Transcript: Press conference launching Big Society Capital at the London Stock Exchange

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Prime Minister David Cameron announces Big Society Capital.

Chris Gibson-Smith

Good morning, ladies and gentlemen.  Welcome.  We seldom get a full full house, so a measure of the interest in today’s topic, launching the idea of Big Society Capital.  I am Chris Gibson-Smith, chairman of the Stock Exchange, and as an institution that is passionate about raising and distributing capital, we are thrilled to be hosting today’s event.  If I can introduce the panel - to the extent that they need it…  It’s fairly impressive to have the Prime Minister’s authority behind this launch, and we’re thrilled that he’s here.  And Nick Hurd is making a habit of visiting the Exchange.  He was here on Monday for our charity trading day.  He opened the markets and we raised £500,000 for distribution to charity.  On the technical finance side of it, we have Sir Ronnie Cohen, a legend in his own time in the private equity world, and Nick O’Donohoe, again with a lifetime of finance experience behind him, who are, if you like, the technical half balancing the political half here.

The Big Society idea and finance has, of course, an enormous context and it’s extraordinarily relevant right now, post the crisis.  One of the things we know is that wealth trickle-down is not happening for the bottom 50% of society.  It hasn’t happened in the United States for 30 years, it’s now stopped in Europe.  This is an extraordinary consequence of globalisation that we hadn’t thought about.  The other is that we’ve got 4.8 million SMEs who are trying to understand how to get finance in a post-crisis world and finding it unbelievably difficult, and the Exchange is right in the middle of that.  And then if you’ve been in the space occupied by trusts, by concerned social institutions, by charities - and I presume most of us have, looking at the list, and it includes me - we know how difficult it is to get finance, let alone efficient finance, and in the post-crisis world that’s just got even more difficult, and Big Society Capital points right at that space.

So without more ado, Prime Minister, please.

Prime Minister

Well, thank you for that introduction and thank you for that welcome.  And very warm welcome to you all.  I’m very excited by what we are announcing today.  Often people look at politicians and manifestos and they read the words, but they wonder, you know, will it ever happen?  Will something actually change?  Will you set up this thing that you’ve spoken about?  And I was reflecting outside that I’ve been reading parties’ manifestos for probably longer than is altogether healthy for me, and you often read about great ideas, about social investment banks and social investment funds, and let’s turn the guns of finance onto social problems rather than just business problems.  You read all this many, many times.  I’ve read all this many, many times.  Well, this government is actually delivering it, within two years, Big Society Capital with £600 million of funds to invest in our society.  

So I think this is an important day, and it’s great you’ve all come here today.  Because I think what’s happening here with Big Society Capital is really important.  For years, the City has been associated with providing capital to help businesses expand.  Today, this is about supplying capital to help society to expand.  Just as finance from the City has been essential to help businesses to grow, to take on the world, so finance from the City is going to be essential to help tackle our deepest social problems.  

That’s why I’m here.  I believe we’ll only tackle those problems if we say, yes, of course government is important.  The laws that we pass, the money that we spend, the actions that we take.  But that is not nearly enough.  Social problems need social action by all of society.  The passion of people, the skill of business, the power of philanthropy.  We know that the best ideas come from the ground up.  We know that when you give communities and charities more power good things happen.  We know that real change cannot come from government alone, and that’s why we’re so determined to take the three vital steps that will help us to build a bigger and stronger society.  Opening up public services, greater competition, greater choice, a wider variety of providers.  Giving people more power, specifically at the local level, more power to take control of their communities.  And bringing charities and social enterprises right to the fore in our mission to change this country.  

Now, of course, change is always difficult.  There are sceptics to convince, there are vested interests to overcome, there are arguments that need to be won, and Big Society Capital I think provides some of the specific answers to some of the specific questions that I’ve been facing for the last two years over this agenda and I want to take a little time in answering them.

Because first you get people saying, ‘Well, it’s all very well talking about charities and social enterprises doing more, but they’re not really capable of it’.  There’s a notion held by some that you’ve got these great monolithic blocks of state-run welfare, state-run healthcare, state-run schools, prisons and hospitals and that’s the way it’s got to stay.  That the voluntary sector is just there to fill in a few cracks in between, just to make up a few gaps along the way.  In other words, leave the heavy lifting to government.

Now, this is not just incredibly patronising, I also think it is profoundly wrong.  The top-down, state-controlled monoliths have failed.  We are seeing that in spades in education.  When we open up and have greater choice and greater competition, when we have academy schools and free schools, and we get businesses to invest in schools, we see standards rise.  We have seen that voluntary bodies and social enterprises are capable of delivering at scale.  

Greenwich Leisure operate over a hundred local leisure centres.  They are not run by the state.  Macmillan help thousands of people through the most difficult of times.  They are not run by the state.  The Big Issue turns thousands of lives around.  It is not run by the state.  Now, of course, there are many organisations that would like to match the scale of those enterprises I have just mentioned.  That is why we need Big Society Capital.  It is going to help strengthen the new social investment market.  It is going to put financial muscle behind good things that are happening and it is going to help them to grow.  It is about backing social enterprises, like, for instance, FranchisingWorks.  

They had the brilliant idea of getting people who had been out of work for years to start up their own franchises, giving them a stake back in our economy.  The stumbling block was capital.  Their dreams were bigger than their budgets, which is often the case.  Now, with a million pound investment from the Big Society investment fund they have the means to help hundreds of people in Manchester to start their own franchise in the next few years.  Big Society Capital is going to help many, many organisations like this scale up and do more.  It is going to smash away that patronising assumption that charities and social enterprises are too small to do the big things.  

Then the next argument you hear is this: of course it is great when a charity provides a good service, but that is a one off.  There are pockets of excellence, the argument goes, but this is a patchwork.  You have got different charities doing different things in different parts of the country.  So, if there is, say, a fantastic drug rehab in Brixton, that is great for Brixton, but that does not really help the addict in Barnsley.  That is exactly what Big Society Capital can help us to change.  It is going to encourage charities and social enterprises to prove their business models and then replicate them in different parts of the country.  Once they have proved that success in one area is possible, they will be able, just as a business can, to seek investment for expansion into the wider region and into the country.  

Take the social enterprise Bikeworks, which uses cycling as a tool to do good things in the community.  They have helped hundreds of homeless people gain new skills and get jobs in the cycling industry.  They have repaired thousands of old bikes.  They have got countless people into cycling for the first time.  In other words, they are a huge success itching to expand.  They started in East London and now they have spread to west.  Their aim, for the coming years, is to create a social franchise that stretches beyond London and to other parts of the country.  

Again, this is where the social investment market and Big Society Capital will be absolutely key, helping turn those proven local organisations into successful national ones.  I think we can knock down the arguments about charities not having the scale or the scope to do more.  

Then, there are those who argue that government either cannot or should not ask charities and social enterprises to do more at a time of tight public spending budgets.  It is the idea that, if you want a great flourishing in the social sector, the only way is to fund it through grants from government.  Again I believe this is both wrong and short-sighted.  When we were elected, almost 40% of all charity income came from the state.  I do not think that is sustainable.  Our vision is about reducing charities’ dependence on taxpayer handouts and instead to create a funding model that is truly self-sustaining.  That is why we have been doing things like opening up government contracts to smaller providers and to social enterprises.  While direct grants from government might be going down, the money available to charities and social enterprises is actually going up.  We are moving from the old stop-start hand-to-mouth way the social sector was funded, towards something new, and, I believe, very exciting.  Big Society Capital is a critical part of that.  If you look at the way this organisation is going to work, there are no handouts, there is no government pulling the strings behind the scenes; this is a self-sustaining, independent market, which is going to help build the Big Society.  

On the subject of social investment, let me just say this.  I know there are some concerns that the budget signals a weakening of our commitment to philanthropy.  Let me make it clear: I want to see more not less philanthropic giving.  That is at the heart of my vision of a bigger society, where we rely more on each other and less on the state.  That is why we are reducing inheritance tax for those estates that leave 10% or more to charity, we are bringing in a generous relief for those donating collections to the nation and we are working to streamline and simplify gift aid.  However, just as they do in the United States, a country renowned for its philanthropy, we are capping tax reliefs because of the principle that everyone should pay some income tax.  Even with the new cap, individuals can still claim up to £50,000 in reliefs or a quarter of their income, whichever is greater.  

However, as the Chancellor said at the time of the budget, we want to engage with you and with everyone in the philanthropic sector to make sure this does not have harmful impact on philanthropic giving, particularly on those charities that can be dependent on large donations.  

There is one more argument that we can decisively knock down today and that is the idea that business is not really into social action.  I have seen a huge appetite from businesses wanting to do more.  I do not just mean by that expanding the corporate responsibility budget just a little bit, I mean recognising the huge power of business to do good.  I mean recognising that corporate social responsibility is not some add-on, it is something that should flow through your entire business.  I mean fast food restaurants signing a deal to make their food healthier, manufacturers offering more apprenticeships and banks backing academies.  Today, if you look around, businesses are actually investing in a better future.  With social impact bonds, that I am sure Ronnie will talk about in a moment, they are going to have an even more direct opportunity to do that.  I think the brilliant idea here is about meshing the risk-taking verve of business with the entrepreneurial talent of our social sector.  With so many of the challenges that we face in our society, it is absolutely obvious that early investment can be vital to solving the problem and actually saving money at the same time.  

If you invest in genuine training programmes to get people back into work now, you save on welfare bills later.  If you invest in public health campaigns now, you do not spend so much on hospital treatments later.  The trouble is, the whole ethos of government is highly sceptical of spending up front because of the risks that the investment will fail and because, on so many other occasions, past government investment has failed.  That is where I think business and the private sector can come in.  

Social impact bonds give business the chance to fund the provision of services up front with the agreement that if savings are made in the future, if you reduce re-offending, if you cut the level of hospital treatments that are necessary and so on, if savings are made in the future, then business gets a good return from that.  Already this is being tried out.  The Peterborough Prison bond is being used to finance rehab services to reduce re-offending.  Around £5 million of capital was raised from social investors who believe in this rehab scheme.  If it succeeds, the investors get a return, and we will all benefit from less drug-taking and less crime.  The country will save money.  If it fails, the cost of the programme falls on the investor, not the taxpayer.  I think this is a really exciting innovation.  Also, as well as being a way of tackling our own social problems in the UK, the UK is leading the world with social impact bonds, as we are leading the world with Big Society Capital, as, indeed we are leading the world on this whole agenda.  There are great opportunities to export it to other parts of the world.  

It also clearly shows that, whatever the critics say, business does have a role to play and we can see that with Big Society Capital.  It will have £200 million equity investment from HSBC, Barclays, Lloyds TSB and RBS.  That is through the Merlin agreement, something I take personal pride in, as I was responsible for it.  I was responsible for the idea and the Chancellor did all the hard work.  That is the way it goes.  We have some of the brightest minds in the city on the board of Big Society Capital - Nick O’Donohoe, David Carrington and John Kingston.  Leading this movement is the father - I nearly said the godfather - of venture capital, sitting here in front of us.  He is one of the most passionate exponents of social investment.  For decades Ronnie has seen the powerful multiplier effect that capital can have, the ideas it can generate and the good it can do.  He helped turn UK venture capital into a sustainable, successful and vibrant industry.  It is great that he is working to do the same for social investment.  We will hear from him in a moment.  

Let me just sum up what today is about: £600 million into Big Society Capital; talented people working for it to make it a success; social enterprises and charities, up and down the country doing great things, wanting to grow and now with a way to fund that growth; and a government that is determined to see this agenda succeed.  I think for too long, politicians have either talked about economic growth or social growth.  I think it is absolutely essential we grow our economy but we grow our society too.  That’s what today is all about.  Thank you.  

Now, we have got time for a few questions and then I will hand over to the father of social enterprise.  

I read your Easter message this morning, Prime Minister, so I have an Easter message for you, which is about giving credit where credit is due and there is credit to you and the government and to Ronnie Cohen for getting this idea, which has been knocking around now for a decade, into a tangible form.  This is good.  As you said, this is a sector that has been cut off from traditional forms of finance and loans.  So, if we want to build a youth centre or a cancer research centre, we fundraise, and it’s difficult and problematic.  So, getting access to capital is important for us, so congratulations.

Prime Minister

Thank you - thank you very much.  That’s certainly the best Easter message I have had.


Prime Minister, on Big Society Capital, what is your benchmark for success?  How much should be lent and how much should be borrowed?  And on a second issue, your government appears to be watering down its plans to extend secret courts and internet surveillance.  Is Nick Clegg punching above his weight in this coalition or are you just caving in to the civil liberties lobby?

Prime Minister

First of all, benchmarks for success - we were discussing this this morning.  I think it’s very important, having got this up and running in two years, which as Steve Bubb has just said, is pretty fast progress given how long these ideas have been knocking around for.  Having got it up and running in two years and having got the funding in place, I think obviously there are several tests.  One is making sure that investments are made in good order and that money is being invested into the social sector.  That is certainly something I want to follow, but also I think it would be important to follow the results. Government won’t be making the decisions.  It’ll be the board that is making the decisions.  

How many social enterprises have been invested in?  How have they been able to grow?  What results do we see in terms of jobs created, in terms of social problems tackled, in terms of building the capacity and capability of the social sector?  I think it’s also important that they don’t feel too risk averse.  I think it’s very important that like any investment fund, you are going to invest in some success stories, and there will be some extraordinary successes - a social enterprise that’s worked in one part of the country can replicate itself across other parts of the country - but there will be investments that don’t work and I think that it is important we recognise, as a society, that if you want social entrepreneurialism as well as economic entrepreneurialism, you have to accept that some of the things you invest in won’t work.  That’s not a sign of failure; it’s actually a good thing that you are taking some risks and trying out new things.  So, that is I think how we measure success.

On the issue of civil liberties and the issues today and yesterday, let me just say this: it is the job of the Prime Minister to make sure that we do everything that is necessary to keep our country safe, particularly to keep our country safe from serious and organised crime and also from terrorist threats that we have faced in this country and that we still face in this country.  Now, as I see it, there are some significant gaps in our defences - gaps because of the moving on of technology, so you have people making telephone calls through the internet rather than through fixed line, but also gaps in our defences because it isn’t currently possible to use intelligence information in a court of law without sometimes endangering national security.  

Now, I want us, and the government wants us, to plug those gaps. but let’s be clear,  We will do it in a way that properly respects civil liberties.  We will consult; we will listen to the arguments.  That is why we have published Green Papers, but it is very important that the government makes progress on these vital agendas.  I absolutely believe that you can achieve both security and a respect for liberty, but it means having to take difficult decisions.  It means working through those decisions and it means explaining to people why they are necessary.  That’s absolutely what I am committed to do, but I very much see it as my responsibility as the Prime Minister to recognise if there are steps we have to take to keep our country safe, then those steps need to be taken in a responsible, moderate, calm and reasonable manner and that is what this government will do.


Big Society Capital is a welcome, a really valuable, probably a transformative arrival on the scene in the UK.  It raises the bar for social ventures.  It also sets a new challenge, which is how can we get enough earlier stage development to get social ventures ready as deal flow for Big Society Capital?  The seed investment, the angel investment, the frankly for some people, the replacement of the bank of mum and dad, which gets most enterprises off the ground for people who don’t have a bank of mum and dad - what can government do?  What can we do in the sector with government to make sure that that new challenge - getting enough candidates for the deal flow for big society capital to make it really work?

Prime Minister

I think there are two things we can do, really.  The first is we need to very actively promote this new model, because as you say, social enterprises and charities are used to fundraising.  They are used to scrimping and saving and making and mending to try and make work what they have got and the sector has been notoriously undercapitalised - very short of capital.  And so social enterprises and charities will be, I think, hopefully very pleasantly surprised by this.  They will love this when they see it, but they are not looking for it, because they haven’t had it before.  So, this is a big culture change where it needs a large promotion and I hope that business gets behind that, I hope that government is going to get behind it, and I am sure Big Society Capital will do their bit as well. So there’s a big promotion to change the culture, to get social enterprises and charities to think of investments rather than grants.  

But there’s a specific thing government can do to help, which is to change the model of how we help charities and social enterprises.  Up to now, a lot of government support has been through grants - grants for activity or grants for work.  What we need to do is change much more towards a payment by results model, to open up our public services, to open up our sourcing of products and services to let social enterprises and charities in, and to say: look, we are in a different world now.  We are going to try and pay you by results and if you get a contract that pays you by results, you will actually find it easier then to go out and raise capital to get investment from these guys at the same time.  

So, there’s a change of culture and there’s a change of model, and if we get both of those things right, we can see social enterprises really grow.  Sometimes this will take difficult decisions.  You know, a lot of these things are connected.  The government spent quite a lot of time this year on the health reforms.  You might think: what on earth have the health reforms got to do with Big Society Capital?  Well, there is actually a link.  If we want to open up our public services and we want to say it’s good that people are going to set up free schools in our education system to provide a great, free education for our children, you’ve got to open up the provision of education.  If you want social enterprises and charities to be able to play a bigger part in our National Health Service - and for instance, Marie Curie Cancer Care provide a lot of NHS services for NHS patients at the end of their lives - if you want that to happen, you have to reform these big, bureaucratic organisations.  

So, sometimes the commentator looks at all this and says, ‘I quite understand the Big Society agenda and helping charities and social enterprises - very good idea, Prime Minister, carry on with that one.  But what on earth are you doing trying to reform the health service?’  These two things are connected and it’s very important I think for people to see that this government has a bigger vision for how we can actually change the provision of public services and really allow a thousand flowers to bloom.


Thank you, Prime Minister.  On secret courts, Nick Clegg does seem to have some serious concerns.  To use that election phrase, do you agree with Nick?  And on tax relief for donations, is there any wiggle room, because the charities seem to have some major concerns?

Prime Minister

On the tax relief for donations, I set out the position in the speech, which is we want to see philanthropy grow.  It’s an important leg of the Big Society.  We want to see philanthropy grow at all levels of society.  We do think that saying you have to have a cap on tax reliefs is a fair thing.  After all, they have that in America, and we are saying to some of the wealthiest people in the country you can have up to £50,000 or a quarter of your income in terms of tax reliefs, but we will work on this issue over the coming months to make sure we don’t disadvantage particularly those organisations that rely on some quite large donations.  So, we’re going to work very closely on that.  

On the issue of how we have a court system that can both protect people’s liberties but also protect our national security, and indeed on the issue of how we handle data both to protect people’s security but again to make sure we can pursue terrorists and stop terrorist acts taking place, these are difficult issues.  They are sensitive issues.  They require a government to have deep, long conversations and work through some very tough issues, and that is why we published - on the court processes we published a Green Paper, a huge engagement with the legal profession, huge engagement with people who care about civil liberties.  We are not at the end of that process yet.

There will be a Queen’s speech later on this year.  It’s not a secret.  In that Queen’s speech - I can’t reveal the contents - but these are issues that we need to deal with.  But there is still time to deal with everybody’s concerns, but we need to stand back and look at the big picture and the big picture is this: government, Prime Ministers, have a responsibility for national security.  We should take every step that is necessary to keep the country safe.  We shouldn’t put our civil liberties at risk by doing so, but where there are gaps that need to be plugged, we need to plug those gaps.  We should do that with consultation, with understanding, with respect to our long traditions for liberty in this country, but nevertheless, those gaps have to be dealt with.  That’s my responsibility and it’s one that I intend to fulfil.


On the Big Society, do you think that Big Society Capital will have enough capital to compensate for any drop-off in state funding of charities?  And on another issue, your newest cabinet colleague Ed Davey this morning said in an interview with the New Statesman that it would be reckless and unwise to rule out joining the euro in the future and that your veto in December was a blip.  Do you agree with him?

Prime Minister

Right.  On the extent of capital, I think it is very important to remember that it’s not just new capital being made available to the sector; it’s a new way of doing government so that actually there’s more contracts available for social enterprises and charities, there’s more payment by results, there’s a different model, because we want to see this sector continue to expand, but expand in a new and more sustainable way.  

On the issue of the euro, the government’s position is absolutely clear, which is we are not joining the euro.  My personal view is that I think that Britain should never join the euro.  I’ve made that absolutely clear.  I think there are many challenges we face in terms of our economy, but it is hugely helpful to have a situation where we have our own monetary policy to suit our own needs, where if we get on top of our debt and our deficit and we take difficult decisions, we can maintain the very low interest rates we need to encourage economic growth and we have the flexibility to do that with our own currency, which I think is the right answer.  

Good, thank you very much for all those questions.  It gives me huge pleasure now to hand over to Ronnie Cohen, who as I said, has been the father of social investment, who has laboured long and hard under all governments to try and deliver things like we are announcing today and it gives me huge pleasure to hand over to Ronnie Cohen.  Thank you very much.

Ronald Cohen

Prime Minister, we can’t thank you enough for the compelling vision that you have put forward today and we owe you our most sincere thanks for raising dealing with social issues to one of the highest priorities of your government.  We know that the Big Society agenda is something that many people have not yet understood, but we believe that today, we begin to put in place mechanisms that really can change the way in which we deal with social issues.  And so I have to say that we are all hugely impressed by your commitment to this cause, and your very deep understanding of it, and I would like to thank you very much for everything that you have said today.

I would also like, if I may, to offer some public thanks because a lot of people have been involved, a lot of them sitting in this room here today on the Social Investment Task Force, on the commission on unclaimed assets.  Nick O’Donohoe and I have worked extremely closely as joint advisors to your government, joint architects of Big Society Capital.  Many people within the social sector and outside have contributed to getting us here today.

But turning this vision into reality involved a huge effort on the part of your Cabinet Office.  And our warm thanks have to go to Francis Maude and to Nick Hurd and to their officials who have been superb throughout this process, to Gareth Davis and Helen Stephenson and their teams because without them we would not be here today.  So thank you very much.

I don’t think after what you have said that much more needs to be said about the reasons why Big Society Capital needed to be created.  But I think a lot of people outside do not understand that our system over the past 100, 200 years when it has delivered sustainable growth and improvements in average standards of living has really failed to deal with its social consequences.  It’s been superb at dealing with its financial and economic consequences, sometimes brutally as we see in this crisis.  

But the reality is that social consequences have required, first of all, the help of charitable foundations, which came in 100 years ago or so and subsequently the efforts of government through the Welfare State and in other ways.  And I think the stark reality today is that a lot of social issues persist and become increasingly intractable, as Philip Larkin said, ‘Man hands on misery to man’.  And that is not surprising for what does equality of opportunity mean for a child born into a family where one or both parents are unemployed and may have a drug habit?  

And so what has brought us here today is a feeling that there has to be investment capital made available now to those organisations in the social sector, as I like to call it, previously called the voluntary sector and the third sector, which has developed to considerable size over the last 100 years and more.  Today it has 700,000 people in Britain alone working in charitable organisations.  In the EU as a whole it has 11 million people working in charitable organisations.  In the United States ten million people.  

And it has considerable assets.  In Britain it has nearly £100 billion of foundation assets.  And yet what is the common characteristic of these organisations that devote their whole lives and effort to helping those who are in need?  The common characteristic is that none of them have the money to make it through the next - or virtually none of them to make it through the next three months.  Very few of them have the money to be able to scale up.  And the reasons are that philanthropic giving and government help are not good models for scaling an organisation for innovation, for risk taking.  

And so my career in venture capital and private equity, which has taught me the power of entrepreneurship and capital markets and it is very appropriate that we should be at the Stock Exchange today, which has acted as such an important link between entrepreneurs and capital markets over so long, that that power which we’ve unleashed for the benefit of economic profit needs now to be unleashed for dealing with social issues.  And I believe, as do many of those in the room today who have been the movers and shakers in this social investment space, I believe that the time is now right for us to try to make this happen.  

Now, financial returns attract capital, but social returns don’t.  We need therefore an organisation that can manage to blend the social and financial returns and incentives of different kinds, and government has a major role to play all along this road ahead of us over the next 20 years, in providing incentives and in helping us to achieve this, an organisation that can blend these three elements in order to connect social entrepreneurs and the capital markets.

And if we succeed in doing that then I think what we will discover is that social entrepreneurship can do what business entrepreneurship did, which is not just to create new innovative businesses that have transformed our lives, by the way, and increase growth and employment in the economy, but like business entrepreneurship it will change the mind-set of government about how we deal with social issues in the same way that business entrepreneurship changed the perspective on competitiveness and growth.  

It will change the mind-sets of investors who moved in the case of business entrepreneurship to alternative investments, away from public stocks and shares and bring them opportunities that blend social and investment returns.  

And it will change the mind-sets of executives who will begin to think that at some stage in their career, at the beginning of their careers, in the middle or as in the case of many of us in the room today, in their second careers, that they have an obligation to use their skills for the betterment of people’s lives.  Because while we can achieve an increase in the average standard of living the reality is that our system leads to an increasing gap between rich and poor, and those who are stuck behind remain permanently stuck.

So where does Big Society Capital come in?  If we want to attract capital to social returns we need social innovation and we need an innovative, powerful organisation to do that.  That is the concept of the social investment bank as a wholesaler.  You have given us more money than we had ever expected to have.  We have to thank the past government for setting up the Social Investment Task Force and for passing the legislation in 2008 on unclaimed assets.  We have to thank you for giving us all of the unclaimed assets and for encouraging the Merlin Banks to participate.

We now have a balance sheet of £600 million.  What is the vision?  The vision is that we will build a thriving social investment sector.  We will now make money available to those in this room and outside who would like to manage social investment funds, who would like to manage funds that back entrepreneurs who have scalable social models and the ability to achieve sustainability but not a high rate of return, perhaps a 4% or 5% return.  We call these social entrepreneurs funds.  We would like to see half a dozen with £20 million each.  Two exist already; The Big Issue Social Entrepreneurs Fund, to which you referred, and the Bridges Social Entrepreneurs Funds and the Venturesome, of course, has a variation on that theme.  

We would like to encourage social venture funds like the Bridges Venture Funds, which invest only in the poorest 25% of the country.  We would like half a dozen investment organisations to arise that focus like Bridges on achieving that.  And we would like four or five social outcome funds of about £50 million each which will invest in social impact bonds and other types of outcome securities where social performance is correlated with the financial return.

And so we’re here today because we finally have an organisation that can say: we will invest as cornerstone investors in these funds.  We can take 20% or 25% of your fund; we will help you to raise the balance of the money.  We have some imaginative ideas about that which we will share with you subsequently.  We can say we will underwrite social impact bond issues and other social outcome securities.  We will invest in those too.  We call for innovation in connecting social performance to the capital markets.  We cannot do it without capital.  We now have the capital that we need.  

All that remains is to say that if we can count on you, Prime Minister, to continue to help us you can certainly count on us.  Thank you very much.

Chris Gibson-Smith

Two very powerful and compelling speeches.  Unfortunately we are out of the Prime Minister’s time but the team will stay and extend the Q&A.  But as he slips away can I say a huge thank you in appreciation both for the Prime Minister’s presence but also for his obvious commitment behind the whole concept?  Thank you Prime Minister.

Now, we are out of formal time, but I think we can expand to make additional access.  Who would like to ask a question?  


I guess this is a question to the middle Nick for want of a better term.  Looking at past histories of governments setting up investment funds both for business and for social activity, if there’s ever been an area of concern or criticism, it’s been in government temptation to push people to spend money quickly, or invest money quickly, which turns into spending money quickly.  Investing quickly as we know, can tend to be investing badly.  How is this government going to manage the courage to give these guys long enough to do their job?  

Nick Hurd

Toby, thank you for your question and thank you for all the work that you’ve done over many years as a pioneer in this field as well.  The simple answer to your question is the first principle under which we have set up Big Society Capital which is independence from government.  Their mission - there are two measures for their success as far as we’re concerned: growth in social investment and the social impact of the investments that they make.  But independence from government is absolutely critical here.  They have to prove a proposition and grow this market of social investment.  That is going to be about being able to point to a track record and a pipeline of successful deals and track record of funds backed.  So, the quality of the investments that they make are absolutely critical.  And that’s more important than getting money out in a rush.  


We’re just publishing a social return on investment report of a service that we’ve got in the Midlands for some of the most deprived people in the country in Sandwell.  And it’s a complex chaotic needs service.  It’s demonstrating a social return on investment, independently assured, moderated, verified by SROI UK of nine to one: for every £1 spent on it, £9 are saved to the public purse.  Very simple question: why isn’t one of these in every town?

Nick Hurd

Well, I think this part of the answer lies in what the Prime Minister was talking about.  You know, we haven’t set up the funding mechanisms or the connections with capital that allow that kind of scale and replication to go to the heart of what we’re trying to achieve here today.


They said it was nuts to set up the Big Issue, they said it was nuts to set up Big Issue Invest so I’m really pleased we’re here and thank you for everybody that’s created this today.  

My question is this: we’ve raised, as Ronnie said, we’ve raised a fund in the private sector out of private money being very hard.  If we’re now going to leverage this £600 million into £1.5 billion and beyond to bring private sector money in, I wanted to ask Nick - I was going to ask because the first question - middle Nick again, sorry: the first question I ever asked David Cameron when he became leader of the opposition is that if we encourage people with 30% gift aid to give their money away, if we encourage people to take risk in private companies through VCT, EIS…  In the last budget we encouraged the creative industry for gaming with tax relief.  I think it’s really key that if we’re going to attract risk capital in this sector we put some incentive for people to take risk in social enterprises, particularly for us who work in the private sector.

Nick Hurd

I totally understand that argument.  We wouldn’t be here if we didn’t think there was a significant pool of money that is prepared to look at social investment: this proposition that you can blend financial return with social impact, you know?  And the way I always put it - if my bank came to me now and gave me a choice of ISAs, bog standard ISA earning x% or a social ISA that earned a little bit less than x but actually helped me make a positive contribution to I don’t know, opportunities of young people in this country, I’d look at that now, but it’s not being offered to me.  All the research that we’ve looked at suggests that high net worth individuals with savings in excess of £100,000 would look at this market right now, but they don’t have anything really to invest in.  

That’s before you even look at the £95 billion that charities and foundation trusts are sitting on, managing in very conservative ways through their very conservative, traditional financial instruments.  If we could just move over a small percentage of that money and get those organisations comfortable, that’s compatible with their social mission.  We can move a serious amount of money.  Can the government help with incentives and removing some of the barriers?  Yes we can.  Which is why tucked away in the budget there’s an important statement about the Treasury’s commitment to work with my department and others to look at all the barriers to social investment.  So, we’re on a journey here.  But the answer is be cautious.  Thank you.


I’ve worked in social investment for the past 15 years and over that time I think we’ve heard really useful contributions and a real drive to adopt some of the best qualities and best contributions from the private sector, from commercial approaches and business practice and I think that’s been really helpful.  And we’ve heard a bit more about that this morning.  And I just wondered what you felt were the important qualities and contributions that we might want to maintain and really understand from perhaps the charity, voluntary and community sector that would be vital to help Big Society Capital if you like, be the hybrid that you’re describing today?

Nick Hurd

The Prime Minister and others have talked about the need for a change of culture and the need to support social entrepreneurs.  Undoubtedly within the charity and voluntary sector there is a tremendous entrepreneurial drive.  There always has been because the sector wouldn’t have got to the scale and resilience that it has if it hadn’t been able to adapt to the situation at the moment.  And that ability to adapt and that resilience is being tested now as it has probably never been tested before.  So, I have a huge amount of confidence that the sector will draw on its traditional strengths to adapt and embrace this new opportunity.  We’re here to help.  

Cliff asked a very good question before, because we shouldn’t just assume that all charities and social enterprises out there are equipped today, are investment ready, are in a fully finished state to embrace this opportunity and these financial disciplines.  Which is why in answer to your question Cliff, we are putting up a £10 million fund of grants so the front line organisations who are ambitious, who want to embrace this agenda but recognise that they are not quite investment ready yet, have the opportunity to buy in the support they need to climb that curve of investment readiness.

But the other answer to the question would be, you know, to attract this investment - this investment is about financial return, but it’s also primarily about social impact.  And the sector if I can use that term in the broadest sense, has to be able to articulate and inspire and convince about that social impact because at the end of the day that is one of the two key motivators behind this market.

Ronald Cohen

Thank you.  I just want to add a comment to what Nick has said, and I’m sure Nick O’Donohoe would agree with me.  We don’t want to give the impression that we’re trying to displace charitable giving.  We’re trying to complement charitable giving with social investment.  And it could well be that charitable donors begin to look at their donations some of the time as the most junior tranche of equity.  On top of which you can put other layers of equity capital.  You can put straight equity, venture philanthropy, social impact bonds, other forms of outcome capital.  Foundations are going to be absolutely crucial to getting this area going.  And as somebody said, just getting them to use their balance sheets to achieve their social purposes would be a big step forward.  So far as organisations that are operating as charitable service providers are concerned that’s where all the expertise is.  

That’s where all the talent is today and we just need to change the mindset about funding through the provision of capital and I’m delighted that we’ve got so much capital to deploy now, but we can try and throw a big rock into the pool of social sector finance so that everybody in the social sector begins to think of alternatives.  Charities begin to think of having trading subsidiaries that can be funded separately that achieve some revenue generation and some achievement of social performance and Nick I know you like to say what it is that Big Society Capital can offer the social sector and investors and perhaps you’d like to say that.

Nick O’Donohoe

Well I think that Ronnie and Nick have said it very eloquently, I mean this is both a financial institution as well as a social sector institution and we need to take the strengths from both sides of the equation and hopefully the team that we’re assembling at Big Society Capital, the board that we have at Big Society Capital and the Trust reflect strengths from both the commercial financial side as well as the social side, because if we’re going to be successful in what we do, we need to bring both these groups together.  


Just picking up from what you just said Sir Ronald, you used an extraordinary number if I heard you correctly.  You talked about a hundred billion pounds worth of assets tied up in endowment to charitable foundations and just picking up from what you just said, will Big Society Capital spend as much effort on extracting that as you’ve implied just now that you will be looking at that?  Can endowments and foundations be encouraged - can they be incentivised in fact - to surrender some of that funds into Big Society Capital?  

Ronald Cohen

Again Nick will want to add to what I say, both of us have spent a lot of time talking with foundations and I have to acknowledge the presence here of Dawn Austwick who leads the Esmee Fairbairn Foundation and sits on the board of Big Society Capital.  

It’s obvious that some trustees of foundations are becoming anxious about the attractability of social issues and are looking for new ways to deal with them. And I think foundations are going to go through a period of social innovation.  I think they are going to begin to think that investing a hundred billion pounds of assets in stocks and shares in order to then give away 2.5% of that - roughly £2.5 billion a year - is not the best way of achieving the objectives that brought them into existence.  They have to use their balance sheet.  But for them to use their balance sheet we need to bring them opportunities that can qualify, that can deliver some social investment returns, social returns if you like, as well as some financial returns and that’s where the innovation that Nick just referred to is going to have to come in.

That’s where social impact bonds begin to open the way but I wouldn’t say today by any means that leaders of major foundations across the world, and this is an idea that’s gathering momentum now social investment in the United States and Australia and Canada and Israel as well as here, I wouldn’t say that the trustees of some leading foundations are not asking themselves very deep questions about how their foundation can achieve the social objectives - they are.

Nick O’Donohoe

Yes I agree with Ronnie, I think it’s important to remember we wouldn’t be sitting up here unless we believed there was a real appetite across the whole investor spectrum for making investments with the intent of creating a social purpose as well as some sort of financial return.  But we should recognise, and Ronnie often talks about the comparison with venture capital, I mean, we didn’t all wake up one day in 1971 and have every major institution decide they want an allocation to venture capital – it takes a long period of time, but you have to start somewhere and we’re starting here.  


To the three of you - and a heartfelt congratulations for getting us this far, because you’ve been championing this for a number of years.  I suppose the question is, we were really pleased that the Chancellor in his budget speech made a commitment to undertake a review of the tax regime around social investment.  To Nick O’Donohoe and to Ronnie, what would you like to see emerge out of that?  And to Nick Hurd who I know was kind of key in getting that into the Chancellor’s speech, what is the opportunity to have a really high profile independent chair to really continue to give the profile and shine the spotlight on this emerging sector to really champion the recommendations made by that review?

Ronald Cohen

Well if I can go first, Peter may I acknowledge you as a member of the board of Big Society Trust which is charged with keeping Big Society Capital on mission and may I acknowledge the presence of the Chair of Big Society Trust, Sir Richard Lambert, who is in the room today.  It’s a very eminent group of people, the Big Society Trust Board, apart from Sir Richard, Ian Davis who was the worldwide managing partner of McKinsey sits on it, Sir Stephen Bubb, Lady Jill Pith-Keighley who is also in the room and whose role in all this I’d like to acknowledge going back to the Commission on unclaimed assets, David Robinson of Community Links and Gareth Davis from the Cabinet Office.

There are two things that we need: one, we need a pool of capital at the level of government departments that can be deployed in paying out on social impact bonds and other outcome securities, ideally we would like the government to say there’s a pool of £500 million to a billion pounds available for allocation by government departments that clear a certain hurdle where they say we want to innovate in the way in which we deal with social issues that our departments are charged with doing and we’re prepared to pay out on results in situations where we hold on to a significant portion of the saving.  The second thing is we need to turn community investment tax relief or introduce a new relief that gives, as Nigel was saying, real incentives for people to invest in this area.  With business entrepreneurship the government got into the act early on in raising the profile and providing tax incentives for investment in changing regulations - we need the same thing here but those two are key policy decisions.

Nick O’Donohoe

Yes, I’d echo what Ronnie said and broadly speaking I agree with Nigel’s point earlier on if you have tax relief for venture capital, if you have tax relief for enterprise zones, there is a strong case for a similar tax relief for people investing in or accredited social investment intermediaries that invest in regulated social entities.  So we’d certainly like to push in that direction but I also give credit to the government - I suspect probably for the first time in the budget statement there was a commitment to broadly consult on this question.  And so we take great encouragement from that.  

Nick Hurd

Peter, as you know, any minister who is not a Treasury minister expressing an opinion on tax faces career consequences I’m not actually prepared to face because it’s been going quite well up until now, but there clearly is an opportunity here.  I mean if social investment is about a blend of financial return and social impact, then and if we’re as serious as we are about wanting to grow this market, then we have to look at what role government can play.  Both in terms of taking down barriers to this stuff because there are lots of regulations and complication there which we could usefully unpick, but also what we could do to sweeten that blend through the tax system and I doubt there are many people in this room who will say that CITR, Community Interest Tax Relief, has been a resounding success in this area.  And the Treasury made some quite welcome adjustments to it but I think there is an opportunity to work together to see whether we could build an argument for something much more effective.

And I welcome the announcement from the Treasury because it signals that the treasury are keen to engage with that debate and it helps enormously having the expertise and the voice from the outside, so I very much welcome for example Stuart Etherington is here, but the work that NCVO did with their group that was looking at this area was extremely helpful.  There’s a lot of expertise in this room who can give us at the Cabinet Office an opinion on what would work and we’re totally open to that.

Chris Gibson-Smith

Thank you very much. One seldom sees a revolutionary initiative launched with quite such welcoming embrace and so little cynicism.  I think it bodes rather well.