Dan Gregory, author of a new report assessing the potential for social investment to help ‘left behind’ areas, explains why a rethink is needed if this model is to work for communities in these places.
In the last few months, I’ve been involved in the development of three reports about social investment. The first, with Flip Finance, took a long view, looking back over two decades. I’ve largely been an observer to the second – the nearly complete Adebowale Commission on Social Investment – which asks how social investment is working for social enterprises. The third, for Local Trust, looks at how social investment is working for left behind areas.
This work is all about giving perspective to social investment – the perspective of time; the perspective of the customer or user; and the perspective from areas with greatest need. I hope these reports may widen horizons for those whose worldview is very much of the present; of the institutions and intermediaries of the market; and of privilege and relative advantage.
Is social investment delivering for those who have been left behind? The data suggests it is not.
Social investment is a somewhat new term, if not a recent practice. The modern history of social investment in the UK this century began in 2000, when Sir Ronald Cohen introduced the work of the Social Investment Taskforce to the government in a letter to the then Chancellor of the Exchequer, describing “a new approach and a far-reaching programme to improve dramatically the prospects of under-invested communities.” Ten years later, as the Social Investment Taskforce published its final report, Sir Ronald again returned to the idea of “developing new approaches to improve the difficult lives of those whom rising national prosperity has not helped.”
‘Left behind’ places are also a relatively new term but not a new phenomenon. OCSI and Local Trust research has identified ‘left behind’ wards concentrated in post-industrial areas in northern England and the Midlands, and in coastal areas in southern England. A high proportion are post-war housing estates on the edges of towns and cities. These are deprived areas which lack places and spaces to meet, with low levels of community activity and poor digital and transport connectivity, which each contribute to worse socio-economic outcomes. These are areas with fewer employment opportunities, with lower household income and markedly worse health outcomes, while educational attainment is significantly lower across every age group. Is social investment delivering for those who have been left behind, as Sir Ronald hoped it would?
The data suggests it is not.
Of course, different investment approaches may be needed for different areas. We have seen over the last two decades how repayable finance for social enterprises and charities built around the idea of financial return can work. It works for parts of the social sector. It can work in many places. These models can stack up.
In neighbourhoods with little civic activity, on peripheral estates and the hardest hit coastal communities, social investment feels a world away.
But we have also seen how some funds, including the Access Foundation and Futurebuilders, have had to structure themselves differently to reach areas which others haven’t. They have often channelled investment into run-down high streets and town centres, helped save and transform empty buildings into local ownership, enabled new models of enterprise and public services. And while these investments have often paid off financially, they do sometimes require subsidy, grants, lower investor expectations, greater patience and flexibility.
But even these approaches don’t always work. Social investment is not really reaching some areas. In neighbourhoods with little civic activity, on peripheral estates and the hardest hit coastal communities, social investment feels a world away. The ‘left behind’ are, again, left behind.
Addressing inequality will require investment that tackles imbalances over the long-term.
So if social investment is to reach these ‘left behind’ areas in future, we need something radical and new to emerge – models which lie beyond most of the current social investment field of vision. We need to build civic confidence and capacity from the ground up, harness local potential, and rebuild social infrastructure – the building blocks capable of delivering and sustaining long term social and economic change. Addressing inequality will require investment that tackles imbalances over the long-term, empowering local people to respond to their particular circumstances, building lasting assets, and addressing social and economic goals in tandem through harnessing local potential.
If current models of social investment are not doing this, then we need new ones. This means long-term finance with a real appetite for risk. Beyond carefully calibrated loan-and-grant blends of commercial-style investment and subsidy. Beyond the use of public money to lubricate others’ returns. What this means is patient, long-term capital, which doesn’t demand – or even necessarily expect – financial return, at least over a limited time horizon. This is about endowing and empowering local people, through investment closer to equity-style approaches – genuine patient risk capital over decades. Not debt, repayable in the short or medium-term, but capital injections which can pay back more deeply and more widely.
This is the sort of investment which is desperately needed – long-term, almost unconditional, resident-led investment.
These could take the form of grants with triggers set long into the future, revenue participation agreements, more community share type models, rights to small percentages of future turnover, profit participation, place bonds, perpetual bonds or something else. Above, all this means risk taking! These models may pay off in time. But they may not. This is the sort of investment which is desperately needed – long-term, almost unconditional, resident-led investment.
We cannot expect social investment alone to solve inequality or dismantle poverty.
Sadly, our current narrow and unimaginative ideas of social investment have assumed that investment must always be predicated on the need for capital to be preserved and returns generated. Thankfully, this simply isn’t true. We know how passion can combine with an appetite for risk in film financing, recording royalties and other creative and cultural endeavours; in community shares and crowdfunding; in speculating on anything from a sports event to a second-hand bargain or the latest cryptocurrency; with premium bonds, student loans, raffles and lotteries; patching up the car to try to squeeze it through the MOT, or even a case in the courts; takeovers of football club or media companies; and exploring new frontiers in space and science. Putting money into these doesn’t necessarily assume return. These are risky bets predicated on hopes and dreams – or need. They sometimes – but only sometimes – pay off in financial terms. But these are well established models in our economic system. This risky ‘corridor of uncertainty’ of real life between the rigidity of public and private institutions is perfect territory for dormant accounts and future waves of unclaimed assets.
We need to take off the blinkers and open up to the specific products these communities need, the business models that can work, and which might – but might not – deliver financial returns. We can increase their chances of success by harnessing the trust and involvement of communities in their management and delivery. We must see the long story, the customer experience, and the perspective of those in greatest need. That we aren’t doing this already represents a failure of the imagination.
Of course, even new models won’t be a silver bullet for left behind places. We cannot expect social investment alone to solve inequality or dismantle poverty – not least as the hundreds of billions of UK government and private sector investment across the UK every year makes social investment a drop in the ocean, a current in more powerful tides. But if social investment is not part of the solution, then it’s part of the problem.