What can the government do to promote social enterprise?

There was an interesting article last week on the Guardian’s Social Enterprise Network by Robert Ashton, which took the form of a wish list to the Minister for Civil Society, Nick Hurd, of “10 things the Government could do to promote social enterprise”.

This is quite timely.  After the initial flush of excitement about the Big Society Bank (or Big Society Capital (BSC), as we are now to call it), the dust is slowly beginning to settle and a clearer picture of what that institution will actually do is emerging.  Meanwhile, those in the policy world are turning their attentions to the question of what the other elements of the strategy to develop the social investment market should be, and this article puts forward some interesting suggestions.

A couple of the highlights in the article are:

Insuring the risk for community investors - mirroring the Small Firms Loan Guarantee Scheme by offering a simple one-off premium to protect people investing in community enterprises, and thereby reducing the risk.

Enable public sector experimentation - create a programme to reward modest risk taking by commissioners of services, to encourage innovative approaches.

These are all sensible suggestions although, as ever, getting them implemented may be easier said than done.  A new insurance scheme for community investment seems like quite a reasonable, concrete proposal, but will require new funding and top-down directives, which gives lots of opportunities for delay and sticking points.  Similarly, the idea of a “programme to enable risk taking” in the public sector, whilst admirable, has the ring of something that would be very difficult to realise.  That is not to say we should give up trying - just that we may have to divide our efforts carefully between those goals that can feasibly be achieved in the short term, and those that cannot, and also think carefully about areas where top-down direction or legislation is not needed to get things going. 

One practical example which links the two recommendations highlighted above has recently been seen by CAF Venturesome.  A start-up arts company (charitable) that was taking part in a Local Authority partnership project to deliver a new cultural centre needed development funding.  The Local Authority was unable to give them a grant. However, it did agree to offer a guarantee against a loan from a third party.  At this point they turned to Venturesome, and we have been able to help with some of their investment needs.  In this way, the Local Authority was able to use their money intelligently to leverage additional social investment.

This example shows the power of guarantees.  Innovation is often possible as long as there is a will to make it happen.  No new legislation or top-down schemes were required in this case, as they would not be in many other cases either.  Instead, what is required is that voluntary sector organisations and Local Authorities are aware of what is possible, and willing to follow the example of a few pioneers and take a calculated risk.  It will not be easy to overcome the culture of risk aversion in the public sector, but hopefully by demonstrating the value of social financing through examples like the one above, we can help to convince Local Authorities and others that the potential rewards outweigh the risks.