The Big Society was frequently talked about as David Cameron’s flagship idea. It was included in the 2010 Conservative party manifesto, and incorporated into legislation as part of the Conservative-Liberal Democrat Coalition Agreement. The idea was heralded as a radical new form of relegating power from higher-up government structures into the hands of smaller local communities and individuals. Although it received considerable criticism, particularly from parts of the sector, and four years later it does seem as if it has been largely abandoned, the Big Society has served as an important step towards envisioning a more socially active and responsible society.
Furthermore, a host of programmes in existence now, and organised by a variety of government branches, have stemmed from the Big Society political ideology. Noteworthy examples include developments that were not necessarily top of Cameron’s Big Society hitlist: personal health budgets, the NHS Right to Request, the Community Right to Challenge, the ‘Our Place’ fund, the Community Organisers Programme, the Social Value Act, Social Impact Bonds (SIBs), Innovation in Social Action, and Open Data.
An important example of this trend is the Care Act, often cited as the first complete reinvention of the health and social care legislation since 1948, and which is expected to be fully implemented by April 2016. The Care Act is based on notions of social equality, well-being, self-governance, and transparency. Under this Act, beneficiaries of a care system will be able to choose the services they wish to pay for, and their feedback on given services should carry gravitas for the provider.
Aid the system
Another important step forward, which has occurred via a Big Society ideology, is the much needed joining of health and social care services and resources — an innovation that, it is hoped, will aid the system in delivering better, more prompt care that is tailored to a recipient’s individual needs. Jon Cruddas, the Labour Party’s big thinker, defined the trend towards the Big Society when explaining what ‘One Nation Labour’ was about: “Doing politics in a new way. Not the old top-down transactional politics of doing things to and for people. But a bottom-up transformative politics of the common good that gives people the power and responsibility to take more control of their lives, their work and their communities.”
Within this, the social investment market in the UK is arguably the most advanced in the world. According to a Social Enterprise UK (SEUK) study conducted in 2013, social enterprises are performing better than purely profit-driven companies. Also, the charity sector is growing rapidly, at a rate of over 20 per cent per year, serving as both a role model and a testing ground for social investments and results worldwide. The future of social investing and a new, more involved and efficacious system of affecting positive change in the lives of the underprivileged is being shaped right in front of our eyes. The Cabinet Office’s 2014 progress report underlines the monumental changes already accomplished in the last three years.
“I think there are big barriers to charity organisations being as effective as they could be,” counters Emily Jolly. Jolly is the director of ACEVO solutions, but her views are her own. “If pushed for a catch-all term I’d be tempted to use ‘professionalisation’. Terms like professional, commercial, and markets can produce adverse reactions in some charities. However, there remains a general need for organisations to demonstrate the impact they are having, whether money is being spent effectively, that their systems and processes are fit for purpose.”
This, notes Jolly, is linked to the phenomena of charity funding from grants decreasing and contracts increasing. “But I’d like to think that professionalisation of charities is good in and of itself. Surely we would all like to see sustainable organisations meeting social needs — if you can do this you stand more chance of expanding and thus increasing your social impact, or even just maintaining the valuable services you deliver for future beneficiaries.”
Role of SIBs
Within the last two years, the number of social enterprises and their employees has grown considerably; while the 2012 Social enterprise: market trends report lists the number of employees in the sector as 1.2 million, the 2014 figures show it has now reached close to 2 million. Some of this growth can be attributed to a 30 per cent tax relief for social investments in the charity sector; a measure introduced by the Government in order to alleviate the risks of social investing and create more business.
Another often advertised achievement for the coalition government was the founding of Big Society Capital. Launched in April 2012, as an independent social financial institution with the goal of aiding the growth of the social investment market, the £600m fund started with the Government’s share of unclaimed assets and investments from four of the largest UK banks. It aims to allocate funding for investment in bodies that support social enterprises.
In addition, in 2013 the coalition government announced a multi-million dollar package as part of a plan to further boost the social investment sector in order to develop tactics that encourage ongoing progress. The Government is hoping to spur the creation of innovative, effective methods of tackling social issues like homelessness and loneliness, as well as programmes to help disadvantaged young people. The government is designing some of these programmes, while others are being designed by charitable organisations, which, if deemed worthwhile, will then be financed by the government.
One of the new ways financing is being procured for socially responsible programmes is via SIBs — a financial mechanism launched by the public sector, which enables investors to issue funding to charities and social enterprises with the goal of improving social outcomes. When social outcomes are reformed, government commissioners must recompense the investors for their investment, in addition to paying costs for financial risk. When social outcomes fail to meet the required goals, investors lose their investment.
The main objective of SIBs is to connect commissioners to private investors in order to discuss difficult and costly social problems and fund preventative interventions for these problems. These bonds allow new services to be tried without the concern of returning investment cost if the services are unsuccessful. They also provide added flexibility for those administering the services to tailor the service rendering to their experience.
A major benefit of SIBs is that they can assist charities and social enterprises in proposing and overseeing Payment by Results (PbR) projects, in which the government compensates the provider of the service for outcomes achieved. Payments are solely based on outcomes and not on the work that was completed in the duration of the project or service. The return of PbR includes better results for the public and lower cost for the government. As Kevin Munday, investment director at ThinkForward, a private equity foundation working with various charities to transform the lives of 11 to 24-year-olds from disadvantaged backgrounds, says: “There are some services where the outcome is clear-cut, counselling and grant funding may be more suitable than payment by results.
Similarly, if the effectiveness of a service is already established, then there may be cheaper ways for government to fund it.”
SIBs can play a significant role in helping to alleviate difficult social problems that are present within the community.
By broadening sources of investment and providing financial services to a larger range of organisations, SIBs expand the diversity of organisations that administer services, which then allows charities and social enterprises to distribute PbR contracts. This elevates levels of innovation and proficiency into the delivery of services, including locations where people using the services are marginalised and difficult to connect with. The external investments that SIBs provide to organisations can be used to pay for preventative services, diminishing the need for more costly services.
By changing the focus of achievement towards outcomes, SIBs enable charities and social enterprises to create preventative methods based on their knowledge and experience of dealing with specific groups and/or addressing social issues. The focus becomes on what works instead of being limited by processes implemented by government commissioners. By doing this, charities and social enterprises can better drive innovation in public services.
Munday says: “At their best SIBs are indifferent on the method of service delivery, as long as agreed outcomes are being achieved. This correctly allows charities to use the knowledge of the communities they service to develop the most effective local solutions. It also enables government and other funders to identify the charities which achieve the greatest impact and channel funding towards them.”
Future of SIBs
Charities are well placed to positively benefit from the ways in which social investments will be refined and utilised in the future. Richard Sved, director of Third Sector Mission Control, specialists in charity fundraising, says: “In a lot of cases those individuals in the UK are unaware of the extra ‘power’ they have. I would add to that the growing influence of crowd-funding and micro-loans, which both give individuals power but which charities can also benefit from.”
However, as the Government re-evaluates its approach to social investment regarding SIBs for charities and social enterprises, there are a few issues that the government would do well to take into account. In particular, there is no blueprint for the planning and actualisation of a SIB — each one must be approached individually by the bodies managing it; various legal structures and payment systems need to better cater to different delivery models; charities are often exhausted with the daunting task of managing governments and investor expectations via a system that is still in development; and, methods of measuring the result and impact of SIBs is still being refined.
Currently, the charity sector is thought to be undercapitalised due to barriers that include an inability to effectively disburse profits, scepticism by banks who view charities as risky for investment, and low waged income and limitations in management capacity. Social investments, therefore, may be best placed for financing charities, with some noting that social investments could play a major role in the capitalisation of charities since they have the capability to encourage innovation, allow social impact, and support income assortment.
“In the current culture, I can only see a lot of ‘consolidation’ for the sector mergers and closures,” says Alex Swallow, programme director of the Charity Leaders’ Exchange. “Too much of our funding provision and contract culture is difficult for smaller charities to get a fair slice of — but I believe the Government are serious in trying to do something about this. What I would prefer is a multiplicity of competing approaches and much more sharing of best practice and information.”
According to Ross Palmer at the Cabinet Office, the UK is seen as the world’s leader in its support for the social investment market. The policies and programmes currently enacted by legislation alongside social investment innovations, such as SIBS, are beginning to demonstrate a real and sustained impact.
However, Jolly disagrees. Based on her personal experience she says: “SIBs in my opinion are overrated. They are expensive and time consuming to set up and add significant complexity to operational delivery. If commissioning and contract management were done effectively you could create many of the supposed benefits of sibs without the additional cost and complexity.”
For instance, Jolly adds: “Supply chains that are incentivised to achieve the overall contract aims, for which alliance contracting is one model but which should be achievable whatever the commercial structure with good management. The perceived need to create an expensive financial product to enable investment in social good is troubling to me.”
There is though now a broader diversity of social investment than ever before. In order for the social investment market to expand, however, more than just government financial assistance is required.
“The majority of charities are small — finance is not suitable for the scale of work they are carrying out,” says Directory of Social Change policy officer, Jude Doherty. But with the support of the Government, social investors, charities and social enterprises will all have key roles to play.
The combination of social investment of the Big Society ideology alongside the charity sector provides a unique position to act as a driving force to enact greater change within the charity sector than ever before. Indeed, the charity sector is now better placed to have considerable influence on government policies and on investment for endowment funds, foundations and trusts. The Big Society as an ideology may no longer be as trendy as it was, but it impact on the way funding is allocated and agency is conceived at the local and individual level is arguably its greatest legacy.
Dr Nicola Davies is a freelance journalist