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The Minister for Civil Society (Mr Rob Wilson)
It is always a pleasure to serve under your chairmanship, Mr Chope. I begin in the traditional fashion by congratulating the hon. Member for Clwyd South (Susan Elan Jones) on securing the debate. I welcome her interest in a very inspiring sector. She said it was quite dry, but I found her comments very interesting and I will come back to some of her ideas in due course. Her comments should not have been unexpected because, as she said, she chairs the APPG on charities and volunteering. The group recently held a session on social investment, which obviously proved to be interesting and has generated a number of ideas.
Social investment can drive innovation in the sector, as we heard from the example of Splash Magic in the hon. Lady’s constituency. It is a powerful tool to tackle some of the biggest challenges in society today and, in the case of her constituency, to tackle jobs and growth issues. Social investment helps economic growth by supporting the UK’s thriving social economy. It also supports social innovation by channelling funding towards entrepreneurial solutions to longstanding social problems, and helps public services by delivering better outcomes and, in some cases, savings to the taxpayers.
I have embarked on an ambitious reform programme for charities and social enterprises because it is my aim to deliver a sector that is more independent, resilient and sustainable over the long term, and much better able to meet the challenges that it faces. Since the general election, the Office for Civil Society has supported the creation of a new fundraising self-regulator. I know that is not directly relevant to social investment, but it is still important to raising money for charities, in particular. The new self-regulator is being led by Lord Grade, as the hon. Lady will know. It has the legislative powers needed to give the public confidence that fundraising scandals are a thing of the past, and is a chance to restore the public trust and confidence needed so that a generous public continue to donate to the causes that matter most to them.
The new Charities (Protection and Social Investment) Act 2016 gives the Charity Commission tougher powers to enable it to regulate the charity sector much more effectively. As the hon. Lady said, the new Act also clarifies the law on social investment, enabling smaller charities to have the confidence to get involved in this hugely beneficial area.
The UK is now recognised as a world leader in social investment. For example, we set up the world’s first social investment bank, Big Society Capital—the hon. Lady went into some of its history—and the first social investment tax relief, which I will talk about further. The first ever social impact bond was also in this country, so we have a lot to be proud of.
We also created Access, the Foundation for Social Investment, to which the hon. Lady did not refer. That has £100 million to support more organisations to take on and get ready for investment, helping to stimulate the pipeline of social investment deals over the next 10 or 15 years. We have made money available through the local sustainability fund, which was created to help organisations to secure a more sustainable way of working by providing funding and support to help them to review and transform their operating models.
Jim Shannon
In addition to what the hon. Member for Clwyd South (Susan Elan Jones) said in her speech, we also recognise the good work of the Big Lottery Fund. It is always good to recognise organisations that make a significant contribution to social investment, and the Big Lottery Fund enables that to happen. Does the Minister feel it is important to encourage and support that?
Mr Wilson
The Big Lottery Fund has some £700 million of grants at its disposal each year, and it is an important part of the funding landscape in this country. It does an awful lot of great work, and I encourage organisations that perhaps have not made funding proposals to the Big Lottery Fund in the past to do so now. The Big Lottery Fund is trying to do a lot to make it easier for organisations to get hold of grants and to ensure that it is focusing on some of the more disadvantaged areas across the United Kingdom.
Returning to my previous comments, I want the leadership that the Government have shown on social investment to continue. The Government are therefore supporting social impact bonds, as the hon. Member for Clwyd South said, and so far we have created 32 social impact bonds, which is more than the rest of the world put together. We have enormous experience of social impact bonds and the social impact bond market. SIBs work on the principle that the Government pay only for the outcomes that we want to see and that we agree should be delivered. Social investors provide the up-front investment to scale up innovative services and are repaid by the Government based on the outcomes delivered.
SIBs are being deployed to get to the heart of some of the biggest challenges that we face as a country. They often focus on things such as early intervention, which will help us to contain the ever-expanding demands on our public services. I recently visited the AIMS—accommodation, intense mentoring, skills—project of the Local Solutions organisation in Liverpool, which is supporting young homeless people into accommodation, training and employment. The programme allocates a trusted mentor to each young person to provide a single contact point, delivering personalised support across multiple services. The programme is financed via a SIB and is a great example of how commissioning for outcomes can give social sector organisations the freedom to do what is needed, when it is needed. SIBs help to foster genuine partnership between the Government, social sector organisations and social investors, supporting organisations that can innovate in ways that big government finds difficult. Perhaps most importantly, SIBs focus on delivering meaningful outcomes for people, and there is more to come.
As the hon. Lady will probably have picked up, the Prime Minister recently announced our new £80 million life chances fund, which is an important next step on the journey and will show how social investment can transform local public services. The fund is a down payment on a social impact bond market that I hope and expect to be worth £1 billion by the end of this Parliament. I want to see more social impact bonds and to support those who want to use this innovative source of capital, which is why we are working with the University of Oxford to create a new centre for excellence that will develop world-leading research in social impact bonds and innovative Government commissioning and will provide the practical support that local commissioners need as part of that process, but there is more to the market than social impact bonds.
Susan Elan Jones
The Minister is making some interesting points about SIBs, and the debate will clearly continue among organisations, but may I draw him on to the issues of quasi-equity and of equity and debt, please?
Mr Wilson
The hon. Lady made three specific proposals. The first was a change to the accounting rules, which she believes will help social investment by disclosing equity, rather than debt. I understand that, and I am happy to look at it. The second was an increase in the level of tax relief. Obviously I will need to discuss that with Treasury colleagues. Again, I am happy to look at it, but I cannot give her any commitments. Thirdly, she wanted to discuss further the whole investment in SIBs, which I have been trying to address.
I will talk about some other issues, too. Alongside charities and conventional social enterprises, new kinds of businesses are committed to making a social impact through their business without having constraints on how they distribute profits. Such businesses are part of the UK’s already diverse and growing social economy, and an independent review is currently considering how to increase the economic and social impact of mission-led businesses in the UK.
The hon. Lady mentioned dormant assets, which is another area that offers real opportunity. I believe there is a host of such assets that belong, in aggregate, to the public and should therefore be used to benefit society, not specific firms that may be sitting, unwittingly or not, on these stores of potential public value. I have set up an independent commission on dormant assets to explore what additional assets could be released to good causes, potentially transforming the way we support the sector.
We have done, and are doing, a lot to support social investment, but I do not plan to be complacent. There is more that we can do, and I will continue to drive the agenda forward. The breadth and innovation of our social sector in the UK is truly inspiring, as the hon. Lady will have witnessed. We are surrounded by incredible organisations that deliver life-changing services and reach all corners of our society. For example, I visited the social enterprise Clarity, which has been providing employment for blind and disabled people for 160 years. Employment in manufacturing a range of beauty and household products enables Clarity’s staff to develop their independence, build their confidence and play a full part in society. Such organisations demonstrate exactly why I am so committed to the sector, which is why I am determined to build their resilience and sustainability so that they can thrive and grow.
Again, that is where social investment comes in. I want to make it easier for anyone to be a social investor, from individuals to foundations to corporate organisations. I want to help investors to connect, through their investments, with the causes that matter the most to them. I would like to see pension providers offer products in which a percentage of their members’ money goes to social investments. We are seeing that work successfully in the French pension system, in which billions of euros have been channelled to social impact investments. Product providers in this country have so far made limited progress on developing social investment offerings for retail investors, so that area has real potential.
Some organisations are pioneering retail products. Threadneedle, for example, has a UK social bond fund with tens of millions of pounds under management that can be accessed by individual investors. That is just the tip of the iceberg for retail fund offerings. Millennials will be the beneficiaries of the largest intergenerational wealth transfer in our history, and in the future successful investment managers and product providers will need to cater for their preferences. They are more interested in values-based lifestyles than previous generations, which includes consumption choices but also the way they want to invest. The Government want to back those people in the choices they want to make, as well as supporting the incredible social enterprises and mission-led businesses we have in the UK to grow in scale to make an even bigger impact on the lives of beneficiaries and communities that they are changing every day.
I am delighted to have had the opportunity to discuss social investment in Westminster Hall today. Social investment is important because it is part of the long-term future of civil society in this country. We have a truly inspiring social sector here in the UK that contributes not only to the lives of our citizens but to the economy at large. We have all seen at first hand the impact that such organisations are having and the difference that they make to people who need them the most. We all want to ensure that the sector can thrive, which is why I am focused on delivering a sector that is more independent, more resilient and more sustainable over the long term. We can see that social investment is working. There is demand from social enterprises and investors alike, which is why I know that social investment is here to stay and will continue to grow and drive this vital sector.
Question put and agreed to.