Big Society Capital: an idea whose time has come?

So with a fanfare, one of the first concrete blocks of Cameron’s ‘big society’ is put in place: Big Society Capital. The £600 million pound fund is intended to help support social enterprises who find it difficult to secure financial support from traditional banks and other forms of investment. Critically, it will be used to support schemes and ventures that can repay the investment (in other words social enterprises which generate an income through their activities) plus a small return on that investment.

Three investments, worth around £3.6 million, have already been announced:

  • Think Forward Social Impact (managed by the Private Equity Foundation), which looks to support disadvantaged young people aged between 5 and 25 through school and work. The investment is designed to help the programme target 950 young people with ‘super coaches’ who provide intensive mentoring.
  • Franchising Works Licence Fund, based in Manchester, which helps with the purchase of franchise licenses for unemployed people or those who cannot otherwise afford the licence cost.
  • Community Generation Fund, which supports small and medium companies who work in the sustainable environment and social impact sector (for example, erecting wind turbines, solar panels, which allow communities to generate an income which is ploughed back into social investments such as community centres).

In all three cases, the income generated is from payment by the state based on results (i.e. keeping people in school, finding and keeping people in jobs, etc).

At the heart of BSC is something quite interesting – an attempt to provide alternative sources of investment for enterprises and schemes that banks would consider too risky. But what exactly is a social enterprise and what are the implications for the voluntary sector more widely, and for service and welfare delivery in the UK?

A social enterprise is a venture that seeks to have a social, rather than economic impact. It may seek to make a profit, but those profits are usually (but not necessarily) put back into the enterprise or used to fund social investments. So a company may charge for a service, but use those profits to support a number of activities that would be considered voluntary.

The BSC could provide a vital fillip to such organisations – many of whom are doing some quite interesting work, both in the UK but also overseas. And expanding the sector is probably a good thing – if only because ideas that work (with investors taking the risk) could be adopted and adapted for wider use here and in developing countries.

So is it all silver lining and no dark clouds? There are some, perhaps not concerns, but certainly issues to consider in the growing role of social enterprises in service delivery.

Firstly The types of organisations that could access BSC funds must generate an income in order to repay the investment. It is not intended to provide grants to voluntary organisations in general, many of whom are struggling to find grants in order to maintain current levels of service, never mind expand.

Secondly, the question of accountability. To whom are social enterprises accountable for their work? If funded by the BSC or similar investment organisations, they will be financially accountable to them. Paid for results by the state, they are accountable (in terms of results) to the state. But social enterprises are dealing with highly vulnerable people and groups (prisoners, disadvantaged youth, long-term unemployed). If we focus only on results, rather than methods and means, is that sufficient protection? Are the oversight institutions that govern state activity in such areas to be expanded to cover social enterprises? Will there be strict monitoring (beyond the focus on results) to avoid abuses. The recent scandal at Tory favourite A4e (which worked to place unemployed in work) reminds us of the potential for abuse and potential fraud in such companies. If the sector rapidly expands, with insufficient regulation and accountability, there is a danger that such abuses will take longer to uncover. But aside from criminal activity, the ethics of working with vulnerable people – pressures exerted upon them in order to meet targets, the extent to which advice and support is designed for their needs rather than for a quick result – is important. Many organisations do great work and are generally committed to the needs of their clients. But as activity in this area becomes a site of profits, organisations less dedicated and caring will undoubtedly emerge, and strong systems must be in place to prevent any abuses. It is not clear that current accountability systems are sufficient.

Thirdly, there is the thorny issue of generating an income from social impact activity. This is not to say that it is necessarily unethical in itself. But, again returning to A4e, should profits generated be at a level that allow for huge salaries to be awarded? Of course, one could argue that as payment is determined by results, high salaries would be earned. But in the state sector, generating excellent results may give rise to a (decent) bonus, but not to startlingly large salaries. Should investors be making returns on investments in social enterprises. They are risking their own funds – so perhaps yes, it is legitimate. But the language of ‘clients’, ‘results-based payments’, ‘investment’, and so on risks turning people into commodities, marketising what should be separate from the market.

And finally, linked to the question of profiting from social activity, is the fundamental question as to whether we are seeing the privatisation of service and welfare through contracting to (albeit non-profit) social enterprises. This is not a new concern. There are many who would argue that one of the impacts of donor funding for NGOs in service delivery in developing countries was precisely this – privatising welfare. NGOs may be non-profit, but they are also private sector actors. Choosing to fund them, rather than the state, in running hospitals, schools, and other services, undermines the obligation of the state as source of welfare for its citizens. Of course, social enterprises (for-profit and not-for-profit) may be more efficient than state-centred provision. Their capacity to risk new approaches is often greater than that of the state, for whom justifying failure to electorates is difficult. And they certainly have a place in the mix of service delivery. But the message from the Conservative government, in ‘big society’ and in its international development policy, carries dangers for those who see the state as the critical institution in funding and delivering welfare.

BSC is potentially very interesting (even if it is small at the moment). And there is no doubt that social enterprises are doing some very interesting things, here in the UK and elsewhere. But this does not offer opportunities for voluntary organisations who are also doing excellent, innovative work without generating an income. There are serious questions to be addressed about accountability, and to whom, for these organisations are in receipt of public money and working with vulnerable people. And there is the political question of the broader implications for the welfare state. Is this privatisation with a velvet glove – couched in a language that makes it hard to contest without seeming to be uncaring or an unreconstructed statist?

So, good news on the establishment of Big Society Capital. But more thought as to the implications of the rolling out of big society.


About Mike Jennings

I am Reader in International Development and Head of the Department of Development Studies at the SOAS, University of London. I research, teach and write on Africa, and the history and politics of international development in sub-Saharan Africa. Research areas include: - The history of development in Africa, from the late nineteenth century to the current day - Politics of East Africa (Kenya, Tanzania and Uganda) - the role of non-state providers (NGOs, FBOs and self-help groups) in welfare service provision - Social aspects of health, including HIV and AIDS, and malaria
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