Five ways social impact investment can help deliver manifesto promises
This piece was written by Tessa Godley, Policy & Advocacy Director at Better Society Capital
Last week, we saw the major political parties launch their manifestos in the build up to the UK General Election on 4 July. There’s a lot of noise, and differing views during an election period, but two things rang true across all parties' manifestos. We need a better society, and we need to look beyond the public purse to fund it.
Social impact investment is a trusted mechanism that attracts significant private investment and strategically channels it to address the UK’s most pressing issues. It can help the next government deliver on its promises for a better society and tackle social issues from homelessness and mental health to child poverty and financial inclusion.
Below, I’ve highlighted five common themes across the Conservative, Liberal Democrats and Labour manifestos and how social impact investment can play a pivotal role.
1. Economic growth
All manifestos highlight the importance of unlocking private investment to help grow the economy. The Conservatives commit to a tax system that will incentivise businesses to invest and Labour promises to strategically use public investment where it can to unlock private investment through the creation of a National Wealth Fund, capitalised with £7.3 billion, which will target £3 of private investment for every £1 of public investment.
Since 2012, social impact investors have unlocked over £9.4 billion of private investment in the UK, more than eleven-fold growth in eleven years, and strategically channelled it to address the most pressing social issues.
Together with the Big Issue and over 35 partners, we highlighted that up to £50 billion of additional social impact investment could be harnessed in the first decade of a new government, with four steps to unlock UK social capital potential.
2. Business including SMEs
Another common thread is the importance of expanding access to finance for SMEs. The Labour Party pledges to reform the British Business Bank to make it easier for SMEs to access capital, the Liberal Democrats point to expanding the British Business Bank, and the Conservatives pledge an ‘Invest In Women’ Fund.
Community Development Finance Institutions (CDFIs) are a good example of specialist social impact investors delivering capital to SMEs that have been underserved by conventional banking institutions and who in 2023 invested a record amount.
Some of the manifestos also signal an intent to help more businesses be mission-led. The Liberal Democrats promise to reform company purpose rules for all large companies and Labour says it will support “diverse business models which bring innovation and new products to the market”. This includes the cooperative sector, and they will aim to double the size of the UK’s co-operative and mutual sector, helping it address barriers such as access to finance.
Co-operatives, social enterprises, charities are brilliant examples of diverse business models which are already changing the shape of UK business for good. Social Enterprise UK estimates there are 131,000 social enterprises across the country, representing almost 1 in 42 of all UK business.
Social impact investment is a key conduit in supporting these organisations to access finance. For example, Co-operative UK highlights that since 2012 over £210 million has been raised through community shares by 130,000 people investing in 540 community businesses.
3. Transition to net zero
Community ownership is also a recurring theme with the Conservatives, for example, committing to extend the Community Ownership Fund. This extends to renewable energy with Labour, for example, promising to invite communities to come forward with projects and work with local leaders and devolved governments to ensure local people benefit directly from the transition to net zero.
Social impact investors play an important role in helping communities take ownership of local renewable energy projects. For example, the CORE partnership enabled five communities to take ownership of eight solar farms generating enough power for almost 13,000 homes. Together, it increased England and Wales’s community solar capacity by one fifth and provided over £20 million in grants for local charitable causes.
Find out more about how social impact investors can support the transition to net zero.
4. Social and affordable housing
Building new homes will be a top priority for any future government, with the Conservatives committing to deliver 1.6 million and Labour promising significant reforms to our planning system and 1.5 million new homes over the next parliament. Labour says they will “prioritise the building of new social rented homes” and the Lib Dems promise to build 150,000 social homes a year.
55% of the social impact investment market, or £5.1 billion, comprises of investors focused on providing new homes for low-income households. Alongside partners, BSC has invested £1.7 billon into housing funds that are projected to provide homes for 15,000 people.
Homelessness is mentioned in some but not all of the party manifesto with Labour committing to develop a new cross-government strategy working with Mayors and Councils across the country “to put Britain back on track to ending homelessness” and the Lib Dems also commit to ending rough sleeping within the next Parliament.
Homelessness property funds are an important part of the social impact investing market and ripe for scaling. Independent research undertaken earlier this year by Alma Economics, showed that the social investment investor, Resonance, has housed over 3,300 people including 1,607 children at risk of homelessness, saving local and central government £140 million in spend.
5. Better public services
Interestingly Labour promises to reform procurement rules to give SMEs greater access to government contracts and the Lib Dems intend to promote public benefit models for monopoly utility companies. Within this, there are several relevant commitments for those delivering Social Outcomes Contracts and for tech for good entrepreneurs. For example, Labour pledges to embed a greater focus on prevention and technologies such as AI throughout the healthcare system and deliver with local communities, and the Conservatives want to take advantage of the latest technologies to transform public services.
Social Outcomes Contracts have a proven track record in delivering in all of these areas – and have generated nearly £9 of public value for every £1 spent, saving the taxpayer £507 million. Former Prime Minister Gordon Brown endorsed Social Outcomes Contracts in a report launched last week, saying, “This report shows the great impact that this approach is making on complex, entrenched issues such as children’s services and homelessness, but there is much more to do. I hope this report will encourage investors and policymakers to scale up support of BSC (Better Society Capital)’s important mission.”
By partnering with social investors and “spending smarter”, Government can attract significant additional investment to help deliver their manifesto commitments, solve the most difficult problems the public cares about, grow the economy, and ensure lasting improvements to people’s lives. Find out more.
