Hammer blow for social enterprises and disadvantaged communities if scheme scrapped.
Disadvantaged communities suffering from the impact of Covid-19 in the West Midlands could be delivered another hammer blow in just a matter of weeks unless a vital scheme that encourages investment is continued.
Social enterprises and social investors are urging the Government to not backtrack on its promise to ‘level up’ the UK’s cities and regions by scrapping Social Investment Tax Relief, which has a proven record of unlocking and directing private capital into some of the most disadvantaged places in the country.
They are now encouraging MPs to get behind their bid to increase accessibility to SITR investment for a further two years as part of an amendment to the Financial Bill that is currently passing through parliament.
Harriet Baldwin, Liam Byrne and Pat McFadden have all shown their support, whilst Gavin Williamson, Jane Stevenson, Mark Pritchard, Preet Kaur Gill and Sajid Javid have been asked to get behind the rallying call.
SITR has already leveraged at least £1 million in private investment to help eleven social enterprises deliver essential services locally. This ranges from Birmingham’s Jericho Foundation (an upcycling venture that provides jobs and training for people with personal or occupational barriers to employment) to the Wellington Orbit, which has brought a disused building back to life as a vital community hub, retail space, café and cinema.
It is the only tax break specifically aimed at social enterprises and is designed to encourage individuals to support the sector by helping them access new sources of repayable finance, with backers receiving a 30% tax break when investing into an eligible organisation.
“The very social fabric of our country is being tested by Covid-19 and social enterprises are on the frontline responding to the crisis, including supporting the most vulnerable in communities by delivering food and medicine and tackling domestic violence. They will also be on the frontline of making things better in the aftermath,” explained Melanie Mills, Senior Director Social Sector Engagement at Big Society Capital.
“Now is not the time to be taking away a tax relief scheme that has been proven to attract significant investment into the most disadvantaged places and causes in the West Midlands and this is why we urge MPs to act quickly to prevent the closure of what is a valuable lifeline for the sector, saving potentially hundreds of jobs and key community services in the process.”
She continued: “The Conservative government introduced the relief in 2014 and, due to the election in December 2019 and the sudden onset of the pandemic, has not been able to complete a review of its impact, which means it could come to an end in April 2021 without timely intervention.
“What we are proposing is a modest two-year extension to allow time to reflect and make any necessary changes needed to support future policy on directing private money to disadvantaged places and causes.”
Big Society Capital has been running the GET SITR campaign for the last three years, in order to help raise awareness of what Social Investment Tax Relief is and how social enterprises, charities and investors can access it. This has created an army of investors, who care about a social issue or are passionate about a local area and want to gain much more than a financial return. In some instances, they are offering their skills, volunteer time and networks.
In turn, there has also been a sharp upturn in the number of community groups, charities and social enterprises that are taking advantage of this new form of finance – in fact SITR has the potential to generate at least £300 million in investment over the next seven years if reformed.
Melanie continued: “There was a real positive movement behind SITR prior to the pandemic and this was typified by impact investor Resonance being on track to reach £5 million of funds under management in the West Midlands by early 2022.
“By removing a tax relief that benefits the poorest and most vulnerable without any replacement would be damaging and inadvertently sends a message that ‘levelling up doesn’t matter’ at a time when social enterprises and charities are on the frontline, with staff and volunteers risking their own lives to help others.
“Social enterprises are backing our rallying call and now we need the MPs to step forward and play their role to ensure we don’t have to hand back millions of pounds of private money to individuals who want to support projects and organisations that are helping others in the heart of their communities.”
Wes Streeting, Shadow Exchequer Secretary to the Treasury, concluded: “Social Investment Tax Relief has played a hugely valuable part in the mobilising of capital from investors into a range of worthwhile causes.
“Its loss would come at a time when the third sector is already taking an enormous financial hit as a result of Covid-19. The Government has to commit to protecting SITR by extending it to April 2023 so that social investment firms can keep raising and deploying capital into social enterprises.
“Allowing it to close without an alternative would send the wrong message to the voluntary sector and undermine the Government’s claim about their levelling up agenda.”
Big Society Capital has sent a letter this week to Jesse Norman MP urging him to extend SITR and this has been signed by 33 of the UK’s leading social investors and third sector support organisations.
