Speech

Speech by the Chief Secretary to the Treasury, Rt Hon Danny Alexander MP, at NCVO

Speech by the Chief Secretary to the Treasury.

Introduction

Good afternoon and thank you for inviting me to speak here this afternoon.

It’s a pleasure to speak with so many people from across the charity sector, all providing critical services to millions of people across the country.

And in difficult economic times, the charitable sector will of course continue to play a vital role to protect the vulnerable and support the poorest in our society.

Economic stability

As you’re all aware, we face a substantial challenge to heal the underlying damage to our economy and return the UK to prosperity.

This Government’s number one priority is tackling the record peacetime deficit that we inherited. 

Tackling the deficit is the only way to return the UK to fiscal sustainability, the only way to secure low interest rates that help families pay mortgages, and businesses refinance loans.

It is the vital precondition for economic stability and recovery. But it’s not an easy task.

And at the same time, as the economy recovers, we have the opportunity to shape that recovery, to rebalance or economy, and build a sustainable future.

We cannot merely revert to the debt fuelled spending and consumption that propped up the economy over the last decade or more.

We need instead, recovery through private sector growth.

A recovery that reaches across all sectors and regions of a rebalanced and sustainable economy.

And a recovery that has responsibility and fairness at its core.

Economic vision

It’s not something that we can achieve on our own.

The leadership of the NCVO and the charity and community sector groups here today are critical to delivering a positive vision for the economy in the future. 

As many of you will know, this year is the bicentenary of the birth of Charles Dickens…who of course wrote so many remarkable novels on the hardship of life in Victorian England.

But thankfully, and in large part, it’s a bygone era.

In no small part thanks to Dickens, his writing and his philanthropy.

But in even greater measure due to the tremendous leadership of the voluntary sector, and the long and distinguished history of many of the organisations here today.

Like the NCVO, we are eager to build a stronger civil society, where “people come together to make a positive difference to their lives and the lives of others.”

It’s an ethic that it is at the very heart of our economic and public service reform agenda.

One that puts sustainability and responsibility at the very heart of our economic system, serving growth and fairness;

And one that emphasises the potential of a vibrant and participatory society, with power diffused away from the centre;

Of course, the you are critical to those ambitions.

And let me begin with our agenda on public service reform.

Public Service Reform

For too long, public service delivery has been trapped in a naive dogma that focused on spending, targets, and central control.

But when we came to Government, we recognised that we were at a watershed for how we produce public goods.

Across all walks of life we see that users and consumers have greater access to information, more opportunity to exercise choice, and greater ability to take action for themselves.

It is that great and welcome change that is at the core of our philosophy on reform of public service delivery…

Increasing choice by giving people direct control over the services they use;

Decentralising power to the lowest possible level;

Ensuring fair access, fair funding and fair competition;

Ensuring services are accountable to users and taxpayers;

And finally, and most important with respect to today’s audience, opening up public services to a range of providers, including charities, competing to offer a better service.

As you are aware, we are working towards an update publication on the Open Public Services strategy which will re-state our commitment to modernising public services, and update on progress to date.

Indeed, across the public sector we are already seeing frontline professionals seize the initiative to innovate and provide more efficient public services.

Across the health sector for instance, 25,000 public service employees are already working in public service mutuals with contracts worth almost £1bn.

Government support for charities

And I firmly believe that we can build on those success stories by bringing in even more providers, and in particular capitalising on the expertise of the third sector.

Many of you here today work on the frontline, delivering vital services, to some of the hardest to reach populations in the country.

You have the hands on experience and expertise to tackle some of our most persistent and intractable ills in society.

And it’s your innovation and leadership that can help to deliver the high quality services that people rightly expect.

I understand however, that if the third sector is to seize the opportunities that public service reform offers, then they also need the Government’s support to ensure they have the capacity in challenging financial circumstances.

It’s why we opened a £100m Transition Fund to assist charities to manage the change to an environment with lower spending, part of a £470m support package for the sector.

It’s why we launched the £16.8m Advice Services fund to help NFP advice organisations across England.

And it’s why we have listened to the concerns raised about the not for profit advise services during the progress of the Legal Aid bill.

Whilst the details will be set out at the Budget, I can tell you today that we will be making additional funding available to not for profit advice services within the current spending review period to support the Cabinet Office review to make advice services sustainable over the longer term.

Gift Aid

But aside from central Government funding, we are committed to helping charities maximise the funding potential from donations.

In particular, I recognise just how important tax reliefs for charities and donors are for the sector, costing over £3bn a year, of which Gift Aid is the single largest relief.

Indeed, gross donations made under Gift Aid amounted to almost £4.6 billion in 2009/10, an increase of 6.5% over the previous year.

We recognise the huge support that the Gift Aid system provides to charities which is why we want to improve the way it works, in order to simplify processes for charities and to encourage giving.

It is also why the Chancellor announced in the Budget that online filing will be introduced in 2012/13, and we have already introduced intelligent forms to reduce the administrative burdens for charities.

Furthermore, we have made changes to Gift Aid to enable charities to better recognise the generosity of their significant donors by increasing the Gift Aid benefit limit from £500 to £2500.

Access to finance

But as well as donation, we want to support greater investment in the sector, and our most innovative social enterprises.

Those social ventures already make a substantial economic impact, contributing £24bn to the economy, the equivalent of 1.5 per cent of GDP, and employing around 800,000 people across the UK.

And in the last ten years social investment has grown from almost nothing to just under £200m in 2010.

But it remains an embryonic and inefficient market, and the lack of capital serves to hold social ventures back.

We want to make it easier for social ventures to access capital, to unlock even more potential to improve even more lives.

Our vision is to create nothing less than a new pillar of finance for social ventures. A third pillar to stand alongside traditional giving, and funds from the state.

Of course that is a huge challenge. But the potential opportunities are equally substantial.

UK charitable investment and endowment assets total almost £100bn. Unlocking just 5 per cent of those assets, and 5% of retail investments in UK ISAs could release around £10bn of new finance capacity.

We are eager to find new ways to unlock that growth.

Big Society Capital

That is why the Government is supporting the creation of Big Society Capital and committing England’s share of dormant accounts funding to its capitalisation.

So far £40m of dormant accounts funding has been set aside to capitalise the BSC, which over time, could grow to as much as £400m. And that’s on top of a commitment from the UK’s biggest banks to provide £200m of further funding over the next five years.

But Big Society Capital is a catalyst for private investment, not a substitute. We want to encourage private investors to look to social investment, and social enterprises, just as they would any other businesses. 

Tax incentives for social investment

That’s why we have already announced improvements to Venture Capital Trusts and the Enterprise Investment Scheme, increasing the tax relief under the latter to 30%.

EIS is already being used by a number of community ventures while HMRC are in discussions with two groups hoping to launch VCTs that will invest solely in social enterprises to ensure they meet the qualifying criteria.

We are also taking steps to support Community Development Finance Institutions as a vital source of lending to people that traditional lenders consider too costly or risky to serve.

We have recently consulted on Community Investment Tax Relief, ahead of State aid re-notification and the outcome of this consultation will be announced at Budget.

Social impact bonds

Of course, some of the biggest potential for social investment comes from pioneering ideas such as social impact bonds.

These Bonds have the potential to offer huge benefits for Government, for service providers, and for investors.

For Government, social impact bonds share the risks and rewards of innovative social interventions with the private sector.

For the service providers, such bonds offer new sources of funding where and when it is needed most.

And for the commercial investor, social impact bonds offer the opportunity to seek returns and make investments in a wider range of activities than they currently do.

Conclusion

It’s clear to me that we are at a watershed moment for how Government delivers public services and how we tackle some of society’s most entrenched problems.

And your sector is crucially important to that vision.

Delivering a rebalanced and more sustainable economy, and a rebalanced and more sustainable society.

I look forward to working with you all in that ambition in the years to come.

Thank you.

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