Watch the Prime Minister’s speech at the Social Impact Investment conference
It’s great to welcome so many of the world’s top social entrepreneurs and investors to London. As Prime Minister I am frequently asked to speak at conferences. But this is a conference I actually asked to speak at. In fact, I asked to set the whole thing up. Today I want to tell you why.
We’ve got a great idea here that can transform our societies, by using the power of finance to tackle the most difficult social problems. Problems that have frustrated government after government, country after country, generation after generation. Issues like drug abuse, youth unemployment, homelessness and even global poverty. The potential for social investment is that big. So I want to make it a success in Britain and I want to sell it all over the world.
So how does it work? Businesses need finance to grow and make profit. Governments need finance to fund big infrastructure projects. That’s why we have banks, bonds, investment markets and all the rest. The idea here is just as simple and just as powerful. Social enterprises, charities and voluntary bodies have the knowledge, human touch and personal commitment to succeed where governments often fail. But they need finance too. They can get it from socially minded investors. So we need social investment markets, social investment bonds and social investment banks. And here government needs to help. Government needs to be more creative and innovative – saying to social entrepreneurs: “if you can solve the problem we’ll give you money.” As soon as government says that, social entrepreneurs can go out and raise capital. So that is exactly what the British government has been saying. And I am proud that Britain has led the way from the outset. We have created the first social impact bond – with more of these bonds in the UK today than in the rest of the world put together. We had the first charity bond too. And last year, I think our proudest creation yet, the first ever wholesale social investment bank - Big Society Capital.
I knew we had to be bold here to make this work. A few million pounds was never going to be enough. So we took - not just some but - all the dormant funds from banks, together with further contributions, to provide a pot of £600 million to invest in our society. And we asked Sir Ronnie Cohen – the grandfather of social investment – to chair it. In just its first year, Big Society Capital has already committed £56 million to 20 different intermediaries, already supporting 23 frontline organisations and creating 13 new social investment intermediaries. That sounds quite technical. So let me put it simply. Big Society Capital matters because it is giving brilliant social entrepreneurs with dreams bigger than their budgets, the means to prove themselves, scale up and do more.
Take the story of Jim Clifford and his wife Sue who have nine adopted children. They are at the centre of the first social impact bond for adoption being created today. How does it work? Every child who remains in the care system costs the taxpayer around three quarters of a million pounds. The fact is that government has never been that good at finding homes for them. This government is changing the rules, promoting adoption doing everything we can to give children the chance of a loving home and one of the ways we can do that is by using voluntary groups and social enterprises to find homes for the hardest to place children. So Jim has created a social impact bond that will help them access that finance from socially minded investors. The way a social impact bond works is simple. When it succeeds, investors are paid from the savings to the taxpayer, but if it doesn’t work, the taxpayer doesn’t pay a penny. By scaling up Jim’s programme nationwide over the next decade, it’s not just investors who could get a return. 2,000 children who would otherwise have been overlooked could get loving homes and the taxpayer could save as much as £1.5 billion in fostering fees. That’s the power of social investment. And it’s why I want to work with our international partners – and the new Social Impact Investment Taskforce to grow a bigger global market in social investment that can change more lives here in Britain and right across the world.
Growing a bigger global market, starts at home. And today we are announcing three major new steps. Tax breaks for social investments. A Social Stock Exchange to measure how successful those social investments are. And most importantly, new help for our communities to buy local assets. I want to take the third of those first. Some people will say – “social investment, all very interesting but how will it affect my life? What could it mean for my community? Of course, we all benefit from tackling deep social problems, but social investment can help transform every community. Here’s how: everyone knows how vital institutions in our towns and villages are, like village halls, playing fields, local pubs. And everyone knows how - despite the best efforts of parish and local councils - these can face closure. I want our social investment funds to give people the opportunity to take them over and run them. This isn’t some pipe dream. Already there are 311 community-owned shops,18 community-owned pubs, as well as community owned bookshops, cafes, swimming pools, bakers, famers markets, even community owned broadband networks.
But people need finance to make this happen. And here is the answer. Today Big Society Capital and the Big Lottery Fund are making a long term commitment to provide a quarter of a billion pounds over the rest of this decade to help communities with ambitions to own local assets like pubs, shops, community centres and affordable housing. Now, of course, some assets are never going to be viable in commercial terms and will always need grants and so part of the money from the Big Lottery Fund will go to help with that. But what is really exciting and innovative is that many assets can be run on a commercial basis given the right mix of upfront funding. So as part of their longer-term commitment, Big Society Capital and the Big Lottery Fund are developing a £50 million Community Assets Fund that will provide a blend of grants and loans to help communities through the phases of local ownership. This will start making payments from next year. It will mean that community groups will be able to explore the feasibility of projects without incurring major debts if they decide not to proceed. At the same time, long term loans will be available to those that do go ahead - attracting further funding from local authorities, philanthropists and Local Enterprise Partnerships.
Take Fenham Swimming pool in Newcastle, for example. First opened in 1938, it was closed by Newcastle City Council in 2003 despite opposition from local residents. So a group from the Community representing schools, residents and health providers came together and saved it. But as they went along, they found they had to meet significant capital costs and the whole project was coming under pressure again. But then with investment from Big Society Capital they were able to install solar panels to heat the pool, reduce their running costs and make it financially viable as a community centre. Thanks to Big Society Capital and the Big Lottery Fund this new Community Assets Fund - another British world first will mean that projects like this will be possible not in just in one community – but in every community across the country.
Let me turn to two other important developments. First, I’ve said before that I want to make Britain one of the best places in the world in which to invest and do business and as a government we are working tirelessly to create the best possible environment for business investment. But if we are serious about social investment – the same test applies. How do we create the best possible environment for social investments in Britain? One key part of that is the tax system. If we want people to take on the risk of an investment, we need to reward them and help their investment to become self-sustaining. We’ve done that for venture capital, it is time to do the same for social capital too.
That is why in the Budget, the Chancellor said that we would consult on a Social Investment Tax Relief. We are launching that Consultation today and we welcome your input. Social investment can no longer be the poor relation. I want you to help us shape an effective tax incentive that mirrors many of the features of the successful tax advantaged venture capital schemes.Big Society Capital tell us that tax reliefs could generate an extra half a billion pounds in social investments over the next five years. And I am determined that we should see the benefits of that.
Second, it is not enough just to incentivise social investments. We need a robust way of measuring their value and in doing so connecting businesses that deliver social and environmental value with investors seeking both a social and a financial return. So I am absolutely delighted that today the London Stock Exchange is supporting the launch of the world’s first Social Stock Exchange, an online portal that will become the first information platform on the planet to showcase publicly listed social impact businesses. The market capitalisation of the first 12 Social impact businesses launching on the Social Stock Exchange today is already £500 million. The next 13 businesses set to join in October will add another £700 million. And this is just the beginning. For years the London Stock Exchange has made London the home for private finance, today London can cement its place as the home for social finance too.
Let me finish by saying this. Some people have asked whether I still believe in building a bigger, stronger society? I say to them - look around this room. See how social investment can help to change lives. See how social investment is bringing communities together. See how social investment is making our societies and therefore our countries stronger. Am I prepared to fight for that? You bet I am. Social investment can be a great force for social change on the planet. It can help us to build bigger and stronger societies. That power is in our hands. And together we will use it to build a better future for ourselves, for our children and for generations to come.