The very social fabric of our country is being tested by COVID-19 and social enterprises are on the frontline responding to the crisis, from supporting the most vulnerable in communities by delivering food and medicine, to tackling domestic violence. They will also be on the frontline of building back better in the aftermath.
It is clear that we need far greater flows of private capital for disadvantaged places and causes. This is why, alongside others, we believe urgent action is needed to extend Social Investment Tax Relief so that it remains a valuable tool in unlocking capital for social enterprises and charities.
SITR was established to encourage individuals to invest into social enterprises and charities. Unlike more commercial businesses, many social enterprises and charities cannot access schemes such as EIS and SEIS so it was designed to help level the playing field.
In its relatively short lifetime, it has had success in unlocking private capital for organisations in some of the most disadvantaged areas. And this has happened during an uncertain policy environment, with the 2016 EU membership referendum, 2017 and 2019 general elections and COVID-19 inadvertently prolonging policy decisions at key moments in SITR’s trajectory.
Due to a sunset clause in its legislation SITR may be retired by the Government in April 2021. This uncertainty is effectively blocking the flow of capital into social enterprises and charities now, given the deployment timing. The Government has an opportunity to end this uncertainty by extending SITR to April 2023.
Whilst improvements can certainly be made so SITR is more effective or a replacement developed that is even more ambitious, this will take time. Most financial advisers and wealth managers require a track record of 3-5 years before advising clients on a product and we are just getting there now, with Social Investment Scotland and Resonance laying the foundations for others to follow. So starting from scratch would be a mistake. Fund managers would have to begin again, 3-5 years away from meaningfully engaging wealth managers and financial advisers at large.
We stand ready to assist where helpful in the process of creating a more ambitious relief to help tackle the challenges of our time. But we are calling on the Government to act now to prevent the closure of SITR without an effective replacement.
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