Amongst the many, mostly predictable, responses to last week’s budget, it was positive to the see the speed and unity with which leading social enterprise organisations got together to highlight the chancellor’s failure to do anything much to help Britain’s social enterprises.
The good news is that Britain is open for business – which, for the Daily Mail, means Corporation Tax is being cut. Another example of Britain being open for business is that the very rich will pay less tax on their salaried income.
It seems likely that many of those earning more than £150,000 per year might be keen to demonstrate the effectiveness of the trickle-down theory by investing some of the money they will now not be paying in tax into social enterprises.
Unfortunately, while the Enterprise Investment Scheme (EIS) provides investors with substantial tax relief on investments – you get 30% of the money you spent back in income tax relief, plus further tax relief if you end up selling the shares at a loss – in many conventional for-profit businesses, there is currently no similar scheme to support investment in social ventures.
There is currently a scheme called Community Investment Tax Relief, which provides tax relief on indirect investments in social ventures – investments in Community Development Finance Institutions (CDFIs). Many CDFIs – such as Big Issue Invest and London Rebuilding Society – do good work but investing some money in an organisation that provides finance to social enterprises, is a very different thing to investing money in a social enterprise that you yourself support.
This was one of the issues highlighted in a (succinct and practically focused) report published by NCVO’s Commission on Tax Incentives for Social Investment in January this year. It’s a shame that George Osborne has ignored it although he has set up an internal review within the Treasury to look at the finance barriers facing social enterprise so maybe officials will have the chance to read some of the existing research as part of that.
There’s clearly massive scope for the wealthy individuals – and the less well-off who have a small amount of spare cash they’d like to spend on social good, EIS offers relief on investments over £500 – to take a punt on a social venture based in their local area or addressing a social need that they’re particularly interested in.
As Jonathan Jenkins, chief executive of The Social Investment Business points out here: “This is a watershed year for the social investment market, with the large injection of capital from Big Society Capital. We need more support from the Government to encourage private investment into social ventures that can change the way services are delivered to our communities.”
While Jenkins is one of a number strong voices calling for positive change, the overall track record of (theoretically) specialist organisations in UK social investment is so far one of much bluster and not much social impact.
Big Society Capital clearly will change the social investment market significantly by putting loads of money into it but, whether or not the idea of Big Society is still a key part of government’s thinking, the ideals behind Big Society would be significantly promoted by enabling private individuals who want to invest in social enterprise (or a social enterprise) to get at least the same benefits as those who invest in mainstream business.