Time for UnLtd to start limiting private gain

Time for UnLtd to start limiting private gain
Toby Blume Blog
31.10.14

 

This blog has been clarified: see final paragraph

 

Most readers will know of UnLtd, the foundation for social entrepreneurs that was set up in 2001 by a consortium of not- for-profit organisations to take over the Millennium Commission’s £100m endowment. You may have missed the announcement a few weeks ago from two of the founder organisations – CAN and Senscot – stating that they had decided to end their involvement with Unltd over the organisation’s stance on funding for-profit enterprises.

 

CAN and Senscot expressed concern over the growing levels of investment being made in profit-making ventures which were supposed to be used only exceptionally, but which became increasingly common over recent years. Senscot reported in May that by 2012 over one-third of Millennium Commission funded investments were going to structures without any form of asset lock. This figure is based on an UnLtd board paper from 2012, which stated that the proportion of “Level 2” awards (up to £15k) made to sole traders was 8 per cent and to companies limited by shares was 25 per cent in the period between May 2008 and December 2011.

 

When UnLtd bid to take over the £100m of public money (remember the Millennium Commission was funded through National Lottery sales), their proposals emphasised the added value they would bring to the not-for-profit sector. They claimed they would leverage millions of pounds of venture capital and investment from the private sector and from individuals to support social entrepreneurs. This social venture fund was supposed to bring in a level of investment that would dwarf the Millennium Commission funding, a clearly attractive proposition, which I have no doubt contributed to the success of their bid.

 

The entire basis of their approach, which led to vast amounts of public money being handed over in trust, was that they would add considerable value to the endowment and increase investment in social entrepreneurs with ideas for community projects.
It was never about generating profit for private gain. Nor was it about competing with charities and not-for-profit organisations. It was about increasing the pot and making it easier for people with ideas to improve their communities to realise their ambitions.

 

The private money, as far as I can see, has not materialised – at least not in a way that bears any resemblance to the proposals they sold to the Millennium Commission. And UnLtd has become increasingly active in bidding for funds – to deliver contracts and manage grants which might otherwise have gone to existing charities that do not have the benefit of a huge publicly-funded endowment.

 

Their willingness to support  for-profit enterprise without any form of asset lock (despite this being a Treasury condition of tax relief) has the potential contribute to a flow of funds out of the not-for-profit sector, rather than investment flowing in.

 

So UnLtd appear to be overseeing a triple whammy to the sector – failing to leverage in significant venture capital, competing with those they were established to support and opening the way for funds to leak out of the sector into private pockets.

 

How can this be consistent with their original aims?

 

CAN and Senscot cited UnLtd’s ‘mission drift’ as being behind the decision to end their involvement. Charities and social enterprises are susceptible to this and to losing sight of the needs of beneficiaries. However, the scale of the public funding UnLtd received and their ability to ‘shape the market’ through their size makes this far more of a significant issue for the whole sector.

 

UnLtd’s trust deed included provision for a protector with extensive powers being appointed to ensure the organisation meets the original intention of the Millennium Commission. Perhaps the protector ought to look into this and provide public reassurance that the endowment funded through public money is being used as it was intended.

 

UnLtd’s current approach is not one I recognise from the proposal made to the Millennium Commission that I supported in the early 2000s. I applaud CAN and Senscot for taking this principled stance and I hope that UnLtd’s trustees might also like to consider where they stand in relation to their original mission.

 

This blog was first published on 22 October. UnLtd challenged the figure of one third mentioned in the second paragraph and the blog was taken down on 27 October while this was checked. The origin of the figure has now been added, with some minor consequent changes to the text. It has also been made clear that the protector for UnLtd has now been reappointed. UnLtd has been offered the opportunity to submit a blog on the same subject.