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Fast action needed for new finance models 1

Finance | Jonathan Lewis | 21 Oct 2010

As the cuts cloud engulfs the UK, could new models of financing provide the bright light the sector needs? Jonathan Lewis thinks so.

As well as posing challenges to families and public services, spending cuts of the scale announced yesterday could spell real difficulties for social enterprises, voluntary groups and small local charities all over Britain.

However, cutting red tape and encouraging new providers does open up opportunities for civil society organisations to get even more involved in public life and public service delivery. But while there are real opportunities, there are real risks as well.

Heads of civil society organisations have told me their concerns that they could be viewed as a substitute for services government can no longer afford. The sector has much more to offer than plugging gaps in public and private provision. Many organisations are well placed to save money and improve the quality of frontline services if given the freedom to be creative and innovative

Name a policy area and there will be a vibrant, ambitious civil society organisation working to deliver those services.

At the Social Investment Business we have invested over £400m in more than 1,000 organisations all over the country and the range of fantastic benefits they have brought to their local areas is mind-boggling. We have seen civil society organisations implement job creation programmes, set up parent-led schools, provide after-school sports clubs, deliver cost-efficient health and social care services, help ex-offenders beat drug and alcohol addictions, counsel war veterans and much, much more.

It was made clear today that local authority and health service commissioners will have more power to spend what they have – but a lot less to spend. Now is the time for civil society organisations to be proactive in looking for ways to engage with commissioners to help them find the solutions we know our sector can provide.

Alongside the CSR presented by the Chancellor, the Cabinet Office published details of its departmental settlement. In his statement Frances Maude reaffirmed his department’s commitment to the Big Society by highlighting a range of new responsibilities backed with a £470m commitment to civil society including a £100m transition fund to “help charities, voluntary groups and social enterprises make the transition to a tougher funding environment”. And at Cabinet Office questions earlier in the day his ministerial colleague Oliver Letwin also put his continued commitment to increasing civil society’s involvement in mainstream public service delivery firmly on the record. This dedicated money is welcome and I look forward to more information about how the sector can achieve all the ambitions floated for it without additional investment. Because the key is how we achieve real, practical, sustainable change.

Commissioners can only do business with organisations that themselves are financially strong. It’s important that ministers recognise that this transformation in public service delivery and the realisation of the Prime Minister’s Big Society vision rely on civil society organisations themselves being supported to cope with financial pressures ahead.

New models of financing – greater use of loans, forming sector consortia to bolster bidding power and innovations like social impact bonds need to be developed at speed to help ensure that despite the trials that undoubtedly lie ahead, this opportunity to transform the sector is not missed.

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