Most of us who work in the charitable, voluntary and community sector don’t care whether policy is badged as localism, Big Society or anything else – we just want the necessary resources and opportunity to get on and do our work. But it’s clear that standing still is not an option. Charities, social enterprises and voluntary groups need to be willing to accept new kinds of finance and break into new markets.
These organisations face real difficulty – with grant money drying up and contracts from local and national commissioners being cancelled. But recent government announcements show that there is a commitment to find new ways forward. The extra £200m for the Big Society Bank and the Cabinet Office’s strategy on social investment published last week outlines plans for different financial products – like Social Impact Bonds and Social Investment ISAs. These are important innovations. Charities can’t plug the gaps in their budgets by rattling tins outside Tesco's. If we want them to become financially stable and sustainable for the long term we have to treat them like the social businesses they are.
Loan finance, and managing the delivery of payment-by-results contracts, help build better organisations – with proper forecasting, governance and business planning. Criticism of the fact that the Big Society Bank will be lending at interest and not issuing grants is born of unfamiliarity with this kind of social investing. Our experience is that there is huge unmet demand for social investment. Loans are a new concept for some in our sector but many charities, social enterprises and voluntary groups have shown they are perfectly capable of borrowing to grow, and paying it back with interest. What they need is greater access to capital and support to help them become investment-ready.
As we continue to hear, the Big Society can be defined in many ways. But let’s just take one possible proxy for it – 50,000 charities, social enterprises, mutuals and other not-for-profits doing twice as much as they do now. Ask yourself, how would you achieve this in a single parliament? And how would you minimise the impact of inevitable cuts on the sector as a whole? They can’t simply double their incomes in hard times and the Big Society Bank can’t invest in them all.
I believe that the answer has to be in contracting – competing with traditional public and private sector providers to win and delivering contracts for public services both locally and nationally. Contracting is not for all, but it has to be taken seriously as it is by a vast margin the greatest potential source of income.
Right now, things are moving in the wrong direction – with councils cancelling contracts with local charities ahead of cutting their own internal costs. I want to see leaders in our sector come together to work out how they can win billions of pounds of contracts that can be delivered by a whole web of charities and other not-for profit organisations, bringing capital into the sector; stealing enough market share from the big private companies to sustain the sector through hard times.
The Public Service Reform Bill is expected to look at ways to create a level playing field when it comes to charities competing for public sector contracts. And Health Secretary Andrew Lansley says he aims to create the largest social enterprise sector in the world through the transformation of the NHS.
The push to grow social finance is extremely welcome, but the best way to bring in the money quickly is to create an environment in which more civil society organisations can better engage with commissioners to win contracts that provide local people with social care, nurseries or drug rehab courses for instance. Organisations can build these relationships on their own or, as we’ve facilitated in some authority areas, they can come together in consortia to pack more of a punch.
That’s the kind of shift that could see a real scaling up of the role charities play in public life, with the benefits that brings in terms of service design, efficiency and quality. And you can call it Big Society if you like.
Jonathan Lewis is chief executive of The Social Investment Business
