Social Investment Strategy

Monday 14th February 2011 Written Statements

[The Minister for the Cabinet Office and Paymaster General (Mr Francis Maude)]

My hon. Friend the Minister responsible for civil society, the Parliamentary Secretary, Cabinet Office, the hon. Member for Ruislip, Northwood and Pinner (Mr Hurd) and I are today publishing a strategy for social investment, “Growing the Social Investment Market”, which gives more detail on the role of the big society bank, alongside other measures to build the market. I am placing copies in the Libraries of both Houses and making it available on the Cabinet Office website.

Social entrepreneurs, and the social ventures they lead, bring innovative solutions to some of our most intractable social problems, by combining commitment to a clear social mission with financially sustainable business models. They are crucial to building a bigger, stronger society, as well as contributing to economic growth and employment. However, social entrepreneurs are often held back by a lack of access to investment finance, which means they find it difficult to get started, to expand their ventures and to achieve their full potential. This is particularly the case now that public spending is constrained and many organisations that may have previously relied on some grant funding to survive are having to cope with the difficult transition to a new financing landscape.

The Government therefore want to accelerate the development of the emerging social investment market, to increase the supply of capital available to social ventures. Our vision is for a market in which investors—from individual citizens to large institutions and charitable trusts and foundations—can choose to “invest for good” by putting their money into organisations that create positive social impact and a financial return. In the long term we want this to become the norm: a third pillar of funding alongside traditional giving and public service income.

The big society bank will play a crucial part in catalysing the development of this market, and some of its functions will be in place in April 2011. And we will now work with leading social investment experts to develop a proposal for the establishment of the big society bank as an independent private sector organisation, with its social mission “locked-in”. The bank will act as a wholesaler to build the market and leverage in new finance. It will operate in a transparent way, publishing annual accounts including details of the financial and social impact of its investments, and it will be financially self-sufficient—able, in time, to cover its operating costs and make investments in line with its core mission. The bank will also act as a champion for the social investment market, offering advice and assistance, and acting as a vital portal to connect social ventures with sources of investment.

Alongside establishing the big society bank, action being taken by Government—to open up public services to a wider range of providers; to empower communities to purchase and run local assets; to review the effectiveness of the current fiscal, regulatory and legal framework for social investment; and to provide financial and other support for social ventures to build their business capability—will help create the right conditions for the market to thrive and grow.

Government and the big society bank cannot achieve this alone. So the strategy also calls on others to play their part. Social ventures and other civil society organisations will need to be willing to explore new forms of financing, and prove that they have financially sustainable business models. Existing specialist intermediaries will have a critical role in developing their product ranges and support and will need to compete with new intermediaries entering the market. Charitable trusts and foundations are in a good position to free up a portion of their investment and endowment assets, which account for nearly £95 billion, for social investment. We look to mainstream financial institutions to dedicate resources to create new products, to build expertise and to leverage their distribution networks. And ultimately, we want individual citizens to start to see social investment as a core savings proposition.

Taken together this framework for action and the establishment of the big society bank will enable the great work being carried out by the innovative, committed people and organisations across the UK to have a major impact in building a better, stronger society.