Published 9 August 2018

Introduction

Charities and social enterprises － ‘the social sector’ － are the core of civil society. A healthy, independent, and engaged civil society is a hallmark of a thriving democracy. A robust sector is a sign of a confident democracy, which offers many ways in which citizens’ views and concerns can be amplified. This country has a long tradition of philanthropic organisations, both small and large, set up independently of government to respond to the challenges of society. A poignant example is civil society’s role with regards to combating threats to democracy, ensuring that broad debate and political campaigning continue to thrive, online as well as offline. It is essential that these organisations can access the necessary support to adapt to meet the challenges of the future.

Throughout this Strategy there are proposals that will benefit social sector organisations. For instance, in Chapter 1 we talk about citizens, including young people, in supporting society. In Chapter 2 we describe place-based investment and empowerment. Chapter 4 describes a range of benefits that business, the finance sector and new technology can bring to civil society. In Chapter 5 we explain plans to reform commissioning in favour of charities and social enterprises.

There remains a range of issues concerning the role and management of social sector organisations themselves, which are dealt with in this chapter, namely the sector’s voice, its funding, its leadership, support, regulation, and its digital capability.

Significant steps are already being taken from within the social sector to address these issues. The government cannot and should not ‘lead’ or organise civil society. But the government has a clear role to play, including where only the government can act, or where government intervention has the potential to offer significant additional value.

In particular the government is keen to work alongside the social sector to realise a future in which organisations are able to adapt and thrive, strengthen public trust and find new ways to resource and deliver their missions. This includes all in the sector feeling that their voice is respected in policy debates, where there is strong support available and ongoing and effective investment in leadership and governance. Finally, the government wants charities and social enterprises to be able to employ strong digital skills to deliver social good.

Mission 6: the voice of civil society

The rules on campaigning

Civil society has a long and proud tradition of campaigning for change and providing voice for the disempowered and disadvantaged in society. Civil society organisations have successfully campaigned for changes in the law and national policy, and at local level supporting access to services and challenging public sector organisations to improve.

Charity law enables charities to undertake campaigning, including political activity, to support the delivery of their charitable purposes. Charity law prohibits charities from supporting a political party or candidate. It is also right that we have a longstanding framework under Electoral Law to provide transparency of third party campaigning in the period before an election. This is necessary to ensure that an election outcome cannot be unduly influenced through excessive spending.

Some civil society organisations believe that the space for campaigning and advocacy has closed in recent years, creating a ‘chilling effect’ on civil society campaigning and advocacy.¹

Evidence from the engagement exercise is that the government should improve its engagement with civil society, consult charities, and community groups, consider what is said and be transparent about decision-making, include diverse civil society voices in policy development, and that beneficiaries especially young people should be engaged and involved in policy making in a meaningful way. One organisation of many stressed during the engagement exercise that charities “play a vital role in shining a light on key issues and the government should support and champion them in doing this”.

The government is ambitious to play a key role internationally in standing up for free speech and a vibrant civil society.

Hearing from civil society

The government is determined that charities and social enterprises should be fully confident in their right to speak in public debates, and to have a strong campaigning and advocacy role. It is right that we have government grant standards which prevent taxpayers’ money being spent on political campaigning or lobbying. However, simply being in receipt of taxpayers’ money should not inhibit charities from making their voices heard on matters of policy or practice.

The government is committed to embedding open policy making across departments － giving civil society significant opportunities to achieve policy change － and is currently developing a commitment to this as part of the UK’s next National Action Plan for Open Government.²

The government also recognises that there is a job to do to reach a collective approach across Whitehall in the way that we work with and for civil society. We are therefore keen to get our internal workings in order to ensure that we effectively join up at crucial stages of policy development to reflect the voice of the sector and to obtain valuable and early insight into how our policies are likely to impact communities and the sector. As mentioned in other chapters, strong partnership working with the sector is key to effectively deliver policies that tackle a number of issues faced by communities and to strengthen the resilience of the sector.

The government will renew its commitment to the principles of the Compact. The Compact is a document that sets out a series of principles and commitments governing the relationship between the social sector and the government. It was last published in 2010.³

The government will convene a cross-government group to work with civil society to establish the principles of effective engagement in the policy-making process, learning from the examples of good practice that already exist. This includes a focus on the effective engagement of young people (see ‘Young people and national policy design’.

The government will work with civil society, the Electoral Commission and the Charity Commission to explore what other non-legislative steps could strengthen civil society’s confidence in its campaigning and advocacy role.⁴ For example, the Electoral Commission has already started work on improving its third party campaigning guidance for civil society organisations.

Victoria Atkins MP, Parliamentary Under Secretary of State for Crime, Safeguarding and Vulnerability says:

Knowing the issues that affect the most vulnerable in our society is the first step towards finding solutions and bringing justice to a community. Charities and the social sector play a vital role in representing people who are unable to advocate for themselves to ensure that the right policies and programmes are in place to protect the most marginalised in our society.

Imagine living with an aggressive partner － coerced and violently attacked in your own home, sometimes for decades – and too scared to speak out for fear of retribution. Or being trafficked from another country and not being able to make or exercise any choices free from duress, pressure or undue influence in order to protect oneself from abuse, neglect and exploitation. The reality is that there are many people whose individual circumstances preclude them from being able to take part fully in important decisions or even discussions that they themselves are the subject of.

In my previous career as a criminal barrister I specialised in prosecuting serious organised crime so I saw how law abiding people could be exploited by criminal gangs. As Minister for Crime, Safeguarding and Vulnerability, it is my responsibility to ensure the Home Office is taking the best possible action to protect the most vulnerable and prevent exploitation and criminality.

We frequently rely on the charity sector often working in partnership with the police to flag issues that we need to be aware of and we work in partnership with them to decide on the best options going forward. We are committed to introduce a landmark Domestic Abuse Bill to further transform the response to these heinous crimes. We have also recently published a Serious Violence Strategy which sets out the government’s response to serious violence and recent increases in knife crime, gun crime and homicide. The strategy focuses on early intervention and prevention which can help catch young people before they go down the wrong path into situations where they are exploited frequently as drug runners and through threat and violence to prop up criminal networks.

Delivery of the Modern Slavery Act relies on our social sector partners working alongside charities to ensure that supply chains and other situations where bonded labour or other forms of exploitation may be involved are identified and dealt with. We work closely with a wide range of civil society organisations, including specialist victim support services, to support delivery of our work. Freeing the nation from the cruel acts of modern slavery and other forms of exploitation remains a priority for the Home Office and the UK government and it is only by working in partnership that we can achieve our aims.

Mission 7: funding and financing the social sector

Diversifying funding and finance

The social sector has experienced major turbulence in the funding environment in recent years. Diversification of income is often the way that social sector organisations are responding to this turbulence.

The picture on civil society funding and finance is a mixed one. There are positive signs about the social sector’s overall financial health. Figures from the National Council for Voluntary Organisations Almanac show that overall income for charities is up since 2009/10, and in 2015/16, total income reached £47.8 billion, an increase of £1.6 billion from 2014/15. However, the largest 3% of organisations receive 80% of the sector’s income and only 18% of organisations (those with an income of £100,000 or more) saw their income grow in 2015/16.⁵ This is creating considerable income disparity between small, local charities and large, national charities.

The way that civil society organisations are funded by central and local government has also changed with contract funding increasingly replacing grant funding. However, a range of new funding opportunities has emerged which supports small and local charities. There has been a 10% growth in earned income (trading) in the small charity sector.⁶ Since 2012, following policy direction from the government, Big Lottery Fund has focused almost exclusively on supporting local civil society, particularly by empowering people to play an active role in their communities.⁷ New technologies and a renewed focus on place and communities are offering opportunities to enhance the funding and finance environment. The government will continue to explore opportunities, working with sector partners, to make access to funding and finance easier, particularly for the small social sector and community organisations. This will include exploring the potential of technology. Adding to this growing momentum in social impact investing in civil society has created several valuable income streams and improved access to finance. The government is keen to use various tools to support the future funding and finance environment for the sector. Promoting philanthropy, ensuring taxes and regulation support civil society, and bringing different sources of funding and investment together for social impact, are all ways in which the government will support resilience and increased impact of the sector.

A supportive policy environment creates the opportunity for social investment to support civil society, but that opportunity can only be realised if there are sustainable social business models in which it is possible to invest. Existing social organisations and new social entrepreneurs often need help to develop and grow these models, through some combination of national and local support.

The Department for Digital, Culture, Media and Sport is supporting the development of enterprise activity to grow and diversify income, and improving access to social investment for charities and social enterprises through a £60 million endowment to Access (The Foundation for Social Investment). Under its new 2018 to 2023 strategy, the Access Foundation is committing £40 million to help charities and social enterprises to develop enterprise models which help increase their earned income and thereby build resilience.

The government also supports building the awareness and understanding of social investment through its partnership with the Access Foundation to fund GoodFinance.org.uk. Good Finance provides charities and social enterprises with a comprehensive digital resource to help them effectively navigate the social investment market. There is also a growing movement of what is called blended finance, in which a mixture of funding from different sources is made available, on a variety of terms, to single projects or initiatives.

The government has partnered on funds like the Arts Impact Fund, Dementia Discovery Fund, Northern Cultural Regeneration Social Investment Fund, and Building Connections Fund which have all attracted a mix of funding from different sources to collectively focus on a specific theme or issue.

The government announced in January 2018 that up to £10 million of funds from dormant accounts will be allocated to the Access Foundation to support blended capital approaches. The government will continue to work with funders to create co-investment opportunities to fund solutions to social challenges.

There has been great progress over the last decade to grow access to repayable finance. The government will continue to support innovative approaches which bring together these different types of finance.

Philanthropy

Philanthropy is a vital income stream for civil society. The UK public donated £10.3 billion in 2017.⁸ Legacy giving alone is worth £2.5 billion per year and payroll giving is consistently over £1 billion.⁹ These generous amounts make up about 40% of social sector income.¹⁰

There are opportunities to build on the generosity of individuals and grow philanthropy even further. The government aims to make giving as easy and as compelling as possible, and has a strong track record in this area.

Our Small Charities Fundraising Training programme helps to equip staff at small charities with the skills needed to attract and engage a greater range of donors. Major match funding programmes, such as the Community First Endowment Match Challenge, encouraged donors to invest in an endowment now worth in excess of £140 million, and which provides around £5 million a year in grants for communities.

The government is working with the Charity Commission and UK Community Foundations to release at least £20 million over the next two years from inactive charitable trusts to grassroots community organisations.

The government recently convened a cross-sector roundtable to provide advice on how the government can support the growth of giving and the strengthening of the UK’s role in global philanthropy, with a view to establishing a longer-term advisory group. Although the government should never seek to influence or direct the way that private philanthropy is directed, the government is ambitious for the UK to become the global centre for philanthropy practice, including the role of corporate philanthropy.

The government will explore how to encourage more collective giving, a collaborative, peer-influenced form of philanthropy that has the potential to develop larger funds to tackle problems. Initiatives include issue-based funding networks, such as the Environmental Funders Network, the Rough Sleepers Funding Network, and the place-focused London Funders model, and we will look to see how the government can support this movement to grow.

The government and the social sector also need to learn the lessons from the public response to the Grenfell Tower disaster, when £28.4 million was donated to support the community affected by the fire. The sector rose to an incredibly challenging situation with extraordinary capability (see ‘Civil society and disaster response’).

The growing focus on place-based work in public policy is reflected in an emerging model of local philanthropy, including ‘civic philanthropy’ programmes supported by city mayors. Place-based giving schemes bring together local philanthropists and funders with the community and local voluntary groups to raise money to tackle local issues in a particular place, such as rough sleeping, activities for young people or social isolation, or serve as investment funds for larger scale infrastructure projects. A culture of philanthropy in local areas is common in the United States. It was common in the Victorian era and left an important legacy in many of Britain’s towns and cities. As an organisation told us during the engagement exercise: “a 21st century version of civic philanthropy would empower local people to adapt to the challenges of the future, be a catalyst for growth and development, and help reinvigorate a sense of civic pride, shared identity and belonging in Britain’s cities”. The key now is to build strong local philanthropic roots that enable everyone, whatever their level of wealth, to be able to give and contribute to a local response to local issues.

The government will invest over £750,000 before 2020 in the growth of place-based giving schemes, to support civic philanthropy, informed by research commissioned by the Department for Digital, Culture, Media and Sport in 2018. This funding will support areas to develop schemes that bring together local funders, philanthropists and businesses with civil society organisations and residents, to tackle local needs in a collaborative way.

Tax and regulation

The government is already supporting charities with considerable tax exemptions and reliefs. Provisional figures from Her Majesty’s Revenue and Customs for 2017-18 indicate the total amount of relief to charities is estimated to be £3.62 billion, which is an increase of £220 million on the previous year, continuing the long-term upward trend. Ten years ago, reliefs to charities totalled £2 billion.

The government has committed to reviewing the Social Investment Tax Relief in 2019.¹¹Reducing restrictions on the size and type of projects which can claim Social Investment Tax Relief could accelerate communities taking ownership of important community assets and expand the use of small scale finance for community energy projects. In these areas Social Investment Tax Relief could play a bigger role in helping social sector organisations to be more financially resilient.

The government also recognises the strong demand from the social enterprise sector for a simpler relationship with Whitehall. The Department for Digital, Culture, Media and Sport will establish a regular forum for social enterprises to coordinate relations with the government.