Andrew O’Brien is Director of External Affairs at Social Enterprise UK
Last night the Chancellor announced a £750m fund to support charities, and which will also include some social enterprises.
This comes on the back of weeks of campaigning by social enterprises and charities in public, behind the scenes, and in representations to Ministers and Parliament. SEUK has been at the forefront of those efforts on behalf of members and the wider movement. We note that this exercise has paid off to an extent and some of the concerns we have raised have been responded to.
One of our priorities has been getting social enterprises access to the funds available to charities. So, it is good to see that the £750m of funding will be open to parts of our sector. Social enterprises are critical to many communities. We are businesses, but we are also essentially delivering for people, often in places or circumstances, where charities do not or cannot operate. It is vital that government creates a level playing field between all of those who are serving society; charities, social enterprises and others.
We have also been calling on the government to release the money in dormant accounts faster, to ensure that liquidity is available to the sector during this crisis. The Coronavirus Business Interruption Loan Scheme (CBILS) does not work for many social enterprises, and we need bespoke schemes tailored to these businesses. Many social enterprises are working in tough conditions where the margins are small and taking on commercial debt is not sustainable. So we support the efforts by DCMS, Big Society Capital, Social Investment Business, and the wider social investment community, to create a £100m fund for social enterprises and charities. We hope that this will be the first of many such funds.
On public services, we are making a strong case that social enterprises should have access to the same support as the rest of the public sector. For a good reason: people don’t care whether they are getting help from a social enterprise or a statutory body. They just want to know the service is effective and safe. Thanks to colleagues such as our SEUK Board Member, Jo Pritchard, we have managed to get social enterprises into the NHS Supply Chain, but we need more financial support and access to supplies. Social enterprises are facing additional costs and often need to restructure their services, for example, moving services from face-to-face to digital delivery. The same funding available to the public sector should be open to social enterprises to do this.
Last night’s announcement is a first step, but it will not be enough on its own
The Chancellor’s announcement of £750m of funding for charities in the wake of COVID-19 will be of value to some social enterprises. We would have liked to have had social enterprises referenced in the announcement directly, but we have been given assurances from DCMS that social enterprises will be eligible for these funds.
However, we must be honest about the fact that this £750m is stretched very thinly across the very large constituency of social enterprises and charities. Charities alone were requesting £4bn in funding and social enterprises will need a similar level of support if this crisis extends beyond the weeks and months that we fear it might.
That being said, the government has acted, and hopefully, there is a growing recognition that social enterprises are an important part of our economy and society. We will continue to engage with government so that they are aware of the challenges facing the sector, the gaps in support and solutions for how these might be addressed.
We are also working with partners across the social enterprise community to develop a set of proposals that we can put to government that address the remaining concerns that we have. We will publish more information in the days ahead.
New government funding comes with conditions
At present the Chancellor has announced that funding will be given to “small” organisations that are making a “big difference” to communities including those providing emergency support through COVID-19.
It is important to note that there is £7bn in grants and billions in business rate relief being provided to the private sector with no conditions and social enterprises should be treated the same. This is an issue we will continue to raise with the government.
At the time of writing, there has not been a clear set of criteria for what a “big difference” or “smaller” organisation is. For example, will a social enterprise which employs vulnerable people in a deprived community but which is not delivering essential medical equipment or supplies (to protect high-risk staff) be eligible? Employing vulnerable people or working in a deprived area makes a ‘big difference’ and these businesses will be the economic backbone to their community in many cases but may be excluded because they are not in a position to do immediate work.
We will raise this issue with the Government and National Lottery Community Fund to ensure that an inclusive approach is taken.
We are also writing to the Government and National Lottery Community Fund to ensure that the definition of social enterprise used is broad and in line with national and international best practice. This is an extraordinary time for the sector and for government, it is vital that we do not exclude good organisations from getting access to funds. We will keep members informed of progress.
Only a minority of social enterprises are likely to get access to the “Smaller Charities” Fund
In order to manage expectations, it is also important to be clear that for £370m “small charities” fund we estimate that this fund could end up covering a population of over 200,000 organisations (assuming that all smaller social enterprises and charities are able to apply).
If you distribute roughly £10k per organisation (akin to what small businesses have received) through the fund, only 37,000 organisations would benefit. This would give support to less than 20% of social enterprises and charities that are eligible.Some of this population may not need a grant, but we estimate that most will need some form of funding in the coming weeks.
The government is also putting together a list of criteria for organisations that will be eligible for the grant scheme, so it may be that fewer social enterprises and charities are eligible for support.
However social enterprises should prepare for significant competition in getting access to this funding.
The state of “departmental grants” is not clear
In addition to the smaller charities fund, another £360m has been promised to departments to spend with “frontline” charities. We understand that this will include some social enterprises.
£200m has already been earmarked for hospices. Tens of millions will also be distributed to groups such as St Johns Ambulance, Citizens Advice, and children services’ charities. This means that the “discretionary” pot which is available to help the sector has already been limited. The total discretionary fund that will be available to social enterprises and charities is likely to be much smaller than £360m, potentially under £100m.
There are thousands of social enterprises which receive 100% of their income from the state and which are delivering frontline services on behalf of central government, local government, NHS and other public bodies. There will be thousands of charities that are providing similar services.
Most of these organisations are either experiencing a significant increase in demand for their services or are having to restructure their operations to cope with COVID-19. These are all services which we will need to continue after the pandemic.
Even if the £100m was exclusively for social enterprises, it would be equivalent to only £15-20k per organisation.When you add a significant number of charities to this mix, the figure is likely to be much smaller. Some would receive more or some less, but it is not going to be enough to keep services open in many cases.
We will be raising the concern with government that this fund is still not enough to keep vital services going, services such as community health care and social care which are even more in demand during this crisis.
What are our next steps?
The Chancellor himself has said that the government will do “whatever it takes” to help people and businesses through this crisis. We take the Chancellor at his word.
We are working with a range of sector partners to keep lobbying and fighting for the sector to ensure that we get the support that we need to get through this crisis. We will continue to work constructively with government on getting the necessary support to the sector.
We need a country where we have a thriving social enterprise sector to aid the national recovery, level up the country and tackle threats that are still out there, such as the climate emergency. This requires a significant additional investment, likely to be hundreds of millions of pounds. It is our job over the coming weeks to ensure that the social enterprise sector gets through this so it can play its critical role in that recovery.