Social enterprise leaders have welcomed the chancellor's budget announcement of a new tax relief to encourage private investment in social enterprise. According to the budget 'red book', the tax relief will complement the government's other recent measures to help social enterprises access the capital they need, such as the launch in 2012 of Big Society Capital. The government will consult formally on the details of the relief by this summer and the relief will be introduced in the finance bill in 2014. The red book noted that "social enterprises play an important role in growing the economy, reforming public services and promoting social justice."
Responding to the announcement Peter Holbrook, chief executive of Social Enterprise UK said:
"We wholly welcome the Chancellor's announcement in today's budget - growing the UK's social investment market is crucial as traditional sources of finance continue to dwindle in the economic downturn. Capital needs to be raised in new ways to support social enterprises working to address the country's social and green issues - levering in private investment is crucial.
"We're delighted that the Treasury has listened to the social enterprise sector which came together to campaign on this, and look forward to working with Government on the detail in advance of the tax incentives being introduced. Access to finance is the biggest barrier for our members keen to grow their businesses and have a greater impact.
"With support from the Treasury the UK's social enterprise sector is much stronger, and can move forward with confidence that it is recognised for the economic and social value it delivers. Despite the recession social enterprises are outstripping mainstream businesses for confidence and growth - 58% of social enterprises grew their business last year compared to 28% of SMEs.
"The UK is at the forefront of social investment and we've already got in place Big Society Capital, the world's first social investment bank with £600million to lend. Our peers in other countries, particularly the United States, are very interested in the progress we're making.
"We recognise that social investment is not a panacea for all social enterprises, but it's an important piece of the jigsaw. We also need to see full implementation of the social value act to ensure government spending works as hard as it can for communities – social enterprises are well placed to win and deliver public sector contracts."
Nick O'Donohoe, chief executive of Big Society Capital said: "The chancellor has today given a very welcome commitment to make changes to the tax system that we believe can stimulate significant additional investment in social enterprises.
"The government has shown a consistent commitment to developing a vibrant social investment market in the UK and this latest measure represents a considerable boost for social entrepreneurs and community organisations, up and down the country, that are looking to raise capital. The chancellor is rightly addressing the anomaly that there are tax breaks for many areas of risk capital investment, and tax breaks for charitable donations, but no tax breaks for those who want to invest risk capital in business whose primary aim is to improve society." Research by Big Society Capital published earlier this month suggested an extra £480m could be attracted into the social investment market if social investors were able to access existing tax reliefs.
Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations (NCVO), said: "Charities run expert, high quality services, but often struggle to find the finances they need to expand their work. Social investment is an increasingly important way for charities to grow. We've long argued that levelling the tax playing field to ensure that social investments are just as attractive as other investments is a crucial part of supporting this burgeoning market. This consultation is a very welcome step and we look forward to contributing."
What's your reaction to the budget, and its impact on social enterprises? Leave a comment below.
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