Apologies for the lengthy silence from me in recent months. It’s been a busy time for Social Spider CIC. Amongst other things, we’ve launched a community newspaper and a national mental health blogging project. I’m also heading up The Alternative Commission on Social Investment: an initiative set-up to investigate what’s wrong with the UK social investment market and to make practical suggestions for how the market can be made more accessible and relevant to a wider range of charities, social enterprises and citizens working to bring about positive social change.
The last few weeks have seen (at least) two major events in the UK social investment market. At the end of October, the Ministry of Justice announced the preferred bidders for Transforming Rehabilitation (TR) programme. Then the following week, social investment finance intermediary (SIFI), Social and Sustainable Capital, launched a £30million ‘Third Sector Loan Fund’, complete with £13.5million investment from high street bank, Santander.
The former story is seemingly terrible news. In fact, the apparent failure of charities and social enterprise-led bids to secure any significant contract value as prime contractors for TR may mark the death of the ‘plan A’ vision for the UK social investment market conceived in the mid-2000s.
The wonderful blog post (at least, as wonderful as a blog post can be when it’s essentially a cry of pain emitted through the medium of analysis of a government procurement process) from Big Society Capital‘s Christine Chang and Matt Robinson, explains what went wrong from a social sector point of view.
Ultimately, the key demands of the TR procurement process were not having a great plan, high level skills and a track record of competence in delivery the services being commissioned, they were: be a massive company with the ability to engage in a 13-month procurement process and to provide a ‘Parent Company Guarantee’ worth 100% of annual contract value. Not surprisingly:
While many social sector organisations have a role in TR bids, the BSC blog suggests they’re unlikely to end up with big roles and the big resources that come with them.
Ironically, given that Justice Secretary, Chris Grayling, is not widely regarded as a left-wing politician, he has done more than any other individual actor in public service markets to ensure the scenario most feared by traditionally left-wing voluntary sector campaigners – that significant numbers of charities and social enterprises will ditch independent voluntary action to become direct competitors to Serco, A4E and Sodexo in battles for government prime contracts – remains as unlikely as ever to become reality.
Pre-TR, Grayling’s CV in his previous role as Employment Minister, included the creation of the Work Programme – a programme which saw large private companies mop the vast majority of prime contracts, leaving charities and social enterprises to sub-contract themselves towards bankruptcy.
This is not to suggest Grayling hates the voluntary sector and is opposed, in principle, to charities and social enterprises secured large government contracts but that the overarching priority in the commissioning and procurement processes for the Work Programme and TR has been to save public money and transfer risk from the government to organisations providing services.
This is not an issue that’s going to bring protestors on to the streets. Some people to in the UK do strongly support largescale public service outsourcing whilst also believing passionately that this outsourced market should be set up in a way that provides genuine opportunities for charities and social enterprises to win contracts. Unfortunately, while there may almost be enough of those people to fill the away end at a non-league football ground, they definitely don’t represent a social movement big enough to swing the next general election.
On the other hand, for social investment as a market/professional activity, the TR process is a big deal. It’s confirmed once and for all that the current government – for all it’s support for social investment in theory – when faced with competing priorities, does not see a diverse outsourcing market supported by social investment as a priority.
For those, both in the voluntary sector and the social investment market, who were dreaming of a social Serco, this is disastrous news. Those most angrily opposed to social sector contracting will probably be too busy being angry about everything that’s happened since 1976 to even notice the significance of what’s happened. For social sector pragmatists, the death of (at least, a big chunk of) social investment plan A, may help create the space to get on with creating plan B.
If the biggest bit of bad news in UK social investment isn’t necessarily all bad, it’s equally unclear whether the good news is all that good. Once again, there’s no doubt that it is big news. A high street bank, Santander, have made a £15 million commercial investment in a social investment fund.
As Social and Sustainable Capital (SASC)’s chair, Nat Sloane tells Civil Society: “What excites me most about this is the mixture of philanthropic and commercial capital.” He adds: “Santander has come in on the same basis it would make an investment in a mainstream fund.” While Bridges Ventures have recently attracted some private money to their Social Impact Bond Fund, both the level of investment from Santander and the fact that it’s in a loan fund do mean that SASC have achieved something significant.
There is a ‘but’, though. The ‘but’ is that it’s one thing to set up a fund and another thing to successfully invest the money in charities or social enterprises (let alone successfully get it back with interest). After years of hype, many in the social sectors now greet SIFIs’ announcements of new funds with the same level of scepticism they deploy in response to government ministers’ announcements of ‘new money’.
It’s important to remember that in its latest annual report, Big Society Capital had made £149.1million worth of commitments to SIFIs but that – at that point – only £47.9million had actually been invested in funds and just £13.1million had been drawn down by frontline charities and social enterprises.
SASC should be congratulated for doing the first part of their job really well but, while the fact that a high street bank is involved in this deal is pretty exciting for social investment insiders, it’s of no major relevance to charities and social enterprises trying to work out whether what’s on offer is appropriate to them.
Ultimately, not investing Santander’s money is not significantly more useful than not investing the government’s money. The number of charities and social enterprises in the UK in the market for a loan of £250,000-£3million is pretty small – the average UK social enterprise has an annual turnover of £187,000. The hardest part of SASC job is still ahead of them.