Scotland’s Charity Sector is Being Marketised

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Leslie Huckfield argues that the Scottish Government is transforming the Scottish third sector through corporatisation.

Amid the pretty comprehensive condemnation of recent Scottish Government economic policy announcements, the status of Scottish third sector funding was largely missed. But we should note a significant mutation in this sector of the economy – away from community control and towards corporate marketisation.

At the beginning of March the Scottish Government’s ‘National Strategy for Economic Transformation’ was launched with a heavy emphasis on business and entrepreneurship. This was followed hot foot by the Scottish Government’s decision on 7 March effectively to ‘dump’ local communities through its refusal to continue funding Senscot (the Social Enterprise Network Scotland).

For those who may have missed it (and much about cooperatives, social enterprises, charities and the voluntary sector is anorak stuff!) by the end of 2021, the Scottish Government had painted itself into a procurement corner where it was forced to make a choice between funding Senscot or SES (Social Enterprise Scotland). For the record, Senscot, founded in 1999, has been the begetter and incubator of a range of community organisations like Development Trusts Association Scotland and Scottish Community Alliance, issues a weekly bulletin with 4,500 followers, has 19 local community networks and 7 national “thematic networks”, with over 1,400 frontline members. In complete contrast, SES is the Scottish version of Social Enterprise UK, which supports private investment to deliver public services round the world, even recommending a ‘social stock exchange’ for Jamacia and the Caribbean!

The London orientation of SES comes from its board members and from its business and market domination. For good measure, Scottish Government’s procurement ‘referees’ included a former SES and Social Enterprise UK Board Member. So, SES gets the contract and Senscot has already issued its staff with 90 day redundancy notices. After the ‘Transformation Strategy’ and this week’s contract for SES, for all those local community organisations dependent on Senscot’s Networks and its weekly bulletins, what else could possibly go wrong?

Since Scotland’s economy is already retreating into post Covid austerity, without appropriate funding for community organisations, many local problems will only get worse. Most public sector reports on Covid and communities usually write about top down service delivery and may not accurately reflect developments taking place ‘on the ground’.

A report last year from Sheffield Hallam University concluded: “In the future, funding that is flexible and supports the core functions of smaller charities over the longer term should be a model of first resort.”

This vital role of smaller organisations had already been identified in Social Infrastructures for the Post-Covid Recovery in the UK in July 2021 from Laura Bear’s Covid and Care Research-Group at London School of Economics. To understand the complexity of what has happened in local communities, see Lois Orton from Liverpool University Public Health and colleagues from other universities with their detailed ethnographic approach showed the same. Closer to home in Scotland, just read Dignity in Practice: Learning, Tools and Guidance for Community Food Providers by Nourish Scotland and the Poverty Truth Commission in 2018. Evidence throughout all these reports shows that while not criticising bigger social enterprises and charities, it is the smaller ones which really make the difference.

Access to smaller local grants needs to focus on smaller specifics, like the continuation of a Kick Start work placement post, provision of rural transport to specific locations or funding a fixed period post-holder servicing an existing need. Funding these should not require complex applications and detailed output and impact measurement, for which smaller delivery organisations do not have sufficient capacity.

But instead of an emphasis on smaller community organisations, the Scottish Government’s Third Sector Growth Fund and its Social Enterprise Action Plan, both rushed through in March 2021 before the Scottish Parliament Election, carried a heavy emphasis on external investment and loans – a serious change of direction.

The Growth Fund includes a ‘Social Catalyst Fund’ – £15mn of investment to be repaid based on turnover, rather than interest rates. Applications involve a possible business plan, cash flow projections and management accounts. Just imagine being a smaller community organisation and having to complete all these to get the funding.

The Catalyst Fund is delivered by the Impact Investment Partnership Scotland (IIPS), owned and managed by FirstPort (the social enterprise start-up organisation, founded by Senscot in 2007) and Social Enterprise Scotland (SES).  Many community organisations no longer view these as representing them since they are now both Government delivery bodies. No wonder SES has just won the contract.

The Third Sector Growth Fund also includes £15m for the Circular Economy and Social Impact Venture Portfolio, administered by Social Investment Scotland. Despite ample evidence, ranging from Big Society Capital to Big Issue Invest, of difficulties in funding any community project through loans, equity and investment, these now form the basis of all these programmes.

The cost of due diligence and administration means that large loans are mostly offered. Social Investment Scotland’s own 2020 Impact Statement shows that the average loan across its programmes to March 2020 was £134,000. The SIS average loan under the Scottish Growth Fund was £1.1m and under the Community Investment Enterprise Facility was almost £3m. Social and community enterprises equipped to apply for loans of this size are hardly anchored in local communities.

This is not to say that there are no funds for communities. The Scottish Government’s Communities Recovery Fund closed in February 2021. Adapt and Thrive closed at the end of June 2021. Investing in Communities Fund offers around £10m each year with a minimum application of £5,000. Though the first Enabling Neighbourhoods and Communities Fund is now closed, there is now a second phase, administered sympathetically by the Corra Foundation, with grants up to £3,000 to groups with an income of less then £50,000.

But, despite this, if the direction of the March 2021 Action Plan and Growth Fund and this week’s contract continues, next will be the marginalisation of Scotland’s Social Enterprise Code (which keeps out private investment) and enhanced Social Investment Tax Relief. This will signal the arrival of more London initiatives like the ‘Power to Change’ programme from the Access Foundation, signposting to a Scottish third sector led by the market and dominated by external impact investment, with input from the private sector to deliver public services on the cheap.

In other words, we are witnessing a far-reaching corporate restructuring of the third sector. Given the scale and range of public services provided through third sector initiative (this itself partly the product of a retreat of public provision), this has far-reaching implications and should concern us all.

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