The difficult economic climate has created a need for community enterprises to raise their own finance and shares and bonds are seen as the way forward.
The newly announced community enterprise strategic framework will help more local groups set up successful local social enterprises and it sets out proposals for community shares that would allow local people to raise funds to maintain or buy a stake in important community services like the village shop or local pub to ensure its survival. A football supporters club could form a co-operative to take over their team, giving the supporters a chance to purchase community shares and so have a say in its future.
A pilot scheme to explore the use of Social Impact Bonds as a new way of funding the third sector to provide services is being piloted in Leeds. This has the potential to radically change how government funds the third sector, by rewarding social investors for work which reduces future social costs. A feature of the bonds is that there is a commitment by national government to make payments linked to outcomes achieved in improving the lives of the group, for example, lower numbers in prison, and lower benefits payments.
There is concern that because the public sector is facing a period of constrained expenditure and with philanthropic donations slowing, there could be a further decline in contracts secured by the third sector, unless finance can be raised in other ways.
Communities minister John Denham said: “Councils and companies are short changing their communities socially if they don’t look beyond the price tag to deliver the current services at the lowest possible cost and consider the many additional benefits third sector providers can bring such as jobs for the workless that can save even more money in the long run. The third sector has a real role to play in delivering services with positive social outcomes and efficiencies if the barriers can be removed, which is why we have published a new framework.”