Earlier this year, Sir Keir Starmer promised a reset of the relationship between government and civil society. The election announcement came before the Labour Party delivered any further detail, and – like the other major parties’ – its manifesto only made modest references to civil society.
But this morning, we had a first hint at what such a reset might entail, with senior Labour figure Sir Stephen Timms setting out his thinking on the need for an Office for the Impact Economy. This rare mid-election campaign policy intervention comes from a well-respected parliamentarian, who – through his time as Chair of the DWP Select Committee in particular – has a detailed understanding of some of the UK’s most complex social issues, and the charities trying to solve them.
But what would an Office for the Impact Economy actually do? And would it make a difference to the civil society organisations working hard on the ground every day to improve people’s lives?
The first thing that’s interesting about this proposal is Timms’ idea for where the office should live – as a joint Treasury-Business and Trade initiative. It would be a pretty significant step towards putting the financial health of civil society on par with the financial health of the rest of the economy, recognising the sector as a source of employment, a home of substantial financial flows and assets, and acknowledging that social impact has economic value. This is a drum many in the sector have been banging for some time, as the all-important Treasury has often felt sealed off from the sector. Just 3.5% of the organisations the Treasury declared meeting with in 2020 were social sector organisations, while social sector organisations make up just 3% of the attendees of Treasury working groups. An office like this could be expected to transform that engagement overnight.
Coming from a former four-time Minister in the Treasury, who spent time there under both Blair and Brown, that’s quite an informed view of the importance of the relationship between civil society and the economic heart of government.
Linked irrevocably with this unit’s positioning in Whitehall is the view that it should be relentlessly focused on the sector’s finances; on philanthropy, social investment, impact investment and the funds that have the potential to flow from businesses. This is a radical departure from the current model of housing civil society finances in the Department for Culture, Media and Sport (DCMS), where philanthropy has only recently received any meaningful resource allocation. Too often, DCMS’s resources are consumed by other priorities like volunteering or the latest sector fund, and finances – where the power to make a difference often lives outside of DCMS – fall by the wayside.
There are four crucial tests the Office must pass if it is to make a real difference to the money coming through the sector. It must be headed up by someone with sufficient seniority. It must be given resources commensurate with the scale of civil society and its £38 billion Gross Value Added (GVA). It must be given sufficient Ministerial backing. Finally, it must involve the sector in all its diversity in its creation and operation.
With few meaningful changes in policy in this area over the past 12 years, there is plenty of low-hanging fruit an empowered and engaged Office could grasp. Many of these were identified by the Law Family Commission on Civil Society that PBE ran between 2020 and 2023. Match funding is a wildly underutilised tool, which government could use to engage philanthropic energies, drive collaboration, harness multiplier effects, and build fundraising capacity in the sector. Mandating the education of financial advisers in philanthropy has the potential to not only unlock substantial spend from the wealthiest, but to improve the quality of funding decisions being made. And accelerating the digitisation of Gift Aid has long been seen by the sector as a big step to ease an irritant that costs millions in opportunities.
But imagine if such an Office got more ambitious. What if it tried to tackle some of the fundamental ways the charity sector’s funding model is broken? Could it turn its mind towards creating some sort of resilience, so that when a crisis hits and demand soars but donations plummet, some sort of stabiliser kicks in? That would be revolutionary for civil society organisations’ confidence and ability to focus on their purpose. Could it get its teeth into the inefficiencies which leave the sector spending around £900 million on funding applications? That would be game-changing for so many small charity CEOs who feel they spend more of their time on the hamster wheel of funding applications than on the job of serving beneficiaries.
Right now, the Office for the Impact Economy is simply a suggestion. But it’s a concrete and potentially powerful proposal from a serious politician. And, given the importance of a thriving civil society to the wellbeing of the country, it’s an idea that should transcend the politics of the election. Irrespective of who forms the next government, bringing civil society into the heart of national policymaking is an approach worth pursuing.