Coalition MPs have successfully opposed social investment amendments to the Financial Services Bill, with financial secretary to the Treasury Mark Hoban especially criticising the proposals.
The amendments, which were tabled by shadow financial secretary to the Treasury Christopher Leslie, sought to place a general ‘social investment duty’ on the new Financial Conduct Authority, to carry out its work in a way which promotes the development of social finance and social investment. Leslie also sought to create a ‘social investment panel’.
However, the proposals were narrowly defeated in the Financial Services Bill Committee last week by 10 Tory and Liberal Democrat MPs, while 8 Labour MPs voted in support of the amendments.
Just days before the debate, nineteen sector leaders had written to Mark Hoban, Financial Secretary to the Treasury, urging him to accept amendments to the Financial Services Bill which promote social investment.
However, during a debate on the amendments, the idea was immediately shot down by Hoban who said he was cautious because the FCA was not being set up to promote financial services companies or a particular sector:
“If the words ‘social investment’ were substituted for ‘other sectors and financial services’, I wonder whether it would receive such a warm welcome from the hon. gentleman,” he said. “The amendment is unnecessary because the whole ethos of the FCA is to promote new providers coming forward, to encourage competition in the market, and not to close the market to others.”
A number of Labour, and Social Democratic and Labour (SDLP) MPs supported the amendments during the debate.
SDLP MP Mark Durkan questioned whether the government wanted to grow and develop the social investment market, while Labour MP Sheila Gilmore argued that the amendments were not about promoting social investment, but about ensuring that it is not inadvertently hampered by a level of regulation or lack of understanding of the nature of social enterprise.
In response, Hoban insisted that the amendments would create an uneven playing field:
“It is not saying that social investment should be penalised, it is saying that social investment should be promoted. In the same way that no group should have undue promotion, no group should be particularly penalised either.”
He added that the smaller businesses practitioner panel would be the ideal place for someone from the social investment sector.
The amendments went to vote. It was supported exclusively by eight Labour MPs, and voted against by ten Conservative and Liberal Democrats MPs.
Social Enterprise UK: "missed opportunity"
Responding to the news, Social Enterprise UK’s chief executive, Peter Holbrook, said:
“The exclusion of the proposed amendments to the Financial Services Bill is a missed opportunity. The Bill provides a once in a decade opportunity to inject social investment into the DNA of the financial services regulator. Without them, the Financial Conduct Authority [previously the Financial Services Authority] won’t be required to consider any of the unique features of social investment.
"The outcome is disappointing and something of a surprise just days after the success of the government backed Public Services (Social Value) Bill. The amendments are also consistent with the expressed aim of the government to grow the social investment market and to find new ways to inject finance into civil society."
Holbrook added that there was still time for proposed amendments to be accepted:
“The amendments have strong support from across the social enterprise, voluntary and social investment sector – we will be working together to keep the pressure up. If we get this right, we will have a financial regulator that has a mandate to listen to civil society.
“If the amendments are eventually accepted, the Financial Conduct Authority will have to consider the inclusion of social finance and social investment in its decision making. This will be encouraged by the establishment of a panel made up of experts and leaders in social investment markets.”
