Tag Archives: philanthropy

Budget announcement on a new tax relief for social investment

Guest post from Tom Hall who is Scope’s Director of Philanthropy and Corporate Partnerships

As we digested what it meant to be an ‘aspiration nation’, another Budget announcement flew under the radar. The Chancellor has revealed that the Government will be consulting on introducing a new tax relief for social investment.

This is good news for charities and the people they work to support. Especially as so many are finding it increasingly difficult to generate the same level of donations from traditional sources

Scope has pioneered social investment because we think it will help charities and social enterprises like us grow efficiently and become more sustainable in the future.

Scope investment bond

We launched our Bond back in 2011, successfully raising £2 million at 2% repayable after three years.

The money has been invested in expanding our network of shops, with each new shop bringing in about £30,000 a year to support our work with disabled people and their families. We’ve also used it to encourage 10,000 more people to regularly donate to Scope. All this will give us sustainable unrestricted income to fund our key work, supporting disabled people and their families through programmes like our network of parent befriending groups.

We have already paid our first interest payment (these are to be paid twice a year) and were delighted to win the Sustainable City Award for sustainable finance this week.

Having successfully launched the Bond and accessed finance in this way, we are now looking at other enterprising activities that give investors the chance to see their money make a difference to the lives of disabled people.

Whilst our bond was a success we felt that it would have been even more successful if our investors could have received some form of tax relief on their investment. There is currently no tax relief available for investors who choose to lend to charities and social enterprises through products such as the Scope Bond Programme.

We believe tax relief would help charities to overcome the barriers they face around being about to pay fully commercial returns and would incentivise investors who want to see social as well as financial return on their investments.

Tax relief on charitable lending

A tax relief on charitable lending, for example of 5% per annum on the amount invested, could significantly raise the financial return and therefore appeal of social investments, helping encourage more people to invest in delivering social impact.

For example a tax relief of 5% per annum would have turned the a 2% return from Scope’s bond into a 4.5% return for the investor, allowing it to compete more favourably with traditional products on the market, whilst having the additional benefit of supporting families with disabled children.

Whilst we don’t think that charities can become reliant on investments secured through loans or bond issues and that these products can only ever be part of a charity’s financing, we believe that there it is necessary for charities to explore more creative and efficient uses of funding, particularly in the current economic climate. Tax relief will help charities and investors move in this direction, become more sustainable and deliver greater social impact.

Financial pressures put strain on the strongest of partnerships

Charities and councils – whether it’s as givers and recipients of funding; commissioners and deliverers of services or campaigners for change and defenders of policy – have always had a love hate relationship.

But at the moment – with everyone feeling the pinch – you get the feeling there’s a bit more hate than love.

The challenges of making relationships between charities and councils work in the current climate were summed up in the provocative title of a recent Guardian roundtable that was asking whether or not it is really worth charities taking on the risk of contracts with the public sector.

This sentiment was echoed by the think tank New Philanthropy Capital at an event to launch their recent report “When the going gets tough: Charities’ experiences of public sector commissioning“.

At both events I argued that now more than ever we charities and councils need to be focusing on solutions rather than problems.

It would be easy to spend our time finger pointing, accusing reckless councils of cutting budgets without considering the impact.

But councils, like charities, are about improving people’s lives.

Working with the public sector gives us the opportunity to shape and create the innovative services that can make this a better world for disabled people. Charities have a tremendous ability to engage with and understand the needs of communities, so by working together with the public sector we are able to help shape the commissioning environment for the better.

But how do we do it?

I think that charities need to take a long hard look at themselves. How many charities are really clear why they provide services?

In many cases I think charities keep doing things because they always have. There was a time when vast residential services were both profitable and seen as the right thing to do – that’s both unrealistic and wrong these days. I suspect many run services because they’re trying to “help their beneficiaries” – but that’s such an old-fashioned way of looking at charities and over the years it’s an approach that has done as much damage as good. And apart from anything else, just because you’re a charity does not mean you are automatically capable of providing better services.

Why is Scope here?

At Scope we’ve really forced ourselves to ask why we run services. Scope does not exist to run services. Scope exists to bring about change in society – to make this country a better place for disabled people. We don’t have to run services. We actually don’t have to exist. We choose to exist because we want to bring about positive change. And we choose to run services because we believe that running services, the right services, can play a huge role. .

We have also forced ourselves to be clear about what we will spend our charitable income on. We’re not here to subsidise the state, and we must not play a part in taking society backwards to a place where people’s basic rights become dependent solely on the charitable benevolence of others.

I don’t think enough charities think like this.

Enormous challenges

There are clearly enormous challenges in this area at the moment, the unprecedented cuts to public spending above all. Local authorities are bearing the brunt of these cuts, which is obviously impacting on the fees paid to providers like Scope. And according to the Institute for Fiscal Studies only 6% of the cuts to Local Authorities have kicked in. With austerity set to continue until 2017 this means continued pressure on fees. Councils will have to innovate when it comes to providing services. They will have to re-design services de-commissioning redundant models to allow investment to go into those models which deliver the best possible outcomes for a lower price.

Partners

The charity sector should be at the heart of setting the agenda. We should recognise that we can get more done if instead of complaining, we respond positively to the changing world.

We are seeking to work as a ‘social partner’ with local authorities. Our Activities Unlimited programme is a new way to provide support to disabled children and their families seeking respite care or a short break to contact a range of opportunities from providers in Suffolk. Families are allocated a voucher that they can use on a range of activities. A dedicated Scope team identifies potential new suppliers, supports provider organisations to improve their performance based on feedback from users and signposts families towards services that are most appropriate to their needs. We designed and piloted the service in partnership with Suffolk County Council, sharing our mutual expertise and experience.

New horizons

We must also look at new ways of bringing money into this world. At Scope we are actively developing new, innovative, ways of raising money to allow us to generate investment capital, which will pilot new ways of providing services before we take them to local authority commissioners. Our £20 million social investment bond is will finance the expansion of our retail operation which will enable us to generate more unrestricted voluntary income which we can invest in creating new services.

I believe there are opportunities for charities to work collaboratively with the public sector to develop services that support disabled people to live their lives way they want to. We just have to be bolder, more confident and more creative – and seize this agenda now before it is too late.