Tories plan funding and tax breaks for social enterprises

A Conservative government should strive to "tear down the barriers" that Labour has put in the way of social enterprises, according to a report commissioned by the party. A Tory administration should create a new finance facility and extend tax incentives for potential investors, it advised.

The report expands on David Cameron’s proposal to promote the growth of local social enterprises in Britain’s most deprived areas by setting up a series of designated social enterprise 'zones'.

Written by Rodney Lord, a journalist and entrepreneur, and Harriett Baldwin, Conservative parliamentary candidate for West Worcestershire, Social Enterprise Zones suggests that each zone would be supported by a central community bank that would work in partnership with existing third sector lenders and coordinate bids for a predetermined allocation of tax relief to be shared between all the enterprises concerned.

It suggests tax relief, based on current regulations for investing in venture capital trusts, of up to 30 per cent on the value of the whole sum for a minimum of five years. There are also proposals for simplifying planning permission procedures for enterprises on brownfield sites within the zones, and for encouraging local authorities to avoid policies that exclude enterprises from competing effectively for contracts.

“It’s the small, community-based enterprises that find it most difficult to get at patient capital, and the real barrier is persuading people to lend to them,” said Greg Clark, shadow charities minister. “This report recognises that problem.”

Cherry Read, head of policy and communications at the Social Enterprise Coalition, praised the report’s work on planning and identifying the barriers that prevent social enterprises from winning government contracts.

But she added that the report was short on detail and addressed only one potential area in which enterprises operate. “If you create social enterprise zones only in areas of deprivation, you are missing out on the best of social enterprises, because they can exist at all levels of the economy and some, such as Cafédirect, are truly international organisations,” she said. “This might be a little bit short-sighted.”

Allison Ogden-Newton, chief executive of Social Enterprise London, concurred. She said: “Social enterprises form natural clusters where communities have had to look at innovative ways to improve local services, but we have concerns about prescribing geographical priorities for what is a highly innovative and spontaneous form of enterprise activity.”

Phil Hope, minister for the third sector, criticised the report as an “uncosted gimmick” that would have to be paid for by cutting funding for other third sector organisations.

“Seventy per cent of social enterprises are not in deprived areas so won’t be eligible for any assistance, and for many of the rest this policy is too narrow to be of practical use,” the minister said. “In contrast, our far-reaching consultation with the third sector identified the importance of a strategic approach directly relevant to the needs of social enterprises.”

Hope said the Government had provided for enterprises in the form of the £215m Futurebuilders loan scheme and the introduction of Community Investment Tax Relief.

Cameron and Clark will consider the report for inclusion in the new Conservative manifesto, alongside the proposals of the Social Justice Policy Group.

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