In the UK, there was much interest ahead of the Chancellor George Osborne’s Autumn Statement yesterday. How would the unexpected upturn in the economy affect public spending? Amongst social enterprise aficionados and civil society organisations, however, all eyes were on the shape of the proposed Social Investment Tax Relief (SITR).
SITR to become a reality
The SITR has been grinding through the Whitehall machinery all year, and it is set to become a reality. However, while there was some mention of the SITR in his Statement, it emerged that the Treasury will be releasing a more detailed response to the public consultation it conducted next Tuesday instead, alongside a response from the Community Interest Company (CIC) Regulator too. All that was confirmed in George Osborne’s speech was a desire to push through a tax relief “to encourage individuals to invest in social organisations” by April 2014.
A road map for social investment
Despite the tepidity of the SITR announcement, there were plenty of other announcements intended to stimulate and support the UK social economy. These include plans to provide a tax relief on investment in social impact bonds, where the “special purpose vehicle” is structured as a company limited by shares.
The government also announced plans to publish a road map for social investment in January 2014, aimed at improving the tax and legislative landscape. This will set out the next steps for a larger tax relief scheme, plus examine ways to support indirect investments into social organisations. The Autumn Statement also alluded to the anticipated changes in regulations for CICs, with the premise of making them more attractive to investors and social organisations alike.
The news received a mixed reaction from civil society organisations. Social finance heavyweights Sir Ronald Cohen and Nick O’Donohoe largely welcomed the news as a positive step forward, though the latter added a note of caution that the final design of the SITR needs to address the concerns expressed through the consultation if it is going to be successful.
Elsewhere the Social Economy Alliance (SEA), made up of over 20 of UK’s leading social sector organisations campaigning to support Britain’s social economy, commented that “co-operative and social enterprises have been resilient and have outstripped ordinary business for growth and innovation. Alternative banks have shown better returns,” meaning that, “the Government should now show its full support to the UK’s emerging socially-driven economy.”
The SEA outlined three key areas where the social economy could benefit from and support other measures announced in the Autumn Statement, including housing, public services and the proposed freeze on business rates.
The Chancellor outlined plans to cap inflation increases in business rates to 2 percent from next April (effectively a cut in real terms) and make them payable over 12 months for the first time. He also announced plans to introduce a “reoccupation relief” worth £1,000 for every new retail premise opened. The hope in the sector is that this will provide opportunities for civil society organisations to increase their presence on the High Street.
A final word
The last announcement George Osborne made was the scrapping of national insurance contributions for businesses employing young people, which could be worth up to £1,000 for every applicable employee – though it is not yet clear over what timeframe such as saving could be made. It is hoped that this will make a significant dent in to the youth unemployment crisis. And with a substantial proportion of social enterprises already providing employment opportunities for young people, it is possible that this announcement will have considerable benefits for them too.
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