Sam Tarff talks capital creation, devolution and election expectations

Sam Tarff, the CEO of Yorkshire-based social investor Key Fund, talks to Pioneers Post about the north-south divide in the UK, the challenge of supplying the correct form of capital and his thoughts on the ever looming general election.

One of the main criticisms of the social investment landscape in the UK is that not enough capital is getting to the frontline. Yorkshire-based Key Fund is trying to do something about this – and so far the results seem promising.

The Community Development Finance Association’s (CDFA) 2013/14 annual survey reveals that the investor, led by CEO Sam Tarff, made 40% of the number of social investments made across the whole of England during that year, despite only operating in the north of the country.

Over the past 12 months Key Fund has also increased its total asset growth by 60% and its net worth growth by 30%. CDFA’s Inside Finance report concluded that Key Fund has so far added approximately £24m of benefit to the UK economy, equating to a £8.00 return on every £1.00 invested. 

Sam Tarff and Martin LewisSam Tarff (right) with Martin Lewis (left) at the Cabinet Office Social Investment Awards

Northern value

Pioneers Post: What are the core values driving the Key Fund decision-making process?

Sam Tarff: We see ourselves as a market builder within the social enterprise and wider social sector. Our market is organisations – social enterprises, community businesses – that are emerging, at the early stage, but that don’t have access to the finance that other, more developed social enterprises have. Our values are informed by the fact that this is our marketplace. 

In the last 18 months, over 75% of our investments are in the top 20% of areas of disadvantage (according to the Indices of Multiple Deprivation) across the north of England where we exist. 

We were formed in response to deprivation and the decline of the steel and coal industries within South Yorkshire. We’ve maintained that mission as we’ve grown throughout the north of England. 

PP: To what extent do you think there is a north-south divide in the social investment sector?

ST: Areas around London have been able to acclimatise to some of the social impact investment developments much more quickly than in the north. The growth in infrastructure in the north has been slower and as a result social investment has been able to create a greater impact financially in London than in the north. 

Personal perspective

Sam Tarff first started working at Key Fund in 2000, initially as an investment panel member and then as a board member. In 2013, he stepped down from the board in order to take on the role of CEO in November of that year.

PP: Looking back over the past 15 years, what social investment developments stand out? How has the sector evolved?

ST: There’s been a massive increase in the interest in how social investment can play a part of the funding landscape for social sector organisations.

There’s been a recognition of the need to provide capital – even if it's not necessarily the right kind of capital yet.

There has also been an increase in value from a policy point of view in the role social investment plays, not only as another stream of income or funding to enable organisations to grow, but also as a way of effecting organisational change so that organisations become sustainable in their own right.

There’s been a recognition of the need to provide capital – even if it's not necessarily the right kind of capital yet. There’s definitely a lot more capital in the social investment sector than there was previously. 

The type of capital has historically been an issue and still is, but there’s now recognition that there needs to be diverse forms of capital in social investment as opposed to just pure debt finance.

If you look at the growth in the amount of capital and you look at the take up of that capital it has been disproportionate. To address that imbalance there needs to be investment in the infrastructure around social investment.

PP: What are your expectations, fears and hopes concerning the general election in May?

ST: The same challenges are still going to be facing the sector regardless of the colour of the next administration. There will still be huge pressure on the public purse to deliver. 

The sector needs to collaborate... If it doesn’t, it opens the door for larger organisations to parachute in.

We’re working with four local authority area districts at the moment. The commissioners in those districts all very much see the value of working with social enterprises as a means of delivering public services. 

Their challenge is that they’re having to shrink the number of people in their organisations and the number of people that are managing contracts. Although they want to work with the sector, practically, they can only service a fewer number of sub-contractual relationships. 

The sector needs to collaborate to recognise those practical, administrative restraints. If it doesn’t, it opens the door for larger organisations to parachute in.

At the moment, historically, things have been top down, national government-led, for example, social impact bonds. Although I think there’s growing recognition that they need to find ways of enabling local organisations to be part of that supply chain. 

PP: Earlier this year the government announced its plan to “devolve the £6bn NHS and social care budget in Greater Manchester to the region’s councils and health bodies” – a good thing for the social sector? 

ST: It’s a good thing from a subsidiarity point of view. That decisions are going to be pushed down to a level that’s closer to the ground is a good thing.

There is a potential risk in that if that devolution of decision-making is being pushed down, the risk to them from a commissioner point of view is that they might become more risk averse. They can’t blame anybody else.

It could be a massive opportunity for the sector but it depends on how that devolved power sees its relationship with the social sector in terms of public services. It could work both ways. 

Looking ahead

PP: What's in the pipeline for Key Fund: do you have plans to expand your operations to other parts of the UK?

ST: We are increasingly approached and asked about whether we are intending to expand to the south but our board’s position at the moment is that we see our operations at this stage staying in the north.

We do, however, want to work and act to ensure that our model is nationwide, either through collaborating with existing partners or through helping to create a similar model to be adopted across the country.


Header image: The Peak District, Yorkshire