Ex-minister Hurd lambasts UK government for failing to ‘get it’ on impact economy
The UK government is failing to engage “in any meaningful way” with the shift towards social and purpose-led business and investment, says the former minister who oversaw the birth of Big Society Capital.
Nick Hurd, a former Conservative MP who from 2010 to 2014 was minister for civil society – a brief that includes responsibility for impact investing and social enterprise – said that the role of social enterprise and social investment was “not in the DNA” of the powerful Department for Business, Energy & Industrial Strategy.
“I don’t think they think at all hard about the social economy, or even the broader context in which the social economy operates, which is the trend towards more purpose-led companies, the whole ESG [environmental, social and governance investing], the shifts in the investment market – I honestly don't think our business department is on that in any meaningful way. And that’s a long-running frustration,” he said.
I don’t think they think at all hard about the social economy, or even the broader context
Some people within the Department for Digital, Culture, Media & Sport – where responsibility for social enterprise and social investment sits, despite several years of lobbying to move the brief into the business department – did “get it”, Hurd said. “But with the best will in the world, and they’d be the first to admit it, that’s not the most powerful department in government.”
From unrivalled to underwhelming
Hurd was responding to questions from Lord Victor Adebowale, the chair of Social Enterprise UK, at an evidence session of his Commission on Social Investment, a group set up last year to explore how social investment can improve the economy.
- Read: Too many ‘fancy-pants bankers’? UK social investors criticised for lack of frontline experience
The former minister, now chair of England’s Access Foundation for Social Investment, also said the public and social enterprise sectors were “two different cultures” and criticised the lack of effort to achieve more social value through government contracting.
“Ask me whether Whitehall gets the social economy or sees it as a highly valued partner – particularly in the Covid context where we need to be thinking of new ways about how services to the public get delivered – no, I don't think anywhere near where you and I want it to be.
“In terms of commissioning and procurement, I think we’re still in the foothills of what should be the mindset, if your determination is to do a better job of tackling some long-rooted structural societal problems.”
I have never seen an example of a government being more proactive in terms of trying to create an architecture to support social investment
In contrast, efforts a decade ago to initially set up and develop the social investment market – though they “got plenty of stuff wrong” – remained unmatched around the world, said Hurd, who as a global ambassador for the Global Steering Group for Impact Investment is helping to promote impact investing worldwide.
“I have never seen an example of a government being more proactive in terms of trying to create an architecture and an ecosystem to support social investment, in order to support a social economy. I haven't seen that determination or energy in any subsequent government in this country, or in any country around the world,” he said.
‘Not attuned to needs’
Reflecting on the setup of the world’s first social investment wholesaler, Big Society Capital, Hurd said it was deliberately made “much bigger than the market justified, because we wanted people to notice it. It was like a big rock we chucked in the pool.” Big Society Capital, and the wider social investment market, had worked “on one level”, he said, for instance by crowding in and deploying capital that otherwise wouldn’t have happened.
But there were two major shortfalls: the system was still not “attuned to the needs of social enterprises in terms of access to finance”, and progress had been far too slow, or even “gone backwards in connecting the social economy to the public sector.”
Despite some progress on social value procurement legislation and outcomes contracting, the aspirations of a key strategy set out in 2011, ‘Growing the Social Investment Strategy’, had largely not been achieved, he said.
As a “perhaps inevitable consequence” of how the market was set up and how Big Society Capital operated, the social investment sector “all too often seems driven by a determination of what is investable rather than what the broader social enterprise movement needs”.
The Access Foundation, on the other hand, was “driven by enterprise need,” said Hurd, providing essential blended finance and going to “some of the most deprived areas of the country”. He added: “I wish we’d set up Access a bit earlier. Because I think it would have helped a lot of really valuable organisations.”
“The presence of a big wholesaler to feed an ecosystem of intermediaries, who are ultimately the people who make a market, I think still was the right thing to do… But you need to do more than that in terms of making sure you feed a pipeline of investable projects.” Other enablers such as social value legislation were also essential, Hurd added.
The presence of a big wholesaler to feed an ecosystem of intermediaries still was the right thing to do… But you need to do more than that
The Access Foundation was set up in 2015 for a fixed period of 10 years and supports charities and social enterprises in England only. It is not yet clear what will happen after 2025.
The Adebowale Commission, which is supported by social enterprise Fusion21, was initially expected to present its recommendations last autumn, but has been delayed until this year. The commissioners are Jess Daggers, a researcher on impact investing and social investment; Jamie Broderick, former CEO of UBS Wealth Management UK and board member of the Impact Investing Institute; Susan Aktemel, executive director at Homes for Good; and Chris Murray, director of Core Cities Group and chair of Fusion21.
Header image: Nick Hurd speaking at the GSG Summit in Buenos Aires in November 2019, before stepping down as minister and MP later that year.
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