The Big Society Update

The ideology behind The Big Society is nothing new to the Voluntary Sector, but it has put voluntary organisations firmly in the spotlight. The Prime Minister wants to open up the delivery of all public services to private organisations and voluntary groups. However, it is sometimes hard to reconcile The Big Society rhetoric against the back-drop of cuts.

Voluntary organisations which have been dependent upon Public Sector funding for a long time face some of the biggest challenges. Many feel that the Voluntary Sector should not be expected to pick up where the State has left off and that it is not for the Voluntary Sector to do the State`s job. The Government`s Big Society agenda is being undermined by reports of local authorities slicing their Voluntary Sector budgets in response to the Government`s cuts. If such reports are correct, it would appear that as feared, rather than create opportunities for voluntary groups, some local authorities have responded to the cuts by protecting services that have always been delivered by their employees "in-house".

Voluntary organisations of all types are facing challenges. Funders like the Arts Council have also seen their budgets slashed which has left them facing incredibly difficult decisions. The Arts Council has reported that it has chosen to make "strategic decisions" about which organisations to fund to try to build "a resilient future for the arts in England" rather than make sweeping cuts to organisations` funding across the board.

The resilience of voluntary organisations is being tested, with some organisations in a better position to survive the storm than others. The Prime Minister has acknowledged the difficulty in reconciling The Big Society agenda against a back-drop of cuts by urging local authorities not to take the easy way out by cutting Voluntary Sector funding. Eric Pickles, the Community Secretary, has even stated that he would go as far as using statutory force against local authorities that made disproportionate cuts to Voluntary Sector budgets. However, it is not clear what statutory intervention he has in mind. Direct intervention from central Government also contradicts two of The Big Society`s core principles, "localism and de-centralisation". Therefore just as the sector is starting to get to grips with the meaning of The Big Society, the messages remain mixed.

The impact of the closure of the Commission for The Compact on 31 March 2011 upon The Big Society agenda also remains to be seen. If the Prime Minister`s vision of opening up the delivery of public services to voluntary groups is to be realised, then there needs to be a robust framework for regulating the relationship between the Public and Voluntary Sectors. The Commission for The Compact was created by the previous government to promote awareness of The Compact, which is the agreement designed to improve the relationship between the Public and Voluntary Sectors. It is now intended that the Office for Civil Society and Compact Voice (part of the NCVO) will have the joint task of promoting The Compact. The Voluntary Sector can only wait and see as to whether Nick Hurd, the Minister for Civil Society`s apparent commitment to The Compact to "provide an unprecedented level of scrutiny" will be translated into positive action. It is intended that there will be a National Audit Office Review into the effectiveness of The Compact and it has been announced that the Local Government Ombudsman will be encouraged to use its powers to investigate breaches of the Compact. 

The 2011 Budget provided some comfort for smaller charities in terms of allowing charities established for three years or more to claim Gift Aid on cash donations up to the value of £5,000 per year from April 2013 without evidence that the donors are UK tax payers. This provides a welcome relief for the "How to Claim Gift Aid for the Collection Bucket" dilemma. The Government also reaffirmed a commitment to reducing the paper trail burden of administering the Gift Aid Scheme by looking at introducing electronic forms and an electronic Gift Aid database. From 6 April 2012 it was also announced that there would be a reduced rate of inheritance tax in estates where 10% or more of the assets are left to charity. 

The 2011 Budget provided some help to charities, but these measures will be of little comfort to charities dependent upon Public Sector funding, who are already facing, or are bracing themselves for the impact of cuts. It also remains to be seen how effective the new community rights via the "Right to Buy" (the right to bid to take over community assets) and the "Right to Challenge" (the right to express an interest in the taking over the running of a public service) in the Localism Bill will be when incorporated into the final Act.

In the face of a constant stream of bad news it is sometimes hard to perceive any opportunities. However, the situation is what it is, and voluntary organisations` determination to remain resilient in face of continuing uncertainty is commendable. Resilience has always been one of the defining characteristics of the Voluntary Sector.

In real terms, most voluntary organisations are used to funding uncertainty and this is nothing new. Voluntary organisations` perceiving the opportunities and seizing the initiative is more relevant now than ever. One of the Voluntary Sector`s core strengths is identifying practical and innovative solutions to local problems. The best voluntary organisations are mission driven and deliver innovative solutions based on a sound financial footing. Opportunities will always be there for forward thinking voluntary organisations.

The Social Investment Business has announced plans to launch a series of consortia involving thousands of charities to bid for local and national contracts. It has been reported that The Social Investment business might create nationwide consortia for each sector, or regional consortia focussing on several sectors. This could create opportunities for smaller local charities to get involved and to consider collaboration to deliver their aims within a defined framework. 

The Chancellor, George Osborne made the welcome announcement in the 2011 Budget that Community Investment Tax Relief ("CITR"), the government scheme that directs private investment into disadvantaged communities will not be abolished. CITR gives tax relief to corporate or individual investors in return for investment in accredited Community Development Finance Institutions which then provide finance to qualifying profit-distributing enterprises, social enterprises or community projects. In his Budget delivering speech, George Osborne encouraged people to take up CITR and it will be interesting to see if new schemes encourage greater investment by corporate and individual investors. The retention of CITR should help to ensure that finance remains available to voluntary organisations operating in deprived communities that cannot access conventional sources of finance.

In February 2011, Nick Hurd published "Growing the Social Investment Market: A Vision and Strategy" which identifies that there is a growing social investment market which is prepared to blend financial return with social impact. The paper sets out the Government`s vision for using social investment to improve society indicating that it wants The Big Society Bank to be an important catalyst for leveraging new finance available to voluntary organisations and social enterprises. It also states that The Big Society Bank will act as a "vital portal to connect front-line social ventures with sources of investment". The Big Society Bank will be a wholesaler and will not take deposits or offer personal accounts or invest directly in social ventures, but will invest in products developed by intermediaries and encourage others to do so to increase the capital available to voluntary organisations and social enterprises.

The Government is working with "leading social investment experts" to establish The Big Society Bank as an "independent private sector organisation". The Big Society Bank will be capitalised by funds from dormant bank accounts and the paper estimates that the first year release will be £60 million and £100 million. The Big Society Bank`s launch has been delayed until 2012 whilst the Government deals with European regulators over the state aid rules (designed to prevent distortion of competition between member states). It will be interesting to see how The Big Society Bank develops.

The concept of social investment as an alternative means of raising finance is very of the moment and there are opportunities for innovative organisations. The Charity Commission recently published new guidance on charities and social investment. 2010 saw the development of the first social impact bonds, which Social Finance (an FSA regulated organisation which develops social investment markets and opportunities) describes as "outcomes-based contracts in which public sector commissioners commit to pay for significant improvement in social outcomes (such as a reduction in offending rates, or in the number of people being admitted to hospital) for a defined population". Public services are therefore funded by up-front private investment and are delivered by service providers including voluntary organisations with a proven track record. The public sector only makes financial returns to investors if specific social outcomes are achieved. The principle is to reach targeted groups of people by early intervention through targeted public services, which will ultimately reduce the cost burden on the state.

There is no doubt that these are challenging times and the Voluntary Sector is better equipped than many to rise to the challenge. Not losing sight of the mission and doing what it is best at (i.e. coming up with innovative and practical solutions to local problems) is the Voluntary Sector`s best chance of seizing the opportunities that are available in the face of cuts and significant pressure. 

Posted on: 22/07/2011

This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.

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