Charity finance policy Governance, legal and compliance

Social investment: Government's Windex for civil society

Those who know me know that I like a good laugh.  So it’s no surprise that I love the 2002 film My Big Fat Greek Wedding.  For those of you who missed the fabulous romantic comedy (a surprise box office hit), it’s well worth watching! In it, the main character, Toula, is a 30 year old Greek ‘spinster’ who is coming under increasing pressure to marry a ‘good Greek boy’. There’s a running gag that her father, Gus, is convinced the answer to every problem is Windex (a cleaning product).Whether the problem is, logically, a dirty window - or illogically, a gargantuan spot Toula develops on her wedding day, Windex is Gus’ fix all. After reading Rob Wilson’s speech delivered on Giving Tuesday, I’ve concluded that social investment is the Government’s Windex for civil society.  

There are over 164,000 registered charities in England and Wales, and 96% of these organisations have an annual income of under £1m. Some are entirely volunteer-led, some have paid staff.  They cover 13 different areas parliament set out as being charitable; from education to animal welfare.  Some rely entirely on donated income from their local communities, some on grants, some deliver public services, and some on trade.  For many their income is wide ranging but increasingly being narrowed. Let me first say what I thought was good about the speech. Rob Wilson stated that we need ‘broader more sustainable funding streams’ - tick. He expressed ‘support … to uphold the very highest standards of professionalism and integrity in the way [we] operate’ - tick. And he stressed the importance of ensuring resources are available ‘in communities themselves’ – tick. So the sentiments started well but… Windex follows.

Grants were described as ‘top-down’ and ‘transactional’ rather than a valuable source of flexible funding which enable charities to operate sustainably and give them the freedom to innovate. The Minister observed that too many charities are chasing too few funds and that this means that a ‘new kind of relationship’ with government should be forged. I agree, but I don’t think that this should lead to the space for grant funding being continuously squeezed.  In most cases where grants are a significant part of the funding mix, social investment is not a replacement. The tone of the speech led me to think that perhaps lessons learned from Government’s experience with Kids Company are being applied sweepingly to the sector at large. Are too many charities over-reliant on a single source and one cheque away from insolvency? It’s rather a sweeping statement. True many charities are hand to mouth; having the skills and finding the space and time to broaden their funding mix or to replace squeezed income streams is challenging. But that doesn’t mean equate to being one cheque from failure!  What sort of message does that send? Especially when coupled with the suggestion that large charities have shattered the confidence of the public in the sector as a whole - if you cannot trust the big guys and the small ones are on the brink of failure: what then? In addition, fragile organisations should not form the basis of expansion for the social investment market. The solution to the problems we face lies in a mix of initiatives.

The government should fund financial capacity building and make strategic inventions - not ad hoc hand-outs targeted at favourable sections of the charity sector (however deserving). I am not suggesting for one moment that military charities, blood bikes or others who have benefitted should not have - but rather that the approach leaves a lot to be desired. Resilience flows from high standards, skills and professionalism - Rob Wilson is correct there. However that should start with the basics: understanding how to budget, identifying the value of producing a cashflow, understanding your business model, funding streams and the volatility/sensitivities in your charity’s market place. It’s about seed funding (in which regard grants are great!) and supporting. It’s about government using its power to shape policy and regulation, for example, resolving the section 75 pension debt problems, and simplifying the tax environment. It is not, in the vast majority of cases, about social investment. I am an advocate of it, but the development of the social investment market feels like it is at the expense of the basics now required by the wider sector.

Social investment may be part of a more sustainable solution for those charities who can create an income stream or who can leverage payment by results in social outcomes that produce measurable return to the public purse. But the vast majority of charities do not have models that can support repayable finance. Imagine if the character Gus tried to use Windex as an eye wash; would he cause irreparable damage before understanding that was not the answer? Social investment applied as a solution to the wrong problem could be equally caustic.

The speech talked about increasing the sustainable funding base for charities, but other than social investment, public services and contracts, the only reference was a rather vague ‘…other new forms of funding’.  What new forms? Rob Wilson’s reference to skills building was seemingly positive.  The quality and skills of those working in charities has increased exponentially. It’s not perfect by any means, and the economic climate of the recent past has caused a ‘capacity crunch’ in the sector which threatens to undo some of the progress made. Social investment and the related investment readiness training won’t address this need. Master classes to help small charities access public service contracts could be great for some - but certainly not all (ditto the NCS and private sector volunteering initiatives).

Fundraising support and training for small charities is very welcome too - but all these things, without financial capability building, is surely just running a tap into a bath without first placing in the plug? There is one final lesson I shall draw from this unlikely source: in My Big Fat Greek Wedding, Toula’s husband-to-be is a vegetarian. Apparently the Greeks do not get how or why someone would not eat meat. In the film, Toula’s aunt exclaims “What do you mean he don't eat no meat?”, to which the entire room falls into shocked silence. Voula just says “Oh, that's okay. I make lamb.” I get the same sensation when I listen to Ministers talk about the funding to the sector and social investment! Like Gus, in applying the same answer to every problem, the government might get lucky and find that social investment does address some problems against all the logical odds and evidence. But this is no basis for building a strategy to forge a new relationship between government and civil society. So by all means, see social investment as an option – but it’s a subplot - it is not the main story. And if it wasn’t so troubling, perhaps it too would be funny.

This post was last reviewed on 27 February 2019 at 15:42
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