Time for Unltd to start limiting private gain

Time for Unltd to start limiting private gain
Toby Blume Blog
22.10.14

 

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 – social enterprise support bodies CAN and Senscot – stating that they haddecided to end their involvement with UnLtd over the organisation’s stance on funding for-profit enterprises.

 

In their statement, CAN and Senscot express concern over UnLtd’s growing levels of investment in profit-making ventures. This was supposed to happen only in exceptional circumstances, but became increasingly common over the past few years. Senscot report that by 2012 over one-third of Millennium Commission funded investments were going to structures without any form of asset lock.

 

When UnLtd bid to take over the £100m of public money (remember the Millennium Commission was initially 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, both from the private sector and from individuals, in order to support social entrepreneurs. This social venture fund was supposed to bring in a level of investment that would dwarf the Millennium Commission funding; an 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 who had ideas about how to improve their communities to realise their ambitions.
What we have seen is the opposite.

 

The private money has never materialised – at least not in a way that bears any resemblance to the proposals they sold to the Millennium Commission.

 

UnLtd have become increasingly active in bidding for funds – to deliver contracts and manage grants which might otherwise have gone to existing charities without the benefit of a huge publicly-funded endowments.

 

Their fixation with for-profit enterprise without any form of asset lock (despite this being a Treasury condition for tax relief eligibility) is contributing to a flow of funds out of the not-for-profit sector, rather than investment flowing in.

 

So UnLtd are overseeing a triple whammy to the sector: failing to leverage venture capital, competing with those they were established to support and causing a haemorrhaging of funds out of the sector and into private pockets.

 

It’s hard to imagine a position more contrary to 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 considerable 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. The most recent information on UnLtd’s website is from 2011, and states that the protector’s term would end in 2012. I don’t know who the Secretary of State appointed as the protector after this, but perhaps they ought to suggest that they look into this and put an end to UnLtd’s ‘money over mission’ approach.

 

UnLtd’s vision of a for-profit social sector 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 putting the organisation’s mission before money.