Draw the line

Social enterprise support organisations CAN and Senscot have ended their relationship with UnLtd, set up to manage a £100m fund for social entrepreneurs, over concerns that grants from the fund are being awarded to for-profit organisations.

In a joint statement, CAN, a charity based in London, and Senscot, a charity and Scotland-wide network for social entrepreneurs, criticise UnLtd’s vision for a “private-profit social sector” as “fundamentally damaging” to public perceptions of civil society.  

Entitled Mission above money, the statement says the two organisations, who were members of Scotland UnLtd, a separate charity set up to administer grants from the Millennium Awards Trust in Scotland, have decided not to accept any further funds and their relationship with UnLtd has ended.

The Millennium Awards Trust (MAT) was endowed with £100m of National Lottery funding in 2002 as a permanent source of grants for social entrepreneurs throughout the UK. UnLtd was set up to manage the MAT.  

Rodney Stares, treasurer and founding member of Senscot, told Civil Society News that MAT funding in Scotland is worth about £200,000 a year, and around £4m-5m a year to the UK as a whole.  

CAN and Senscot’s statement says: “Any grants to private, for-profit enterprises were to be rare exceptions, with the reasons clearly documented at point of grant dispersal.

“There was an erosion of the not-for-private-profit principles from 2008, and by 2012, it became clear that a significant number of MAT endowment awards were made to structures without asset-locks.”

The aim of the trust is to fund social entrepreneurs to pursue their ideas for public benefit. Level one awards range from £500 to £5,000 and are given to allow people to develop their ideas into projects.  

The next stage can provide awards of up to £20,000 for projects to be scaled up.

“That’s the stage at which we were much more concerned about the legal structure of the venture, whether it was a company limited by guarantee, a community interest company, or a cooperative, what control was there on money being taken out of the company rather than being recycled back into social benefit,” Stares said.  

CAN and Senscot’s statement says Scotland UnLtd continued to make awards to not-for-profit ventures, but UnLtd has developed into one of the UK’s leading advocates for the inclusion of private-profit companies in the sector.   

“CAN and Senscot campaign in the opposite direction, arguing that social enterprise attracts the special recognition of fiscal benefits from the state precisely because it excludes private profit,” it says.   

“CAN and Senscot consider UnLtd’s vision of a ‘private-profit social sector’ to be fundamentally damaging to public perceptions of third sector activity; this has reached the point that we no longer find it acceptable for Scotland UnLtd to receive the flow of MAT funds to Scotland on the basis that UnLtd seek to see them distributed.”    

UnLtd responds

In response, UnLtd issued a statement saying: “UnLtd is disappointed to note a critical press release from CAN and Senscot. However, we welcome the opportunity for constructive debate on this important issue.

“Some social entrepreneurs show the potential to rapidly develop their venture to deliver major impact. Some of these believe they need to take on equity investment to achieve this growth. Few social investors are available to provide this high-risk finance at such an early stage: it really needs equity finance.

 “Using external funds, UnLtd has been carefully testing work with social entrepreneurs who create social purpose companies limited by shares, and use other methods of “locking in” their social mission – such as ‘golden share’ arrangements.”

The statement says the UnLtd has been involved in work to design a legal and reporting system for “profit-with-purpose businesses” to attract more entrepreneurs into working for social benefit.  

“We are sad that Senscot and CAN are closing down Scotland UnLtd. New arrangements are being created to ensure that Scotland still benefits from the Millennium Awards Trust and UnLtd’s wider work, in our continuing and highly successful partnership with leading Scottish agency, Firstport,” it says.

We are sad that Senscot and CAN are closing down Scotland UnLtd. New arrangements are being created to ensure that Scotland still benefits from the Millennium Awards Trust and UnLtd’s wider work, in our continuing and highly successful partnership with leading Scottish agency, Firstport.

We are delighted at the amazing talent of people stepping forward as social entrepreneurs and achieving ever greater social impact and sustainability. From innovative new social movements and charities, through to social enterprises and profit-with-purpose businesses, they are the future for the social and economic recovery we all wish to see. Our job is to help them on their way.