UK Budget 2021: Social Investment Tax Relief win for campaigners – but fight continues
Social enterprises and investors welcome UK chancellor’s SITR extension, but commit to fight for further support. Other measures offer short-term help, although long-term outlook remains uncertain.
A crucial tax relief policy to stimulate social investment will be extended for two years, the chancellor Rishi Sunak revealed today as he outlined the UK government's 2021 Budget.
Social Investment Tax Relief (SITR) offers tax relief to individuals to encourage them to invest in social enterprises. As much as £15m in investment has been raised by organisations through the scheme so far since it began in 2014.
SITR was set to end on 5 April 2021, but Big Society Capital, Social Enterprise UK, Resonance and Co-operatives UK campaigned for the scheme to be extended. The sector was on tenterhooks right until the last moment, as the chancellor (pictured) didn’t make an announcement in his Budget speech this afternoon, but only included the detail in the Budget document published shortly after he concluded.
Conservative MP Danny Kruger, who backed the campaign and who, in September last year published a report into the role of civil society in “levelling up” the UK, tweeted that he was “delighted with [the] announcement...we lead the world on the use of private capital for public good.”
In its current form, SITR enables investors to claim 30% of the cost of their investment from their income tax bill.
However, campaigners were disappointed that the scheme was extended for only two years.
“It's very good news for the short term. It shows that the government is listening to the sector, which is always positive,” said Andrew O’Brien, director of external affairs at Social Enterprise UK. “But we could have to fight this again in a couple of years’ time.”
Melanie Mills (pictured), senior director of social sector engagement at the UK’s social investment wholesaler, Big Society Capital, said: “Two years is really not long enough if you look at the cycle of raising and investing money.”
She added: “The chancellor explained how long it would take for the economy to recover. Why would a tax relief therefore not mirror that? Why would social enterprises and charities only be given two years?”
Beyond the extension, SITR needed to be reformed and improved, Mills said.
She would like to see SITR open to structures and trading areas such as community energy or care homes, which are not currently included in the scheme. “SITR could really support the ‘building back better’ [government] agenda.” she said. “Many more social enterprises and charities could benefit from the tax relief.”
Today’s announcement was a good first step, she added, but the campaign for SITR didn’t stop there. “What we now need to do is improve and extend it.”
Paul Handford, head of communications at social lender Resonance, which has invested in a number of social enterprises through its SITR fund, said he welcomed the news and said that Resonance was now looking at how to make the most of the scheme’s short extension. While it meant that the investor was able to carry on deploying capital in existing funds, the team were looking at the funds and products that they could offer in light of the two-year extension, he said.
Two years is really not long enough if you look at the cycle of raising and investing money
SITR is the only tax relief scheme that incentivises private investment into social enterprises and charities, and allows investment in both shares and loans. Mainstream business tax relief schemes – which are designed to incentivise individuals to invest in companies that are not listed on the stock market – do not apply to social enterprises and charities.
Social enterprises will be also eligible to access ‘restart grants” of up to £6,000 for non-essential businesses and up to £18,000 for hospitality and leisure, which will have to wait longer before being allowed to reopen after the ongoing lockdown.
New Covid-19 loan scheme launched
Today the chancellor also launched the Recovery Loan Scheme which will allow all businesses to access loans of between £25,000 and £10m which will be guaranteed at 80% by the government.
The new policy will replace the Coronavirus Business Interruption Loan Scheme (CBILS) which provided loans of up to £5m to small and medium-sized businesses affected by Covid-19, guaranteed by the government at 80%, as well as Bounce Back Loans, which enabled smaller enterprises to access loans of a maximum of £50,000 guaranteed by the state at 100%.
More than £18m in CBILS loans were distributed to social enterprises and charities through a bespoke fund managed by Social Investment Business and backed by Big Society Capital. Stephen Muers, interim CEO at BSC, said the scheme had “worked quite well” and was more successful than other previous government-guaranteed loan schemes, although it only applied to organisations that were deemed “credit-worthy” and did not cover the whole sector.
The new scheme is open to all businesses.
“We welcome the introduction of the new Recovery Loan Scheme programme,” Muers (pictured) said. “The UK’s 100,000 social enterprises employ two million people and contribute £60bn to the UK economy, so it is vital that this new scheme supports them in accessing the financial support they need to get through the pandemic.
"We look forward to seeing more detail on the policy and how it might support frontline organisations in creating impact for their communities amidst highly challenging circumstances.”
O’Brien said the minimum loan amount of £25,000 may need to be “slightly smaller” to make sure it could benefit micro enterprises. “We might get back to the government around that,” he added.
Furlough scheme extended
The chancellor announced an extension of the government’s Coronavirus Job Retention Scheme in its current form until the end of June, after which it will be gradually scaled back until the end of September 2021. Under the UK’s coronavirus job retention – or furlough – scheme, the government has paid up to 80% of employees’ wages – up to a maximum of £2,500 per month – if they could not work because of the Covid-19 lockdown.
The furlough scheme has already proved a lifeline for social enterprises. When Pioneers Post interviewed the winners of our NatWest SE100 awards in May 2020, most of them had made use of it.
And when Colin Downie, a director at global social enterprise the WildHearts Group spoke to Pioneers Post in December, he said: “If it wasn’t for [the furlough scheme], we would have made redundancies.”
Community Ownership Fund
The government will introduce next summer a £150m Community Ownership Fund to enable community groups to buy local assets such as pubs or cultural venues, and run them as community-owned businesses. They will be able to bid for up to £250,000 matched funding – which means the government will be matching the amount of the money that the community will be able to put in. The measure was part of the government’s 2019 election manifesto.
Rose Marley (pictured), CEO of Co-operatives UK, said she was pleased by the announcement. When a community space is going into disrepair, “the fact that there's a fund that will enable you to take control and ownership of this as a collective and as a co-operative, it's really exciting.”
She said that she did not oppose match funding in principle, as it enabled the community to demonstrate its will to take over a local asset. However, some commentators have raised concerns that poorer areas will struggle more than others to raise funding locally.
A short-term outlook
This year’s budget, aside from the SITR extension, didn’t present any measures specifically targeted to social enterprises; instead they will benefit from general business support, Richard Hazenberg, director the Institute for Social Innovation and Impact at the University of Northampton, said.
There was a need, he added, to make sure social enterprises were at the heart of the levelling up pathway which the government had only started to outline.
SEUK’s O’Brien said the budget seemed to focus mostly at getting the country through the ongoing crisis.
“This is very much a Covid-focused budget,” he said. “Many social enterprises might be saying, thank you for helping us with Covid – but what does this mean going forward?”
The next budget would be crucial for the long-term vision, he added. “We're still waiting to see what ‘build back better’ means in practice.”
- The minister for civil society Diana Barran declined to comment. The shadow minister for civil society, Rachael Maskell, did not immediately respond to our requests for comment.
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