Speech

Impact Measurement Conference

Speech made by Francis Maude at the Impact Measurement Conference about charities, social enterprises and voluntary groups.

Minister for the Cabinet Office Francis Maude made the following speech at the Impact Measurement Conference on 16 October 2012.

Governments have never been short of words to praise your sector - and rightly so: charities, social enterprises and voluntary groups are the backbone of our communities.

But where governments have come up short - is in translating words into action. Putting their faith in this sector to take a much bigger role running our public services.

Why? Because everything had to be controlled, micromanaged from the centre - the schools, the prisons, the hospitals.

This government-knows-best attitude fostered a rigid, one-size-fits-all approach where services were designed around the administrator’s needs, not the users.

Now we are entering a new era. This government believes the strength of society - indeed of Britain - flows not from what the state does, but from what people do, - what they do together, in association with one another.

The best ideas come from the ground up - from charities, from volunteers, from local communities. People who live and breathe local services - the ones running hospitals, caring for the elderly and educating children.

That’s why we are shifting power away from Whitehall - bringing it closer to the people and building a bigger society.

And this is opening the door for civil society organisations - to challenge the status quo, and find new ways to tackle entrenched problems and improve people’s lives.

The future is exciting - it’s also challenging. And the ability to successfully measure and demonstrate the social impact of charitable work is taking on even greater importance - as this Conference recognises.

So I’m very grateful to have the opportunity to talk to you today - about how government aims to support a stronger, more independent voluntary sector by opening new markets by creating a powerful social investment market in the UK and by supporting your work on Impact Measurement.

Open government

One thing you’ll be used to hearing from us by now is that this is a brave new world - with less money. As we pay down the unprecedented deficit we inherited - budgets are tighter and that’s affecting everyone working in public services.Our Transition Fund is making available over £100million to support civil society organisations which deliver public services. But it was never a long-term solution.

The truth is that the funding situation we inherited in 2010 was not sustainable. Then, because over half of all charity income came from the state, charities were kept dependent on the state.

Future models of funding will be radically different.

Firstly we are opening up new markets for civil society organisations to deliver public services; allowing charities, social enterprises, private companies and employee-owned mutuals to compete to offer high quality services. The Community Right to Challenge, the Community Right to Buy and the Rights to Provide are all about voluntary and community bodies, as well as public sector workers themselves, taking over services and assets. And we are supporting mutuals, cooperatives and social enterprises which want to spin out of the public sector; so workers can take control of their destiny.

Many mutuals establish themselves as social enterprises - reinvesting profits into their services or their local community. For example Leicester’s Inclusion Healthcare, which delivers primary care to homeless people, uses its surplus to fund free therapy and foot care services.

Social enterprises like these are part of a new era - community led, not government controlled.

Secondly we’re opening up government contracts so it’s easier for smaller providers and social enterprises to do business with government.

Our new online service - the government e-Marketplace - enables smaller organisations like charities and SMEs to register for contracts below £100,000. No need for burdensome Pre-Qualification Questionnaires (PQQ) which too-often block civil society bids.

Social finance

These are important reforms. However we recognise it’s not enough for government to simply open up these opportunities for social sector organisations and expect you to be ambitious about taking them - without thinking about how you finance these ambitious.

Very often charities and social enterprises will be doing great work - but don’t have the financial muscle needed to scale up and take on even greater challenges.

We all know businesses need capital finance to grow and thrive - but so do charities and social enterprises.

We are determined to create a powerful social investment market in the UK, acting as a third pillar of finance for the sector, alongside traditional philanthropy and government grants.

Just as the venture capital market developed in the UK in the 1980s to allow business enterprise to flourish, we aim to develop a sustainable market to invest in social enterprise.

A key part of this agenda was the launch of Big Society Capital in April. This is the first social investment institution of its kind in the world and it is transforming the world of social finance for charities and social enterprises by unlocking the money they need to grow when a big opportunity comes along.

It is capitalised with up to around £400million from dormant bank accounts and up to an additional £200 million will be provided by the four largest UK high street banks.

And already Big Society Capital has a total of 12 commitments totalling £37million.

For example it is investing £1million in PURE, a carbon reduction charity which loans funds to finance small community owned renewable energy projects in disadvantaged communities. This investment will enable PURE to fund up to 70 community energy projects.

A further investment of £450,000 has gone to Triodos New Horizons, a fund established by Triodos Bank, which has been commissioned by the Innovation Fund to tackle youth unemployment in Merseyside. It will work with the Greater Merseyside Connexions Partnership to provide intensive support to 3,900 young people.

Big Society Capital is also establishing a £10million Results Fund, which will stimulate the creation of Social Impact Bonds aimed at the lives of communities and people most in need.

The fund will invest in third sector organisations competing for Payment By Results schemes under which providers are paid on the basis of the real world improvements they deliver, rather than for the activities they perform.

Social Impact Bonds are a hugely important innovation for allowing people to invest in social projects and be paid a return if the projects are successful.

And these bonds are particularly important for financing Payment by Results because social organisations will often not have working capital to finance their way through to the back end of payment by results contracts.

The UK is a world leader in Social Impact Bonds. The first in the world, the Peterborough Prison SIB, was announced by this government in September 2010 and is financing services to reduce reoffending among ex-prisoners released from Peterborough Prison.

Up to £40milliion could be raised by four Social Impact Bond pilots launched in Hammersmith and Fulham, Westminster, Birmingham and Leicestershire where investors and philanthropists can invest in the bonds which then fund intensive interventions in families with multiple problems.

We are increasingly moving to this model for prisons and offender rehabilitation, employment support, youth services and children’s centres.

The Cabinet Office is supporting the development of more SIBs in two key ways. Firstly, we are exploring an ‘Outcomes Finance Fund’ to make it easier for public bodies to issue payment-by-results contracts and social impact bonds for charities.

The fund will serve as a top-up in instances when a public body wants to run a payment-by-results contract that would save money for a range of public bodies, but could not justify using its own budget to set it up.

Secondly, we are developing a SIB ‘Centre of Excellence’ to provide practical advice and support to SIB developers. More details of both these initiatives will be announced later this year.

This is an important agenda- with the potential not just to do social good but to boost our economy. Britain is in a global race and we must harness the growth potential of this market.

That’s why this week the Cabinet Office and UK Trade & Investment are leading a delegation of social entrepreneurs and investors from Big Society Capital, Social Finance, Social Enterprise UK among others to the US. The US, like the UK, are currently at the forefront of social investment and innovation, developing new institutions, products and infrastructure to help social organisations tackle society’s most intractable problems.

This trade mission aims to open up a dialogue between US and UK policymakers, investors and entrepreneurs. They will discuss barriers to and opportunities for developing the global social investment marketplace, We want to foster deal making between entrepreneurs and investors across the special relationship.

Measuring impact

All this adds up to a wealth of opportunity for charities and social enterprises in the future.

But what completes this picture is of course Impact Measurement. In other words being able to demonstrate your achievements and improve your work - by effectively measuring its impact.

Impact Measurement matters. Charities and social enterprises aren’t being handed anything - you will be competing for these opportunities, competing for public service contracts, competing for new capital.

And you will need to be able to show that what you are doing works, that money is being, and will be, effectively deployed.

The Cabinet Office has been working with the social sector to drive a new programme Inspiring Impact which is designed to accelerate the uptake of impact measurement across the UK social sector over the next decade. Inspiring Impact is of course being coordinated by New Philanthropy Capital our hosts today.

It is our belief that for impact measurement to become more coherent, consistent and routine, we need to see:

  • a recognised set of consistent, accessible, credible metrics for organisations, commissioners, and investors - including trusts, foundations and donors;
  • a widely recognised, accessible databank to host the metrics;
  • a menu of credible methodologies for measuring social impact, with explanations of each methodology’s application.

Alongside this, there is a need for investors, commissioners, trusts and foundations to embed incentives so that organisations recognise the importance of accounting for impact and it becomes a routine part of their core business.

Cabinet Office has supported both the drawing up of the programme and some start-up funding, but I know you’ll agree with me that, for this to work, it has to be run and owned by the sector.

Conclusion

This country is facing big economic and financial challenges.

And there are some who say that with less money you just have to do less. And that we should stick with what we know, with the state providing.

The same people say charities and social enterprises can’t do more.

They are wrong.

Now more than ever our public services need creative, dynamic, pioneering solutions.

And this government is determined to put charities and social enterprises at the forefront of our mission to create effective, personalised, value for money public services.

To make this happen we will strengthen the new social investment market so that you can grow and expand.

But it’s going to be up to you to prove your business models.

That means making impact measurement part of everyday practice for charities, social enterprises, funders, commissioners and investors across the country.

This is a great challenge and a great opportunity. I have no doubt you are up to the task.

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