How close is too close? The new UK Conservative government has cut the Office of the Third Sector and is changing how social enterprises in the UK gain access to financing.

The Office of the Third Sector was located in the Cabinet Office and had close attention of Labour who created strategies for driving capital and building skills towards social enterprise. David Cameron's change in direction is a clear signal that being too close to the seat of political power can thwart a movement as quickly as it can catalyze one.

Since the launch of the Social Investment Task Force in 2000, the UK has embraced the social innovation movement with wide and deep networks of social entrepreneurs, new models of social finance, innovative social enterprises with strong central government support and investment. Read the UK Policy Tour on Social Innovation and Social Finance to learn about the UK landscape. You can also read the recently launched Social Investment Ten Years On final report from the Social Investment Task Force.

The Office of the Third Sector has been replaced by the Office of Civil Society, which is now responsible for social enterprises. Nick Hurd, the new Minister of Civil Society at the parliamentary secretary level is undertaking a review of organizations that have been part of the third sector network.

Future Builders, managed by Social Investment Business is now eliminated. It was a £200m fund to provide loan financing, often combined with grants and professional support, to third sector organizations to help them bid for, win and deliver public service contracts. Futurebuilders revenue will be realigned to provide grants that must be matched by non-government funds to social enterprises in economically poor areas. There are concerns that Capacity Builders (a government agency providing professional support to social enterprises, charities and non-profits) may also be cut or scaled down.

These cuts are part of a broader sweep from the Chancellor. Recently they asked departments to come up with budgets that reflected a 25%-40% reduction in spending.

The election of a new Conservative government led by David Cameron on May 6th instigated the Tory’s Big Society Strategy. Of particular interest is the government’s commitment to building a Big Society Bank (formerly known as the wholesale bank) funded by unclaimed assets to create innovative products such as the Social Impact Bond and to provide advisory services and small amounts of "working capital" for social enterprise.

The Cabinet Office's Big Society Strategy notes that social enterprises have not been adequately encouraged to develop their own diverse sources of revenue. The government recognizes the value of social enterprise and wants to ensure that start-up financing is available for social enterprises to bid for government and procurement contracts with a payment-by-results framework.

All this is a lot of change for the social enterprise scene in the UK! Whether these changes will spur more resilient initiatives or instead starve new growth is yet to be seen. The big question is will these changes in the UK affect our momentum in Canada?

This is the first blog in a series on key international trends that are changing the landscape of social finance. The series will take a big picture look at shifts and developments on the world landscape that will shape our strategic thinking in Canada.

Photo Credit: http://www.flickr.com/photos/62337512@N00/3902764265/

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