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Dormant Assets Consultation - Further Interpretation

Updated: Oct 7, 2022

Voice4Change England (V4CE) strongly recommends that the government commit to tackling race quality with the remains of the Dormant Assets Scheme. This is a colossal opportunity for the government to have a targeted and high-impact change which would go a long way to ameliorate racial inequalities that persist up and down the country.

Alternative Causes – Race Equality

V4CE urges the government to reach out to Black and Minoritised communities that felt the brunt of the COVID-19 pandemic and will equally be exposed to the cost-of-living crisis in more ways than their white counterparts. Furthermore, the other four social causes recommended: Youth; Financial inclusion; Social investment wholesalers and Community wealth funds will be still addressed if Race Equality is explored as the preferred social cause. The youth, the financially precarious and those left behind areas that Community Wealth Funds are seeking to tackle will all be empowered and aided in their struggle if race equality is at the heart of the conversation.

The disadvantaged areas the Dormant Assets Scheme looks to support will often be areas with a high density of Black and Minoritised communities and there will be meaningful impact if the funds are allocated in this way. The option of the additional principle is adhered to as these communities can be reached where the government can sometimes not. V4CE is just one example of a charity and national advocate for the Black and Minoritised voluntary and community sector. There are existing organisations and/or systems of delivery, governance, and accountability that is present within the sector that can be the vehicle for this social change on a nationwide scale.

We are apprehensive that if the funds are allocated to the other four social causes, though all worthy, that the Black and Minoritised communities that we represent will not be as likely to benefit from those funds than their white counterparts. It is widely accepted that the community and voluntary sector is overwhelmingly white and middle class. Consequently, though not deliberate, we can often see Black and Minoritised communities neglected and ignored. This is no more apparent than in the content of the other four proposals which we see very little acknowledgement about the need to tackle racial equality through their schemes. Furthermore, there is sparsely a commitment to reassure Black and Minoritised communities that they will not be left out which so often is the case. However, in some cases there is a promising prevailing wind such as the Community Enterprise Growth Plan. They have taken heed of the independent Commission on Social Investment, chaired by Lord Victor Adebowale CBE, and have committed to supporting start-up funding for a £50m black-led social investment fund which would take the form of a Black-led and focused social investment intermediary.

V4CE believes that as part of the government’s work on Levelling Up, the Dormant Assets Scheme can be a way in which Back and Minoritised communities can benefit from that agenda. For too long Black and Minoritised communities are not only not asked to shape that conversation but are left out altogether. The infrastructure is in place for the voluntary and community sector to empower and enfranchise communities up and down the country in this cost-of-living crisis. There is more than sufficient scope to fund initiatives that would not otherwise be funded by the government, ability to attribute and measure the impact achieved, and it aligns with key government policy priorities, including securing voluntary industry support. We urge the government to champion race equality as the preferred social cause and break new ground in showing its commitment to fighting for race equality.

V4CE would also like to express solidarity with the Women’s Resource Centre (WRC) who are deeply concerned with how women, girls and children who are experiencing a severe increase in levels of poverty, poor mental health, unemployment, and abuse and yet they continue to be effectively defunded. Furthermore, Black and Minoritised women are the most marginalised group in society and the government should take heed of this and provide the necessary funding.

Social investment

We agree that social investment should remain in second place as a cause for the dormant assets scheme.

Access to finance remains a critical issue for social enterprises, charities and the voluntary sector. A third of all social enterprises (34%) have applied for external funding or finance in the past 12 months, significantly higher than the same amount for other SMEs (10%). There is significant evidence that social enterprises and trading charities need access to more social investment.

We believe that social investment in its broad sense, providing 'financial and other support to third sector organisations' as referenced in the Dormant Bank and Building Society Accounts Act 2008, has a critical role to play in meeting that need for finance.

Social investment has helped to provide some social enterprises and trading charities with the finance that they need, but there is still more that can be done.

The Independent Commission on Social Investment, chaired by Lord Victor Adebowale CBE and including representatives from the social investment and social enterprise sectors as well as independent research expertise, found that there was significant gaps in the social investment market.

Unequal access to finance was found for black-led organisations and organisations outside of London and the South East. There was also a lack of diversity of products available, which further restricted the ability of social enterprises and trading charities to grow. This has also significantly disadvantaged black-led organisations and those outside of London that need more flexible forms of finance.

All of this was compounded by a lack of place-based and place-led infrastructure to support the development of social enterprises as businesses and trading charities. The next phase of the dormant assets scheme should be used to address the gaps found in the Adebowale Commission.

We believe that the most effective way to achieve this would be through the implementation of the Community Enterprise Growth Plan, although we recognise that specific proposals are not being sought at this stage of the consultation.

Supporting the further development of social investment, dormant assets funding could:

  • Create significant economic value to communities across the country, particularly disadvantaged and deprived communities - The Adebowale Commission estimated that a reformed social investment market could support 5,000 social enterprises, supporting 180,000 jobs, tens of thousands of which would be in our most deprived communities and contribute £3bn to the UK economy, including £1bn in additional taxes to the Exchequer.

  • Tackle racial inequality – social enterprises are more likely to be led by people from a minority ethnic group than other small businesses (14% v 6% for small businesses). Through the creation of a black-led social investment fund and reforms to the social investment market, we could support over 800 black-led social enterprises. Initial feedback from UnLtd & Big Issue Invest’s Growth Imapct Fund has found considerable demand for flexible, enterprise-centric finance from diverse organisations. The next phase of dormant assets should help to address that inequality.

  • Help rebalance and level up the UK economy – social enterprises are more likely to be working in deprived communities than other forms of business. One in five (22%) of social enterprises work in the most disadvantaged areas (as measured by the Index of Multiple Deprivation – one form of measuring disadvantage). Investment in social enterprises is more likely to reach those that have been traditionally found it harder to access support. They are also more likely to employ people from disadvantaged backgrounds than other forms of business.

  • Create additional social, economic and environmental value – Social enterprises create significant additional social, economic and environmental value through their activity. This can come in a variety of ways through employment, environment sustainability and increasing the independence of people and communities. The vast majority of social enterprises (84%) seek to employ people from disadvantaged backgrounds. Social enterprises create disproportionately more of their jobs in deprived communities, with over 30% of all jobs created in the most deprived areas (600,000 jobs). Not only does seeking to employ people from these background help improve their financial situation, it also generates benefits to mental wellbeing and physical health. Moreover, by helping those furthest from the labour market, social enterprises help to create stronger and more resilience local economies. The evidence base for this is strong. A 2019 New Economics Foundation cost-benefit analysis found that a £60,000 investment into social enterprises creating inclusive employment yielded £1.75m in social value to the economy. Social enterprises are also taking more action to tackle climate change. Nearly one third of social enterprises (30%) installed energy efficiency measures in the past 12 months, compared to just 13% of SMEs. By seeking to reduce their carbon footprint and prioritising environmentally sustainable growth, social enterprises are generating positive environmental impact. Social investment, in facilitating that work, helps to add to the stock of social value created by the social enterprise sector.

When done right, social investment support through dormant assets can generate significant positive impact for society. The independent Quadrennial Review of Access – The Foundation for Social Investment found that Access’s blended finance has had a “significant positive impact” on the social enterprise sector and charities. It has made over 640 investments so far, with largest single group of investments taking place in least deprived areas as measured by the Index of Multiple Deprivation. An independent evaluation of Access’ Growth Fund found that two thirds of VCSE organisations that had received investment through the fund had grown their income, most of those organisations cited the growth in income to the social investment.

The work of Access has also shown the value of wrap around business support through grants as well as providing finance and is a model that should be expanded throughout social investment.

Another successful form of social enterprise is 'Match Trading', pioneered by the School for Social Entrepreneurs. Match Trading provides incentivises for social entrepreneurs to acquire customers and grow through trading. Coupled with enterprise learning programmes, match trading grants help leaders to realise their strengths and create financially resilient enterprises that are better placed to drive social and economic change in communities. Match Trading matches actual growth in trading income £ for £ with a grant. For every additional pound an organisation generates through trading activity, they are rewarded with grant funds to match (up to a predetermined cap e.g. £10k). Social enterprises receiving Match Trading grants, alongside enterprise learning programmes, typically increase their income from trading by 64% within a year, and this uplift is sustained in subsequent years. Match Trading grants drive a 9.5% increase in traded income as a proportion of total revenue.

Social investment has the potential to leverage significant additional assets beyond the dormant assets already committed. So far, Big Society Capital and other bodies have brought in additional £2.5bn in new capital for investment into organisations with a social or environmental mission on top of the £425m committed for dormant assets. Overall, £3 of matched funding has been found for every £1 invested.

Social investment also sees dormant assets recycled more effectively than other programmes. For example, under the current Community Enterprise Investment Facility (CIEF), Community Development Finance Institutions (CDFIs) are on track to repay all the dormant assets investment plus 4% interest. This means that money can go back into the system and help more organisations in future years.

We can be confident that investing in the next phase of social investment can generate similar returns. The Community Enterprise Growth Plan social investors estimate that this plan could double the overall initial investment of dormant assets through match funding in line with previous experience.

All this evidence demonstrates that we need a comprehensive approach to social investment, building on a variety of different methods.

There is no one way to do social investment and we would encourage the next phase of dormant assets to take a more holistic approach, drawing on what has worked (such as blended finance and match trading) and tackling in the market including place-based business support for social enterprises.

In conclusion, there is a strong evidence base for social investment remaining as a cause for dormant assets and that further investment, with the right plan, can generate significant positive benefits for communities across England.

Community Wealth Funds

We agree that community wealth funds should become a cause for the dormant assets scheme but on the condition that they reassure Black and Minoritised Communities by guaranteeing funds will find its way to them - this should then be monitored and audited on an annual basis.

The Bennett Institute for Public Policy at the University of Cambridge defines social infrastructure as the 'physical and community facilities which bring people together to build meaningful relationships.'

A significant body of research highlights the social and economic effects of these facilities and spaces which bring parts of the community together. If we want to bring people together and create a stronger society, we need to pay particular attention to our social infrastructure.

Unfortunately, England’s social infrastructure is being rapidly eroded. A recent study by Locality found that over 4,000 public buildings and spaces in England are being sold every year. A high proportion never re-open; organisations are closed, and services boarded up. The number of pubs and libraries have also been in sharp decline. Over 25% of pubs have closed their doors since 2001 and the number of libraries dropped by nearly 30% from 2001 to 2018. 70% of youth services closed between 2010 and 2016. Locality also found that “the poorest places are often most reliant on public buildings and spaces”, therefore their closure has a “devastating impact” on communities which were already facing poorer outcomes.

On average, the cost of a social infrastructure asset over a 10 year period is £1.75m, with average annual revenue costs of £81,000 a year and capital costs of £32,000 a year. Social infrastructure is valuable, but it is not cost free.

A Community Wealth Fund, along the lines promoted by the Community Wealth Fund Alliance, would help to address loss of social infrastructure and improves the lives of people in communities across England, particularly the most left behind.

Research by Frontier Economics found that investment in the social infrastructure of the most ‘left behind’ neighbourhoods can generate significant economic returns. For every £1m invested, there are fiscal returns of £1.2m (at least 50 per cent of which are likely to be cashable) and there are wider economic returns worth a further £2m, including a £0.7m boost in employment, training and skills opportunities for local residents. Looking more specifically at the arts and culture, the Centre for Economics and Business Research has found that for every £1 in turnover which the arts and culture industry generates directly, a further £1.24 in output is generated in the wider economy. Similarly, for every 1 job created by the arts and culture sector, 1.65 jobs are supported in the wider economy.

We know that social infrastructure is also a big employer, but it is particularly important for young people and those marginalised in the labour market. Approximately 700,000 young people in the UK are employed in occupations linked to social infrastructure according to the Bennett Institute. Over 60,000 disabled people work in pubs, shops, bars and clubs.

Social enterprises and community businesses are one of the fastest growing forms of organisation in the country. These are entities which trade for a social purpose and reinvest their profits back into delivering that purpose. In response to the loss of funding or the need to save social infrastructure, many places have created social enterprises and community businesses to generate new forms of income.

At the heart of these new models is finding ways to make them sustainable through blending a range of different activities together to create sustainable income or through expanding the reach of existing businesses to do more for the community.

The good news is that these models can be sustainable. Research from Power to Change has found that three-quarters of assets in community ownership were in 'very good' or 'good' financial health and almost half experienced improvements in their financial health over the previous three years. The most recent State of Social Enterprise report from Social Enterprise UK found that despite COVID 74% of social enterprises made a profit or broke even and 44% grew their turnover. Many of these social enterprises operate the social infrastructure that communities depend upon.

A Community Wealth Fund – an independent fund designed to put power and money in the hands of local communities – would support these organisations and create significant added value.

We support efforts to provide patient funding over 10-15 years so that communities have time to develop sustainable solutions to preserve local social infrastructure.

The Big Local programme – based on the same principles as the Community Wealth Fund proposal has already had success in improving deprived neighbourhoods and the quality of life of residents.

Evaluation and research of the Big Local programme has found that long term investment in populations would drive improvements in health, educational attainment and increased participation in higher education.

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