The Social Sector is NOT the Third Sector

The Social Sector is NOT the Third Sector
Laurence Demarco
21.09.12

Big Society Capital (BSC) – the Govt’s wholesale social investment bank – made a long awaited announcement this week – about how its funds are to be distributed – which merits our attention.  BSC’s vision for the UK third sector – is clearly set out in this piece for the Stanford Review early this year by Ronald Cohen. See, https://senscot.net/?viewid=12416   He describes a sector marketised – to attract investment from the capital markets – into what he calls ‘an emerging social investment asset class’.
 
This BSC model of social investment has been challenged by Senscot, and other commentators, for three main reasons. 

The first is a moral one – that certain human and social functions should not be for sale – that markets will not ‘honour’ them.  Much third sector activity comes into this category.
 
The second criticism is that the BSC model has nothing to offer the majority of third sector organisations – small and local – which are unlikely to ever generate any significant surplus from their operations.
 
The third objection to the BSC model is a more pragmatic and immediate one; that there simply aren’t the social enterprises, willing or able, to reward investors sufficiently; and that this will be used as an excuse to extend investment to private businesses – by blurring the definition of social enterprise.
 
This week’s announcement has no bearing on the first two issues above; BSC is run by bankers – impervious to the moral argument; and the drive to marketise our sector remains on track.  But to our third point – the statement speaks directly – our fears are realised – BSC investment is to be opened to ‘for-profit’ businesses.
 
The BSC statement reads “First and foremost we will seek to ensure that the vast majority of the investments made by the intermediaries we support will go to regulated social sector organisations. We believe, however, that it would be wrong to completely exclude companies that seek to create significant social value but have organised themselves as for-profit companies.”  See full statement, https://senscot.net/?viewid=12750
 
As their statement acknowledges – the substantial public funding which BSC is trusted to invest – is obliged, by statute, to go to third sector organisations.  Everyone knows that the third sector, by definition, cannot include private business; so BSC has invented a new category called the ‘social sector’ – which they are free to define as they wish.
 
The explicit inclusion of ‘for-profit’ enterprise into their new category is fraught with difficulties.  Those of us who count ourselves part of the third sector – who cherish its core values – are already aware that there are those who ‘wear our colours’ for private gain.  This BSC decision blurs the boundaries – probably its intention.
 
Commentators, like Senscot, will continue to unpick the detail of BSCs definition of its new ‘social sector’; but it is already clear that it is – in the most fundamental way – different from the third sector.  We must ensure that the terms are never conflated – because they mean different things.