Danny Kruger: £7.6bn new funding is major opportunity for UK social enterprises
The Shared Prosperity Fund, the Levelling Up Fund, the National Fund and soon to be released dormant assets should be significant funding opportunities for UK social enterprises, according to Conservative MP and civil society review author Danny Kruger.
Together the funds represent more than £7.6bn of funding due to be released over the next few years.
Kruger was speaking on Thursday 13 May at 10xRF, a series of online events run by Responsible Finance which represents the UK’s community development finance institutions and credit unions.
He said: “We have an opportunity now as we are redesigning the support which places and social causes get as we leave the EU.”
We have an opportunity now as we are redesigning the support which social causes get as we leave the EU
Kruger highlighted the Shared Prosperity Fund, which will eventually replace EU structural funding in the UK, and the Levelling Up Fund, which was announced at the 2020 Spending Review.
He said there was “an opportunity for the social enterprise sector to be major beneficiaries of these funds”.
Later, Kruger mentioned new funds due to come from unused bank accounts and insurance policies following the Dormant Assets Bill, which was mentioned in this week’s Queen’s Speech. The new legislation is expected to unlock around £880m for social and environmental initiatives across the UK.
He also flagged the National Fund, a charity established in 1928 with the aim of paying off the UK’s national debt after the first world war. It holds £500m, and its future is currently subject to legal proceedings.
The Devizes MP previously worked as prime minister Boris Johnson’s political secretary. In June 2020, Johnson asked Kruger for proposals to “sustain the community spirit” of lockdown. The result was Levelling up our Communities: Proposals for a new social covenant. Earlier this year, Kruger set up the New Social Covenant Unit, a think tank focusing on strengthening “families, communities, and the nation”. Kruger is also a former speechwriter for David Cameron when he was leader of the opposition. After co-founding and running the crime prevention charity Only Connect, Kruger returned to politics to advise the Department for Digital, Culture, Media and Sport as ‘civil society tzar’ helping develop its civil society strategy in 2018.
Funds for UK social enterprises to watch
Value: £1.5bn a year
Expected to launch in 2022, this will replace the EU Structural Funds that the UK received to support economic development and reduce inequality. Its aim is to “help level up and create opportunity across the UK for people and places”.
Value: £4.8bn between 2020-21 and 2024-25
Announced at the UK government spending review 2020, this funds local infrastructure, particularly in ex-industrial areas, deprived towns and coastal communities.
Value: around £880m, timescale to be confirmed
The Dormant Assets Bill will expand the existing UK Dormant Assets Scheme to include unused funding from insurance, pensions, investment and other accounts. It is expected that the funding will have a social and environmental focus.
The fate of the charity’s assets, which were initially focused on paying off the UK’s national debt, are currently subject to legal proceedings. (According to a judgement made in November 2020, the national debt at 31 July 2020 stood at £2,004bn, and the value of the National Fund was £512.2m, representing approximately 0.026% of the national debt.)
During his conversation with Responsible Finance CEO Theodora Hadjimichael, Kruger emphasised how he believed social enterprises – including community development finance institutions, which are social enterprises themselves – could help to regenerate communities.
“Social enterprises have such a good record in investing in people, and circulating the profits locally,” he said. “They have a more patient approach to internal investment and they create a social infrastructure that makes places livable...They are fixing markets from within.”
Investing in social enterprises is “a good use of money”, he added. “They all earn returns over the long term and create an economy that we all want to be part of.”
Kruger called for more decentralisation within the UK, pointing out that the low number of very big banks meant that small businesses had a difficult time raising finance during the pandemic.
Treasury ministers are very supportive to this agenda but they are very distracted and have to work in our very centralised system
He added that he wanted to see local and regional distribution of these funds. “I hope that the government is prepared to be innovative with those pots and distribute the allocation of them to intermediaries without too much control from the centre,” he said.
The current government was sympathetic to social enterprises and “ignorance over social lending” was beginning to change, said Kruger.
“You have got a bunch of treasury ministers who are very supportive to this agenda but they are very distracted and have to work in our very centralised system. It’s a slow process.”
Kruger also spoke about Social Investment Tax Relief (SITR). He joined the campaign earlier this year for the financial incentive to be extended beyond its scheduled end date in April 2021. The UK chancellor Rishi Sunak announced in the 2021 Budget that SITR would be extended for two years, rather than the five years which campaigners had hoped for.
Kruger said: “It’s a shame that it’s only been extended for two years. We are going to have to continue to champion it to government... Two years isn’t enough for that investor confidence to build.”
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