Power to the People?

In Tom’s March column for Progress Online he berates a missed opportunity to support social enterprise as Parliament declines to amend the Financial Services Bill


Financial Services Bills do not normally arouse great interest within the Third Sector of charities, social enterprises and voluntary organisions – but in 2012 a brief few days of hope in the Bill Committee has ended with extreme disappointment.

Amendment 72 to the Bill would have placed a ‘social investment duty’ on the financial investment regulator to carry out its work in a way which promotes the development of social finance and social investment; whilst 73 would have required it to establish a ‘social investment panel’ of persons with knowledge and expertise in social finance and social investment which it would be obliged to consult and take note of in the conduct of its activities. In other words, some of the barriers and disincentives which prevent large scale professional investors from engaging with social enterprise would be removed.

Lib Dem and Tory MPs combined to deny these measures a place on the statute book.

It’s not just proponents of Big Society that see social enterprise as having a promising future. But with capital investment by financial institutions in social enterprise at a paltry £165 million last year and two thirds of all investments in declared not-for-profit institutions being just £5,000, there is plenty of scope for improvement.

The problem with investing in a community-focused enterprise is that its assets aren’t for sale, in order to preserve the sanctity of its social mission, and the cost of registering your involvement as a serious investor with the Financial Services Authority (or what will replace it in the Bill) is prohibitive. These amendments, which were tabled by Labour’s Chris Leslie and supported by over 20 of the third sector’s leading umbrella bodies and social enterprise expert groups, would have brought social enterprise expertise into the regulator and cut costs in a display of pro bono light touch regulation. This is thoroughly in line with ministers’ statements throughout the Big Society era and also, of course, with the aims and ethos of what remains of the Social Value Bill, the private member’s legislation which forces commissioners to take into account the needs of social enterprises, now an Act of Parliament.

Why should the devil have all the best tunes? By liberating whatever level there exists of ethical professional investors in this way we would have ensured a level playing field and made much needed cash available for a variety of social business models, some of which were established by the recent Labour government – at no cost to the taxpayer. Social enterprise, it is said, needs three to five years of growth at previous rates to be able to have the capacity to be a serious player in service provision and give the private sector a run for its money.

Whilst acknowledging that the status of ‘social enterprise’ is no guarantee of commercial success or even financial viability, amendments 72 and 73 would have accelerated the investment process and made the accomplishment of social missions more likely. They would have given added energy to the growth of social investment and served the common good through empowering community groups and other socially minded organisations to at least have a chance to contribute to the age old cause of ‘power to the people’.

The inexplicable loss of these amendments has denied the Government a major opportunity to give credibility to fundamental tenets of the Big Society.