By Richard Johnstone | 31 January 2014
Councils have been urged to back plans to create 39 local investment funds across England that could boost local third sector providers of public services.
Sir Stephen Bubb, chair of the Social Investment Business, which established the first £2m Local Impact Fund in Liverpool last week, told Public Finance councils could play a key role in determining where loans were directed by helping launch similar schemes across the country.
It is hoped that 20 such initiatives will be operating in local enterprise partnership areas across England by 2016, providing more than £100m of social investment. Each will distribute European Union structural funds, matched by a local investor – which could be a council and LEP – with the eventual aim that all LEPs would have a fund as ‘part of their armoury’, Bubb said.
‘I would like to have some discussions from local authorities about how they can be partners in these funds,’ he told PF.
‘If they’re partners alongside the local enterprise partnership, they can then help shape where the loans go.
‘The fund will get European money, but the priorities for lending will be shaped by the partners. So if councils want to have a particular emphasis in a particular area that’s absolutely what the fund could provide.’
The Liverpool pilot has been established with £1m of European funding, matched by the Social Investment Business investor group. It will provide unsecured loans worth as much as £250,000 to social enterprises that want to expand.
Bubb, who is also chief executive of the Association of Chief Executives of Voluntary Organisations, said the scheme would assist the government’s drive to increase the range of providers for public services, including creating new mutuals.
A lot of interest is expected from charities involved in public service delivery looking to expand.
‘What we’ve found in the loans we’ve made [through the SIB in the past] is that they have very significantly been tied into the delivery of public services – employment, services for the elderly and for children, rehabilitation – where councils and government have been seeking a bigger role for the third sector. It will be in those areas.’
Finance remains an obstacle to both the Cabinet Office’s Mutuals Support Programme and broader attempts to increase the diversity of public service providers, he added.
However, there was also a need for more ‘political leadership’ from government to drive through reforms.
‘You sometimes wonder whether their desire for more mutuals and more third sector service delivery is as strong as it should be,’ Bubb told PF.
‘We’ve seen the Work Programme – which charities thought would be a big area for them to deliver – has not been that. [But] the government is looking at contracts in rehabilitation, which is an obvious field for charities and social enterprises.’
Bubb, who also led the work on choice and competition for the NHS Future Forum during the government’s 2011 ‘listening exercise’ on controversial health reforms, said there were opportunities as councils were further advanced in use of third sector providers than the NHS.
There remained a need for ‘systemic’ changes in the NHS despite the introduction of the government’s reforms last April, he said.
‘What’s very clear is that clinical commissioning groups [which replaced primary care trusts] are not using their new freedoms to commission differently,’ he added.
‘The pressure in the system now is in funding hospitals. So the pressure coming on local commissioners is to commission in a way that doesn‘t undermine the local hospital, as opposed to thinking, “we need to commission differently”. There’s a lot of work to be done there.’
This was different in town halls, where ‘the battle has been won’, he said. ‘Most councils these days do understand they can deliver differently through partnership – you don’t find many chief executives who wouldn’t be thinking how to use charities and social enterprises better.’
