Budget highs and lows
I had a moment of realisation following the Chancellor’s Spring Budget announcement to extend Social Investment Tax Relief (SITR) until April 2023. There was a sense of elation and delight that our hard work campaigning across the sector, was worth it. What I learned is that you need to take the small wins and enjoy the moment because no sooner than they have happened, the restless desire for change kicks in and the win was just the starting point.
In a budget with so much talk about business, recovery, the economy and honesty, there was not one mention of poverty, health and social care or dedicated support for charities who need help right now. So, I know that the extension of a relatively niche tax relief for two years might seem somewhat insignificant to some and not the cause for celebration – but it does matter. Although it is a small win, it is going to make a big difference, and this is why.
The power of together
The win helped restore some of my faith in democracy. That if you work hard enough and can present a clear economic and social argument, backed up by both data and stories, you can break through (as you may guess I am the eternal optimist.)
The #SaveSITR campaign reached almost four million people on social media, enlisted the support of over 35 MPs from across all parties and put the social enterprises, charities, and community businesses at the heart. This was never about us, but about the organisations for whom without access to the type of investment SITR facilitates; community pubs, shops, lidos, cinemas, sports facilities, education and online learning would not exist.
What our campaign demonstrated is the power of together where many organisations and individuals played their part. We worked alongside Social Enterprise UK, Co-operatives UK and Resonance daily to amplify our message and reach. Unwavering support from Social Investment Scotland, Social Business Wales, Social Enterprise Scotland, Social Enterprise Northern Ireland, the CIC Association, The Community Shares Company, Triodos, Ed Mayo CEO at Pilotlight and more (I can only apologise as I know I will have missed someone important out). This was an outcome of teamwork, pooled resources, sharing skills and ultimately, leaving no stone unturned. I enjoyed this part enormously, proving we can work together and look forward to doing more of it in the future.
#SaveSITR the beginning not the end
Saving SITR was never the goal, it was a simple call to action. Recognising that losing any tool which allows social enterprises, charities and community businesses access to capital at such a vital time of needing to #BuildBackBetter was unacceptable. Realising that starting from scratch to recreate a tax relief for this purpose would have been a step too far. An extension of two years is a positive move in the right direction, but it is an extension and simplification beyond that which is the outcome we need to see.
We are under no illusion that two years of more of the same will unlock the potential that SITR has. At a time when private wealth has grown exponentially during the pandemic, we need to bring private capital to invest patiently in social enterprises, charities, and community businesses. This budget set the scene to challenge and champion how SITR can be used to create much greater social and environmental impact.
We look forward to the 23 March when the responses to the SITR consultation are finally published in restarting the conversations about:
- how extending trading activity eligibility to community energy can help the government achieve their budget commitment to become carbon net zero.
- how SITR could be used for long overdue investment into health and social care and in particular care homes that have played such a fundamental role during the pandemic
- how SITR could become a key tool in raising investment into community run services where business models are challenging. Or, where private business cannot work and where licensing or leasing assets as part of their revenue streams is an essential part of making a community organisation sustainable. This is the very essence of what the tax relief is designed to do and is definitively high risk
There were other announcements in today’s budget which are also welcome. The Community Ownership Fund will provide much-needed grant support to match community investment; however, at the same time it highlights a lack of alignment between government departments. If only MHCLG, DCMS and HMT had spotted the opportunity to ensure that all community matched investment was eligible for SITR. It speaks to why the expertise from our friends and colleagues at Power to Change, Plunkett Foundation and The Community Shares Unit need to be involved in creating and shaping such policies. Rest assured we will be raising this opportunity to see if it can be realised.
On the surface of it, a two-year extension may seem great but realistically we know that it isn’t enough. Just ask our colleagues at Resonance, Triodos or Social Investment Scotland how long it takes to fundraise, to identify a pipeline of deals and to deploy. Back in 2019 when the call for evidence was launched, two years might have been sufficient. Yet, with only four weeks left on the current Sunset Clause in the SITR legislation set to expire, the marker has virtually come to a stop. SITR has never had the certainty to gain traction. Five years would have been better, and permanency would be best. The Chancellor set out his expectations for how long the economy would take to recover framing this until 2025 so it seems inequitable to allow SITR less time.
SITR – a new hope
My biggest question is, why does SITR remain restricted by so many of the EIS conditions, a legacy of its creation? Historically, the potential for tax avoidance and limited resources have been highlighted as a key concern in opening up SITR for greater use, with the announcement of the new HMRC Taskforce this should no longer be a barrier. If then, this tax subsidy is to incentivise investment into asset locked bodies who by their very governance are not for private gain, then all trading activity (excluding those that are unethical e.g., tobacco, arms, gambling etc) should be eligible. We want investment to support sustainable and impactful enterprises who create social and environmental impact, where improving lives, not private wealth is the objective.
In summary, the extension of SITR was a good day but tomorrow is already here and there is still so much more to do.
Update - response to the Finance Bill
The short-term nature of the SITR 2-year extension could significantly undermine the ambition to see the tax relief reach it’s full potential. We believed that we had an opportunity to influence the Finance Bill to increase the extension to 5 years. As the bill reached committee stage at the end of April, it was decided that SITR would not be extended to 5 years. The Government argued that the performance of SITR to date, raising £11.2m in investment, was lower than anticipated.
We do however, now have an opportunity to consider what a reformed SITR should look like.
So, whilst it’s not the outcome we hoped for, we now have a clear path forward and we will:
- Work collaboratively and gather experience and insight cross-sector to propose what an alternative tax relief could look like.
- Support fund managers and wealth advisors to deploy as much SITR capital as possible over the next two years, whilst we engage and continue to raise awareness across the social sector.
- Continue to champion SITR and support organisations who are looking to raise investment, often in rural and remote communities, to support the Levelling Up agenda.