Below is the text of the speech made by Rob Wilson, the Minister for Civil Society, at Hogan Lovells in London on 2 March 2016.
Good morning everyone, it’s a great pleasure to join you at this Social Investment Academy.
Thank you to Worthstone for putting on what I’m sure will be a very useful event. Here at Hogan Lovells you are in good company – with people who really want to make a difference.
Hogan Lovells has helped 30 social enterprises secure investment by providing free legal advice. It is one of a growing number of businesses recognising that social enterprises play a crucial role in tackling and addressing social and community problems and, at the same time, enhancing the economy.
I’m pleased to inform you today that this government has embarked on a somewhat overdue and ambitious reform programme for charities and social enterprises.
It is my aim to deliver a sector that is more independent, more resilient and more sustainable. Better able to meet the many challenges that it faces.
Over the past year or so, my Office for Civil Society has ensured the creation of a new fundraising self regulator, led by Lord Grade, making certain it has the legislative powers to give the public confidence that fundraising scandals are behind the sector. A chance to restore the public trust and confidence that it needs so that a generous public continues to donate to causes that matter most to them.
I recently piloted the Charities Bill, soon to become an Act, through Parliament. This Act will give much tougher powers to the Charity Commission to enable it to regulate the charity sector more effectively.
Several confusing regulators abolished, but replaced with a new one, whilst enhancing the Charity Commission’s powers. In essence ensuring our charities have a framework fit for 2016 and beyond, operating with the minimum bureaucracy but with robust powers.
And the Charities Act also clarifies the law around social investment, enabling smaller charities to have the confidence to get involved in this hugely beneficial area.
Social investment is growing. It will play an increasing role in how the sector will be funded and there is a role for all of us in achieving this. Social investment can accelerate the growth of new businesses, transform the impact of our public services and support stronger communities to tackle the social challenges that they face.
The UK is recognised as a world leader in social investment. We created the world’s first social investment bank, first social investment tax relief and the first ever social impact bond. I want this leadership to continue and the government is therefore supporting this market to remain a world leader. We have already created 32 social impact bonds (SiBS), more than the rest of the world put together.
SIBs work on the principle that government only pays for the outcomes that we want to see and agree should be delivered. Social investors provide the up-front investment needed to scale up innovative services. The investor is then repaid by government based on the outcomes that have been delivered. Hopefully this involves a return on investment.
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 prevention and early intervention, which will help us to contain the ever expanding demands on our public services. The delivery organisations, in many cases, will be charities and social enterprises who have the experience of delivering successful programmes across local areas.
SIBs help to foster a genuine partnership between government, Big Society organisations and social investors – bringing in the additional investment needed to support these organisations, who can innovate in ways that big government simply can’t.
Perhaps most importantly though, they focus on delivering meaningful outcomes for people. For example, supporting a child out of residential care into an adoptive home, a young person into their first job, or a rough sleeper into supported accommodation.
The Prime Minister recently announced our new 80 million pound Life Chances Fund, which is an important next step on a journey that will show how social investment can transform public services. This is a down payment on a SIB market that I hope and expect to be worth more than 1 billion pounds by the end of this Parliament. The growth of SIBs will continue into the next Parliament and will become the norm for the way many public services are funded.
Social impact bonds are barely mentioned in the media today. In a few years time they will be the most talked about funding mechanism for government social projects. I will be talking about them a lot.
In its different forms, social investment is already making a huge difference to the lives of thousands of people throughout the country
For example, Aspire Gloucestershire and Ambition West Midlands, 2 programmes focused on supporting young people who are homeless and out of work, have raised over 900,000 pounds in investment through a social impact bond to support 490 young people to improve their lives.
Part of this investment was raised from high net worth individuals who wanted to use their money to change lives as well as generate a financial return. These investors were also able to take advantage of the social investment tax relief.
Another example is Golden Lane Housing, who were able to use a Retail Charity Bond to raise 11 million pounds to buy and adapt housing for people with learning disabilities while providing investors with an annual return of over 4%.
What I really hope you go away with today, is the sense that this is a no-brainer, that we can invest for positive social returns that can change people’s lives. And that you can all help to make this happen.
You are the pioneers. The fact that you’re here means you know this is something to think about, to pay attention too. You don’t need me to tell you that the demand is there – that 73% of investors are now interested in making a social investment. This market will be taking off and I hope you’re here to make the most of it.
We’ve had the social investment tax relief now for nearly 2 years, and we’re now seeing the impact in communities across the UK.
It’s getting more investors involved, giving them that extra incentive they need to consider something a bit different, and opening their eyes to these amazing organisations that really are changing people’s lives. We are working to expand the relief, leading the process with the European Commission as we speak.
But what about you? You are the gatekeepers. The ones that investors trust to provide advice and guidance. I’m pleased to announce that we’re working with Worthstone to develop an accredited social investment education and training module for retail investment advisers.
This will give you the tools and knowledge you need to carve out your offer and to push this market forward.
More widely than that, we also think that regulation is an area that might need a fresh look. The government is committed to doing anything it can to remove unnecessary burdens, while not eroding consumer protection or the integrity of the financial system.
I’m extremely pleased that the Financial Conduct Authority (FCA) is recognising the growth of this market and is currently gathering evidence on regulatory barriers to social investment.
This is your opportunity to share experiences of what would make it easier for your profession to move this market even faster and make a real difference to communities across the world.
This government is absolutely committed to growing the social investment market and making it easier for socially-motivated investors to invest in line with their values. I hope to announce further plans on this later in the year.
But now it’s over to you. Feedback to the FCA to make sure you’re operating in the right regulatory environment. Do the deals, talk to your clients and push the boundaries.
The time for social investment, ladies and gentlemen, has arrived and it’s here to stay.