What the UK impact economy can expect from Labour’s new government
During the recent UK general election campaign, social economy leaders have stressed how, and why, any new government should partner with the impact sector to deliver on their pledges. Now that Labour is at the helm, what can we expect from them?
The Labour government’s plan to “rebuild the country” after 14 years in opposition revolves around five key missions – driving economic growth, developing clean energy, reducing crime, improving the education system, and saving the health service. With not much money around to deliver its pledges, the government will need to find allies – and the impact economy could be an obvious one. We ask key actors in the sector what they expect the government to do.
1) Using impact finance to unlock private capital for public good
The Labour party spent much of the campaign arguing that the Conservatives “crashed the economy” and that not much money was left to “rebuild the country” as a result. Now, the government is trying hard to find the funding it needs to deliver its pledges.
While not explicitly mentioned by the government, impact investing has been put forward by some senior figures in the Labour party as a solution to help ministers find the resources they’re lacking.
Last week, Stephen Timms (pictured) – a former chief secretary to the Treasury and newly-appointed minister of state at the Department of Work and Pensions – called for an upcoming Labour government to “forge a strategic partnership with the impact economy” and for the creation of an Office for the Impact Economy. His plan: to mobilise impact finance and purpose-driven business to help the government deliver its missions.
Tessa Godley, policy and advocacy director at UK social investment wholesaler Better Society Capital, tells Pioneers Post she welcomes Timms’ recognition that the impact economy is “a huge opportunity for the new government to grasp”.
She suggests the creation of a taskforce, as a precursor to the Office for the Impact Economy, “to think through how the machinery of government and policy can be best set up to mobilise the financial resources, talent, and innovation of the impact economy and accelerate progress across the [government’s] five missions”.
Another high-profile backing of impact finance came from former Labour PM Gordon Brown – thought to still have the ear of prime minister Keir Starmer. In a Guardian article published last month, Brown highlights how social outcomes contracts – a contract for the delivery of public services, where the money is provided upfront by impact investors and the government pays it back only if certain social outcomes have been met – could help plug a lack of funding.
- Read more: Impact 101: What is an outcomes fund?
Seb Elsworth, CEO of social investor Access, the Foundation for Social Investment, says that building on the ideas that emerged during the campaign, “we expect the government to look closely at how to channel more private, philanthropic and public money into investments that benefit our communities and improve people’s lives.”
He urges the government to “move quickly on confirming the next wave of dormant asset funding” as an “early opportunity… to jump-start the flow of finance to vital community organisations”.
Funding from dormant assets (money left unused in banks or financial securities where the owner cannot be found) has been used to fund social investment in the UK and a large share of it is yet to be allocated.
2) Supporting diverse business models
To the disappointment of some leading actors in the impact economy, the Labour party’s campaign manifesto made no mention of social enterprises or social investment – with social entrepreneur Bayo Adelaja describing the omission as “downright insulting”.
The document, however, said a Labour government would seek to support diverse business models such as co-operatives and mutuals – which could be an opportunity for social enterprises to play a role, too.
Emily Darko (pictured), director of policy and research at national membership body Social Enterprise UK, says: “Labour has committed explicitly to support diverse business models – which includes social enterprise, so it’s hard to see how this mandate can be delivered without the business department taking on some policy responsibility for our sector alongside co-operatives and mutuals.”
Many MPs showed an understanding of doing business differently, Darko argues, including the new secretary of state for Business and Trade, Jonathan Reynolds, who is a Labour-Co-op party member.
Andrew O’Brien, director of policy and impact at think-tank Demos, says he expects that “Labour is going to try and reach out to the sector… because ultimately, it doesn't have enough resources to deliver its missions on its own, so it needs other actors behind it.”
3) Drawing upon the knowledge of 'progressive business leaders'
Several figures in the impact sector see a positive sign in the appointment of James Timpson – CEO of Timpson Group, known for employing ex-convicts and running pre-employment training programmes in prisons – as minister for Prisons, Parole and Probation.
Above: Timspson practises ‘upside-down management’ – giving customer-facing staff the authority to change prices, among other things – and refers to its people as ‘colleagues’ rather than employees (credit: Timpson).
Social Enterprise UK’s Darko says that with a Minister for Prisons “with direct experience running a business that employs ex-offenders, this government can help realise the even greater potential of businesses that deliver for people and the planet beyond only profit.”
Chris Turner, campaign director of the Better Business Act and executive director of B Lab UK, says the appointment was “a good early sign that Keir Starmer is serious about leveraging the experience and ambition of progressive business leaders in achieving its aims.”
Examples of progressive businesses for the government to learn from aren’t lacking, according to Turner. He says: “Our 2,000-strong community of UK B Corps are already proving what’s possible when businesses pursue positive impact... The new government should look at how B Corps and other purposeful business models are outperforming traditional businesses on a host of measures.”
4) Listening to impact champions in government
O’Brien welcomes the appointment of Lisa Nandy (pictured) as secretary of state for Culture, Media and Sport (DCMS), due to her experience as former shadow charities minister. He adds he thinks she is “one of the government’s best communicators”.
Timms and Timpson, both in ministerial roles, are also among the most obvious champions of business and finance for good, while Reynolds, a Co-op Party member, brings some understanding of alternative business models to the Cabinet table.
A big unknown remains, however: the new minister for Civil Society, which currently oversees social enterprise and social investment, is yet to be named at the time of writing. Former Civil Society ministers have in the past played an important role in supporting the sector – Nick Hurd, in post between 2010 and 2014, has been a champion of the impact economy, overseeing the birth of Big Society Capital in 2012 and now chair of global impact investment network GSG Impact.
5) Using the social economy as a tool – but perhaps not a philosophy
Many in the impact economy are hopeful that Labour will take on the idea of business redesign to advance their agenda. Economist Kate Raworth, who advocates for a complete redesign of the economy that works for all, shared on social media that she gave Keir Starmer her book, Doughnut Economics, just days before he was elected.
But others suggest Labour has shown little interest in business redesign at this stage. Demos’s Andrew O’Brien observes that Labour’s campaign has revealed a “very conventional” idea of the economy. The party has so far talked about being pro-business, as a driver of growth and wealth creation, but hasn’t mentioned the need to change it. “[It seems that] they’re not buying into it,” O’Brien says.
If the sector wants to be part of the conversation it needs to speak the language of missions
He adds: “Labour is going to be ruthlessly focused on the missions in government. So whilst there may be sympathy for the sector, it does not see growing the sector as one of its priorities. It will support the sector to the extent that it is the best way to deliver the missions.
“If the sector wants to be part of the conversation it needs to speak the language of missions and not get offended if the conversation is relatively instrumental to start with.
“Hopefully when the government sees the brilliance of the sector in practice, it will recognise that it needs to see it as one of our future strengths.”
Image credits: portraits of Lisa Nandy and Stephen Timms – UK Parliament.
Top image: Keir Starmer speaks at his first press conference as Prime Minister. Picture by Simon Dawson / No 10 Downing Street.
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