Pretty good year

If you want to know what’s been happening in social investment in 2014, the answer is that Iain Duncan Smith (IDS) thinks it’s going brilliantly and I think the market is experiencing a ‘different level of success’. That’s the headline news in Big Society Capital (BSC) CEO, Nick O’Donohoe’s blog-based review of the year.

It’s an honour that O’Donohoe is taking my views into account in his assessment of the current challenges facing his organisation but (while I can’t speak for IDS) he’s wrong to suggest that I’m one the ‘stakeholders’ continuing to ‘judge success or failure by a rather one dimensional yardstick’.

As regular readers will know, the vast majority of my blogs on social investment over the years have explained why the market is failing at least two different interest groups in at least two completely different ways but O’Donohoe is clearly right to highlight the difficulties BSC faces in supporting the development of a social investment market that works for different people who want different things to happen.

Ironically, the one unequivocal aim that BSC has – to support the development of the social investment market – is a ‘yardstick’ that no one apart from BSC staff and trustees, and possibly few civil servants, is particularly interested in (in itself).

In fact, the main argument for the existence of ‘the UK social investment market’ as a specific sector or space within the UK economy is the fact the BSC exists to develop it and the clearest, if not necessarily the most (socially) useful way of outlining that markets parameters is based on whether or not an activity is something that BSC could invest in.

O’Donohoe’s blog post reviews progress against in priorities areas outlined in BSC’s current strategy (launched in May 2014): small and medium-sized charities; innovation; mass participation; scale. It encompasses a wide range of activities from community shares to hedge fund-led housing investments that BSC invests but which have nothing much to do with each other plus some – such as Nominet Trust’s grants programme – that BSC isn’t involved in.

This not a bad thing. It’s vastly preferable to BSC investing in a narrow range of activities relevant to a tiny segment of the social economy and taking no interest in anything other funders/investors are doing but it doesn’t do much to alleviate confusion about what the social investment market is and what BSC is ultimately for.

For all the positive news in 2014, there is no realistic expectation that Nick Hurd’s claim on BSC’s launch day that: “For many years, charities and social enterprises have been telling government how hard it is to access long-term capital. We have listened and within two years have delivered a new institution that will make it easier” – will ever be fulfilled in the sense that that most observers would understand the terms ‘make’ and ‘easier’.

And Prime Minister David Cameron’s statement that day that social investment: “is a self-sustaining, independent market that’s going to help build the big society” – now reads like a message in a bottle from a land beyond our comprehension.

2014 has seen BSC gradually move beyond its initial failure to get money out the door to distribute its own funds with growing competence primarily (if not exclusively) into funds and institutions intending to make relatively safe asset-backed investments, while also providing some of the financial muscle to back up the government’s (as-yet undimmed) enthusiasm for Social Impact Bonds.

It’s also successfully completed part two of its lobbying operation to secure the introduction of Social Investment Tax Relief, with the eligible limit raised to £5million in the Chancellor’s Autumn Statement.

Alongside this activity, BSC has been furiously seeking ways to outsource the wider obligations bestowed on it by the fundamentally political nature of its creation. In particular, providing finance for small charities and social enterprises (which, in reality, is most of them) – which O’Donohoe told me in February is ‘just not possible’ on a commercial basis.

We’ve seen Big Lottery Fund step in to take some of the pressure off with the (much trailed build up to the) launch of the £150million Power to Change grant fund for ‘sustainable community-led enterprises’.

Behind the scenes, BSC and Big Lottery have also been working together to develop a new institution to work with intermediaries to provide blended finance/mixed-funding products/loans with grants (delete according to taste) to organisations who aren’t in a position to take on fully commercial investment.

While it’s not exactly prizes for anyone, there’s been enough happening to keep enough ‘stakeholders’ happy to keep some kind of social investment show on the road – even before you consider the phenomenal pdf action generated by monumental solution-in-search-of-a-problem of the year ‘Profit with Purpose Businesses‘.

When you add in success stories like community shares, the messier social investment market that’s emerged in 2014 is more useful to more organisations and (hopefully, ultimately) more people than the pointless venture capital tribute act that was on offer in 2012.

It’s less clear what moral or functional principles, if any, hold it together and, as a result, on what basis any forthcoming battles for BSC resources will be fought. Dan Gregory’s question: ‘What’s so social about social investment anyway?‘ has not been answered.

If the UK social investment market of 2015 was a social enterprise emerging from a programme of investment readiness support what would it’s shiny, new elevator pitch be?

Another BSC employee, Development Director, Danyal Sattar, has recently published a series of blogs that provide a brilliant overview of the ‘what’ of social investment but still don’t really address the why.

The Alternative Commission on Social Investment is not going to provide a single, direct answer to that question but hopefully it will provide some useful suggestions on what a more social ‘social investment market’ could look like.

2014 has been a pretty good year for UK social investment. It’s a year that seen most people working in social investment move decisively beyond rhetoric towards doing. In 2015, it may become clearer what we’re doing and why.

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8 responses to “Pretty good year

  1. David, as 2015 begins we are overwhelmed with food banks and payday lenders and it’s difficult to understand that a government who brought us the social investment task force and made social enterprise government policy hadn’t consider the issue of human rights.

    As a consequence, the reality of economic exclusion that we saw in North Carolina followed us here and social investment doesn’t seem to be making any difference: .

    https://www.linkedin.com/pulse/20141210100005-3207079-the-international-covenant-on-economic-social-and-cultural-rights

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  2. It’s not often I disagree with David but on this topic we could not be further apart. I understand fully the context for the Pretty Good Year label – I suppose sitting close by or even taking part day in day out talking this stuff up and down can seem like a year goes pretty quick. Also being so close to the debate which is almost entirely London centric, little steps forward may seem like real progress? However another year in the life of the starving social enterprise movement is a long time and no amount of well meaning talk or new schemes like the Power to Change stuff will change the full blown fact that nothing BSC does is connected in any way to dealing with poverty – not even close – and until it can show progress in this area – there is nothing pretty good about any of its efforts.

    Danyal Sattar of BSC writes well about the social investment model…how long its been going, where it comes from and what forms it takes but not once in any of his words does he get close to pushing the direction towards the needs of people who are struggling in this country and how social investment will square that circle by investing in those who are truly set up to tackle poverty. . I suppose he is the rock in that hard place sitting an organisation whose CEO states there is no money to be made out of loans of less than 250K which as you say David is where most Charities and social enterprises sit – so people and organisations will starve and the chattering class who sit doing little more than talk about this stuff will remain well paid pushing the needle just that little bit more – or so it seems in London..

    BSC is the driver for the social investment model and whilst I am sure they would like others to take the heat from time to time, I was one of those people who attended their launch roadshows – trailblazing – telling us all how different it was to be once their money broke out. I have also attended a few since where their tactic now is to control any sort of dissent by trying to get dissenters never to attend again unless they return with good things to say – its a disturbing tactic but hey don’t dare challenge BSC.

    Well these roadshows and their have been going on for years and now only intermediaries are attend wanting to fit into the social gravy train that BSC have ably created. Let be clear, in the years since BSC trailblazed nothing has changed, in fact the money has gone it the wrong direction stuck in the the wrong business model. BSC knows this but when its leader goes to print praising IDS (the chief architect of the growth of poverty in this country) we are able to take more than an educated guess about where his politics sit. For Nick and his gang of very well paid staff its the politics of profit and the word social just gets in the way – ooops that last remark will probably now mean I am not allowed into any future BSC roadshows – anyway..

    To finish again with the thinking of Danyal Sattar…he talks of social investment being around for a long time, going back hundreds of years in fact. Yet as we sit reading his history lesson the organisation he works for wants more time to understand its model whilst expecting us all to be patient as we watch real community based social enterprise starve of the type of investment his organisation was supposed to provide into the marketplace? By the way it could if it wanted to it just does not want to.
    Danyal says the BSC money is the ‘peoples money’ – he is right its just a pity its not getting out to the people.. I do wonder what these ‘people’ would think if they found out that the main outcome from their money was to pay intermediaries very well indeed to do nothing relevant and to pay BSC staff top salaries to still be thinking about an investment model that has been around for hundreds of years.

    So sorry David what seems like a pretty good year down where you are- seems up here like nothing more than the same old same old nothing – and do know what that last remark is being generous.

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    • Beanbags admin

      Hi Robbie,

      Not sure we necessarily disagree wildly on the general position but we probably do disagree on how we move forward.

      As you know, I’ve never been an advocate of the wholesaler/intermediary model in social investment. I wouldn’t have given BSC £400million of ‘the people’s money’ to develop the social investment market on the model proposed in 2011/2.

      If I was taking the same decision now based on their current approach, I still wouldn’t give them the money and I’m no less bemused by ‘social investment as an asset class’ than I ever have been but making that point another 10 or 15 times is of limited use or interest to anyone.

      BSC did get that money and it does exist, along with a range of connected structures and programmes. For me, the overall impact of that activity is positive – compared to it not happening at all – and most people working in social investment (in London but also the ones I’ve met in Bristol, Manchester, Sheffield, Edinburgh and Belfast) have good intentions.

      Some of the investments and initiatives mention in my blog will help small charities and social enterprises (and larger charities and social enterprises that help reduce poverty).

      But the blog isn’t called ‘everything’s brilliant’. It’s not. Those of us who want more of the resources available for ‘social investment’ to be spent on distinctively social approaches to investment have to keep on making our case(s).

      All the best for 2015,

      David

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      • David – all the best.

        I do hope what we see is a lot more than intention and much more delivery – which if it is to appear means social finance needs a redesign. I think you and I are in touch with pretty much the same people up and down the UK and so far I think that only the Key Fund, SENSCOT and he Builder work Helen and I are doing is anywhere close to trying to arrange money that is closer to what community based social enterprise needs. Everyone else is still trying to squeeze social enterprise into their versions of debt finance – could be wrong though.

        See you somewhere/sometime soon

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    • Robbie, The social gravy train you refer to may well be eclipsed at the EU where it seems an entire new carriage has been added.
      It was 6 years ago, through the ‘Citizen’s Consultation’ that I put a social enterprise investment strategy plan on the table, several aspects of the plan appeared later in the Social Business Consultation, under new ownership.

      Last year they went one step further with the re-invention of our people-centred approach to economic development.

      Closer to home we had the conference on ‘Inclusive Capitalism’ where my attention was drawn to Fiona Woolf who seems to have borrowed our IP. I wrote an open letter, FWIW.

      http://www.businesszone.co.uk/blogs/jeff-mowatt/social-business-people-centered-economic-development/inclusive-capitalism-open-let

      A closed and selective conference drawing attention to the risks of rising inequality may seem ironic, but not as ironic as President Clinton being one of the speakers.

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  3. No need to mention CIC at all then David?

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    • Beanbags admin

      Hi John,

      Not avoiding mentioning CICs – I am currently a director of four – but didn’t have anything to say specifically about them. What should I be looking at? Are changes to the dividend cap/performance-related interest encouraging more social investment? Are CICs using SITR?

      Happy New Year!

      David

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  4. Pingback: The Best of the Blogs: Part 2 of 3 – David Floyd | THOUGHTS PROBABLY SOMEONE ELSE'S

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