‘Yet again the UK social sector has been locked out of finance that could transform our work’

A year and a half into a Labour government and we’ve seen a huge array of strategies, covenants, new offices, missions and partnerships. So many and various are these announcements that it’s become hard to keep track of the sector CEOs’ LinkedIn posts welcoming each new initiative. Lots of these have been backed by significant finance and they aim to address areas and causes that have long been out of favour and are in desperate need of support.

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Despite these flagship projects, however, time and time again, seemingly through ignorance or oversight, the social economy gets locked out of the largest cost cutting measures, incentives, subsidies and public finance schemes.  

Time and time again, seemingly through ignorance or oversight, the social economy gets locked out of the largest cost cutting measures, incentives, subsidies and public finance schemes

The social sector has a huge impact on the lives of everyday people, and potential to grow and scale in line with the government’s missions – we don’t need special treatment or new special funding, we just need access to finance on the same terms as everyone else. 

The National Wealth Fund narrows its focus

Last week, the National Wealth Fund (NWF) launched its new five-year strategic plan, Unlocking the UK’s Future, and it’s the same story again: an overlooked social sector locked out of finance that could transform our work. The NWF was launched in 2024 as a new public finance institution by the chancellor Rachel Reeves , and was capitalised with £27.8bn. (Public finance institutions are government-owned bodies that provide finance with an intention to crowd in private investment, affectionately known as ‘PuFIns’.)

Having taken time to deploy at the pace it intended, the NWF’s solution is now to narrow its focus, look to larger ticket sizes, deprioritise investing in funds and focus on just a handful of regions with targeted settlements – in the hope that exclusions will lead to more money out the door faster.  

It seems the impact assessment didn’t consider the impact economy

At Social Investment Business (SIB) we’ve been meeting with NWF over the past year, finding many areas of strategic alignment and exploring how we could deploy their finance to community organisations, charities and social enterprises in support of the government’s growth and clean energy missions, but the new strategy firmly closes that door. Not by intention or design, but by oversight. A series of structural restrictions and changes that mean the finance becomes inaccessible. It seems the impact assessment didn’t consider the impact economy.

A recurring pattern

It’s a pattern we’ve seen across the past 18 months: Ending the Public Sector Decarbonisation Scheme, finance that could have retrofitted the buildings out of which neighbourhood services are delivered, those services government say they want to support; an extended the Boiler Upgrade Scheme which continued to lock out larger community spaces from grants for heat pumps; the latest dormant assets settlement with a much smaller proportion for social investment; and an Autumn Budget that celebrated slashing energy bills – but which excluded the charity sector from those reforms, instead burdening them with a hefty new electricity levy to pay for Sizewell C nuclear power station.

The Labour government is saying and doing positive things for the sector. We’ve seen the launch of the Office for the Impact Economy and the Civil Society Covenant, and significant capital funding through Pride in Place, investment in Neighbourhood Health Centres and the promise of further investment in youth clubs, building on SIB’s work with the Youth Investment Fund. We’ve also seen the announcement of the Better Futures Fund – the largest social outcomes fund in the world. But all of these are restricted by theme or place, while finance from public finance institutions like NWF remains inaccessible or – counter to government promises – has become even more so under their watch. 

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We now have a situation where community buildings are some of the least efficient, poorly insulated buildings in the country. Social sector organisations in the equivalent of fuel poverty are paying as much as 50% of their entire budgets on utility bills, but without access to the finance needed to retrofit at the pace of industry, housing or the public sector. 

The government’s Warm Homes Plan, published in January, was particularly vague about eligibility for the sector. The new Warm Homes Fund, and the innovative finance that will be developed, all lacked detail on what buildings could access the finance. This lack of clarity at least leaves the door ajar. In a Commons debate following its publication, secretary of state for energy security and net zero Ed Miliband did suggest the government might consider non-domestic buildings so, for now, we await more details. 

This persistent pattern of exclusion by oversight must be addressed. The solutions are there, it just needs intentionality

There is much to be celebrated, and significant progress has been made with the government on the role of social investment and partnership with the social sector, but this persistent pattern of exclusion by oversight must be addressed. The solutions are there, it just needs intentionality. 

We don’t need special treatment – in fact we’d like to stop being especially excluded. It’s time for the government, and its public finance institutions, to fully recognise the sector and simply provide us access to the money on the same terms as everyone else.

Header photo: The UK's chancellor, Rachel Reeves, delivers a speech on economic growth in January in Oxford. Picture by Kirsty O’Connor / Treasury, published under a Creative Commons licence.