Government unveils major boost to social investment sector
19 Jun 2014 03:50 PM
The government announces
a multi-million pound package of finance to boost social investment market, and
its strategy to grow the sector.
Strategy to grow social
investment market
In its 2014 progress report, the
Cabinet Office reflects on the huge strides made in the market over the past 3
years, including
- the introduction of the
world’s first tax relief for social
investment
- the creation of Big Society
Capital (the £600 million social investment
bank)
- significant growth in the number
of social enterprises, which now employ more than 2 million people in the
UK
Read the 2014 progress report.
The UK is now home to the
world’s most advanced social investment market, growing over 20% a year,
and is seen as the global hub for social investment.
The progress report sets out the
most important focus for the next year: making it easier for people to become
social investors, as well as helping organisations to access this type of
funding.
The government also wants to
encourage the growth of innovative models to tackle social problems such as
homelessness, loneliness and disadvantaged young people.
One way this can be tackled is
through social impact bonds
(SIBs). SIBsenable social investors to provide finance to charities or
social enterprises, delivering public services on a payment by results basis.
They make a return on their investment, based on outcome payments from
government if the intervention is successful.
15 SIBs already exist
here, making the UK the world leader in this type of fund, and the government
recently announced over £30 million funding for social impact bonds
supporting disadvantaged young people.
New social impact
bonds
Today 2 new SIBs have
been announced in Worcestershire and Birmingham.
Reducing
isolation
The SIB in
Worcestershire will target 20 to 30% of the lonely population in the area. It
aims to reduce loneliness among over 50-year-olds to reduce dependency on
health and social care services. This is the first ever SIB to
address this particular issue and is being commissioned by Worcestershire
County Council and local Clinical Commissioning Groups.
Supporting children in
care
The second SIB in
Birmingham will provide bespoke support to vulnerable young people in the area.
It will focus on youths aged 11 to 15-years-old who are taken into residential
care, or who are at risk of entering care.
£60 million investment to
help ventures access social finance
To make sure that more social
ventures can benefit from social finance, an investment of £60 million
for social investment “readiness” over the next decade has also
been announced today. The investment will come from the loan book of a fund
called Future Builders.
This investment is specifically
ring-fenced to support social ventures who have high potential but struggle to
access finance, and who could benefit from business capacity building support
in preparing for bidding for social investment. It will be based on the Cabinet
Office’s pilot £10 millionInvestment and Contract
Readiness Fund. Social ventures who raised finance through this fund
received £38 for every £1 of government grant.
Minister for Civil Society Nick
Hurd said:
Engagement in social investment
around the world has reached new levels, and the UK is leading the way in this
global movement. Today’s announcements show our commitment to building a
market that is accessible to everyone and our report reflects on the huge
progress we have made into turning our vision into reality.
The announcements come on the
same day as the UK hosts the Social Impact Investment
Taskforce, with 200 leading figures from around the world. Led by Sir
Ronald Cohen, the taskforce brings together government officials and senior
figures from finance, business and philanthropy from across the G7 countries.
It will publish a report of recommendations to grow the global market later
this year.
Notes to
editors
Social impact
bonds
Social impact bonds are
payment-by-results programmes that will pay for positive outcomes achieved.
Through a SIB, social investors will cover the upfront costs for social
enterprises and charities to deliver programmes. Investors only receive a
return on their investment if the programme has achieved the agreed
outcomes.
The UK is leading the world in
catalysing the growth of the social investment market and developing social
impact bonds. There are 15 SIBs in operation in the UK (excluding the
2 announced today) with many more in development.
Future Builders
Fund
The Future Builders Fund
provided loan financing, often combined with grants and professional support,
to VCSE organisations in England to help them bid for, win and carry
out public service contracts. It is now closed to new
applicants.
Future Builders offered
investments of more than £150 million to over 370 third sector
organisations and showed that there is an appetite for loan finance in the
third sector. In 2010, the fund closed to new applicants.
The Social Investment
Business Group (SIB Group) now manages the loan book on behalf of
government. Big Society Capital is now playing a key role in lending
to VCSE organisations.