employees. This sort of smaller-scale finance to smaller organisations has previously been hard to come by, because some grant subsidy is needed to make it happen.
Building on the pioneering role that the Big Lottery Fund and other foundations have played in demonstrating how blended finance can work, government should consider what contribution it can make to further help ensure social investment is meeting the needs of the whole sector through providing this sort of grant support.
Those are my initial thoughts. You can still respond to the consultation until 22 May.