Ten points for partnership: a business manifesto for government with government
October 01, 1996
This fifth article in a series on trends in public affairs examines what corporate community involvement practitioners could be asking from government and offers a ten point manifesto.
The premise of this article is that corporate community involvement has come of age. Governments should stop telling companies to “get involved” without understanding the needs of business. Firms should start offering a deal – yes, we will get involved in social and community issues but the partnership will only be effective on the following terms.
Three sectors
But has CCI really come of age? From the commercial side, the overwhelming majority of large companies now overtly acknowledge that business can only succeed in the long term in a stable, healthy society. They recognise that communities have a legitimate interest in their affairs, along side employees, suppliers, customers, the government and, of course, the providers of capital.
Plenty of those companies, though not yet the majority, have a track record of experience through involvement, often knowing more about the practicalities of real problems and what needs to be done at grass roots than many a civil servant.
From government’s side, the stability across the political spectrum is remarkable by historical standards. The present government has redrawn the boundaries between sectors, with diminished responsibilities for state and more for individuals and companies. In compensation it cut tax rates, for companies from 52% to 33% and for higher paid individuals from 90% to 40%, (although this did not led to a great boon in charitable donations). Fundamental change to that settlement is now unlikely whatever the outcome of the election.
In the community, there are still sceptics who fear companies are just out to make a fast buck, but most people and most voluntary organisations understand the legitimate interests of business and welcome constructive engagement.
So, if it time for companies to stop being put upon by government, if companies are ready to insist on some ground-rules for effective partnerships, what is the deal? Here is a ten point manifesto, to achieve four main objectives:
– a stable framework for engagement, with consistency and clarity in policy;
– a clear policy direction, plugging ‘gaps’ and encouraging local engagement;
– remove disincentives to action;
– fairness in accountability
Stable framework
1. Business case involvement, no imposition of obligations
Government must explicitly acknowledge the ‘business case’ justification, that companies will get involved when it makes business sense, not as surrogates for government nor as charitable foundations.
In America the Community Reinvestment Act places an obligation on banks to undertake programmes for community benefit to gain and retain a banking licence. Some have argued for an equivalent in the UK, but imposing obligations is a flawed approach: activity becomes skewed to meet the narrow needs of the legislation, not necessarily those of business nor of the community. The only exception is in industries which are already highly regulated, such as private monopoly utilities. As quasi public services, in effect the regulator determines the key drivers of their business, not customers, other stakeholders or market competition. So the simple RPI-X type formula could be broadened with a simple community involvement obligation.
2. Concordat, with a stable, clear policy framework
The Deakin commission on the future of the voluntary sector recommended a concordat: a statement of the broad principles governing the relationship between government and voluntary sector, defining priorities and offering a measure of stability. Everyone seems to agree it’s a good idea, especially in the climate of uncertainty and change that a new government of a different political persuasion would create. If public/voluntary partnerships would benefit, how much more so would private/public and three way partnerships.
Indeed the biggest single complaint from companies at present is the constantly changing and conflicting demands, first from one government department and then another, first one policy objective then another. Often one part of government will undermine what another is doing; as the DTI was trying to foster small firms and exhorting large companies to pay their bills on time, other parts of Whitehall had a worse payment record than many companies. To an extent, this is inevitable: all governments struggle to overcome this, usually through central policy units. The recent innovation of government regional offices have helped greatly in pulling programmes together.
The solution is to do as some local authorities have done: set a few key overarching objectives, publish them and explicitly test all current and new initiatives against them. The present government would put encouraging competitiveness top of its list. Another might stress combating youth unemployment or investment in education. Such a clear, consistent policy approach, applied over years, would not only provide the framework in which partnerships could thrive, knowing the context in which they are working, it would lead to better and more successful government too.
Policy direction
3. End the alphabet soup of changing initiatives
Much of companies’ CCI effort goes into local economic and social regeneration schemes involving government at council, regional and central levels. Over the years, the policy objectives, particularly in urban areas, have remain reasonably consistent, but the vehicles and rules have changed with alarming frequency. Since the mid 1970s we have had inner city partnerships, task forces, city action teams, enterprise zones, urban development corporations and city challenge. TECs, Business Links and the single regeneration budget are now the chosen vehicles, with the latest fashion being competitive ‘challenge’ funding. All demand high levels of private sector involvement, whether corporate contributions, investment or senior executives sitting on boards.
What is needed in local economic regeneration is consistency both in objectives and in delivery structures. If change is necessary, consult beforehand. Only change if it can be shown that a new way of doing things will yield benefits which outweigh the costs of change.
4. Local area initiatives
Local areas and regions are important not just for economic regeneration, but for much of CCI activity. That is where the company has its operations, where staff live and where ‘licence to operate’ considerations loom largest. Except where the local authority is exceptionally enlightened, there is often no long term framework, basis or strategy for partnership, so companies and others can know how to get involved and with maximum effect. Government regional offices are explicitly forbidden to engage in “planning”.
New local Civic Partnership Forums involving the three sectors should be set up to provide the starting point and context for corporate engagement. Each should have a linked Community Development Foundation, to which companies might be prepared to offer a block of funds, matched by local authorities, for onward distribution to projects within a locally agreed strategy. Existing restrictions on distribution by third parties of National Lottery monies should be relaxed, boosting the funds in the hands of people who know the local scene.
Such local funds could tackle another problem for companies: the growing proportion of CCI budgets going to match staff fundraising, without policy restrictions, so weakening the strategic impact. Staff could be encouraged to direct their fundraising effort to the community development funds, somewhat along the lines of United Way in the USA.
These Civic Partnership Forums could address the need for community entrepreneurs, can-do people that make the myriad voluntary groups function, increasingly seen as vital ingredient. Another idea is Social Enterprise Zones, most recently proposed by David Robinson, director of a social action centre in London’s East End. Modelled on Business Enterprise Zones, they would be geographic areas where existing rules are relaxed, such as allowing unemployed people to receive benefits while also starting a business. Used as test beds for new ideas and time-limited as a catalyst for action, they could boost corporate involvement at grass roots.
5. Sort out the policy gaps
Companies must ask government to clarify those policies with gaping holes. The first is enterprise. Who is really in the driving seat of delivering services to support SMEs: the TECs, enterprise agencies, chambers of commerce, Business Link, local authorities? The present government intended Business Links to be the front door, firmly under licence to TECs, but now they are developing a life of their own. Labour risks complicating the picture further, proposing to “enhance” Business Links and introduce a strong regional element through development agencies.
It is also not yet clear how its ‘big ideas’ in youth unemployment and training would fit with all the urban regeneration and SRB funded initiatives nor how companies should get involved. Their plans are ambitious and would inevitably involve major institutional changes. Would these be announced at ministerial press conferences to get a splash in the media or would companies be involved at the outset?
Remove disincentives
6. Create a Community Partnership Incentive Scheme
The arts have the Pairing scheme, renamed from the old Business Sponsorship Incentive Scheme. Sport has Sportsmatch. Long overdue is a small, targeted Community Partnership Incentive Scheme, perhaps restricted to first time contributors and medium sized companies. This would have an effect way beyond its cost to the Exchequer. As the other two schemes have found, the benefit goes wider than funds levered, by publicising, legitimating and building momentum for subsequent years. A new government might want to restrict it to certain policy priorities, like youth unemployment, so steering corporate effort without issuing edicts.
7. Remove barriers to people involvement
The biggest growth in community involvement will not be in cash but in kind, mainly in time. Currently the costs of staff time ‘donated’ to charities and to certain specified bodies like enterprise agencies and TECs are explicitly given tax relief. Everything else risks falling foul of the rule that only expenditure incurred “wholly and necessarily” in the conduct of business is tax deductible. That must be cleared up.
Alex de Mont, former adviser to David Owen, has suggested in a Social Market Foundation Memo to Modernisers (May 1996) a People Aid scheme, allowing a tax deduction for companies which release staff in paid time for community activity, especially in education. He also argues for a relaxation of retirement pension fund rules, so managers released early but engaged in education (or other community) activity are not penalised. Currently tax free redundancy payments can be challenged if the company has made arrangements for a transitional placement, paid from a company grant, in a community group.
Wider than tax, everyone is emphasising the importance of life long learning and of individuals making a personal commitment to their own development. Labour and the Liberal Democrats are proposing personal learning accounts, and it is only a question of time before companies are ‘encouraged’ to contribute. In return, companies must insist that volunteering involvement, as a school governor or local group treasurer, must be recognised and, if the individual desires it, formalised, perhaps providing a credit towards an NVQ.
In addition, companies should ask for more investment in the local infrastructure for volunteering. The government’s Make a Difference initiative has helped set up volunteer bureaux in some towns currently lacking them. If more staff are to volunteer easily, longer lists of opportunities and assignments, and a bigger brokerage capacity, will be essential. Getting employees involved, both along Prince’s Volunteers lines and more broadly, will be essential if Gordon Brown’s ideas for tackling youth unemployment through voluntary work and environmental taskforces are to be a real route back into the world of work, not just a repeat of the 1970s community programme.
8. Simpler tax incentives for giving
For other gifts-in-kind, such as redundant goods and equipment, an enhanced tax deduction as in the USA, say at one and half times cost, would act both as an incentive to disposal for beneficial use and as a compensation for additional costs incurred in reuse rather than simply dumping.
On cash donations, the primary need is for simplified rules, not more tax relief, with the threshold for single payments lowered, and the payroll giving upper limit raised. One innovation suggested by DEMOS is giving the tax credit to the individual or company making the donation, rather than the charity, creating a psychological incentive. Another possibility is allowing tax relief in the first year of a multi-year commitment on the whole sum, effectively front-loading the tax on a covenant, with clawback if not fulfilled.
Government is likely to be cautious on tax matters as revenue lost can easily be greater than the increased spending generated. However at the very least, short term tax breaks can shift non-government spending into different priorities. In any case, charities are still net contributors to the public exchequer, mainly through VAT payments.
9. Help shift the mentality from donations to investment with a return
Many community projects are really mini-enterprises, meeting social objectives while also earning some income. Grants are not always essential, as some projects can service and repay loans. Few companies have explored the practicalities of a revolving loan fund, greatly increasing over time the impact of a fixed budget, although NatWest has made a start through the Local Investment Fund. Partly this is due to ignorance of the possibilities and the perception that it is too difficult. Partly it is due to technical impediments from tight regulation of the banking business. A modest relaxation of rules on the latter would also help send a signal on the former through publicity.
A shift to loans by both individuals and companies would be boosted by a charity TESSA, encouraging long term commitment. However, unlike conventional PEPs and TESSAs, tax relief is already available on the basic payment, so the incentive would be in allowing full tax relief in first year, with clawed back, and at higher rates. Another possibility is a Charities Expansion Scheme, modelled on the Business Expansion Scheme, in which an irrecoverable investment can be written off against tax, as an incentive to risk-taking and innovation. This would work well linked to Charity Enterprise Zones, encouraging companies to put capital sums into specific projects.
10. Encouraging fairness in reporting and accountability
Community Affairs Briefing has previously decried the failure of CCI practitioners to develop objective standards, comparable with quality awards, Investors in People and BSI/ISO environmental standards. DEMOS and others have floated ideas for an Investors in the Community kitemark. In June the Labour Party suggested an Investors in the Future standard, allowing companies to benchmark investment, innovation, employee involvement, community relations and environmental protection. This envisaged an independent body to set the standards and monitor progress. The present unenforced Per Cent Club rules offer precious little credibility to members needing a sign that they take CCI seriously.
What can government do? Currently the Companies Act requires the reporting of UK charitable donations in annual accounts. This should be broadened to encompass total community contribution, UK and worldwide. As is common practice in other areas, the exact definition of contribution can be safely left to a code of practice, certified by Accounting Standards Board, which can be varied as circumstance change without recourse to primary legislation. This code would address valuation methods.
Second, the Companies Act should require a statement on both policy and practice concerning contribution to community. Such statements are already required on the payment to suppliers, employment of disabled people and systems to inform and consult employees.
Third, outside the UK large companies are currently required under an EU directive to consult through works councils with their staff. An explicit requirement could be added to report on their contribution to the community, as the best already do.
Finally, local government, the health service, education and the police all use league tables of comparative performance, which are audited and published. The Audit Commission should develop a measure of social cohesion, to be compiled by local authorities. Based on a combination of (say) crime statistics, educational achievement and scale of involvement in voluntary activity, plotted against indices of social deprivation, these could start to provide a performance measure of the success of the Civic Partnership Forums.
This ten point manifesto offers a structure for dialogue with any new government with new ideas endorsed by the electorate, regardless of which party or parties end up in power. Dialogue and consultation at the outset is the overriding need, to agree a stable framework, otherwise the significant changes suggested, such as forums at local level, will simply exacerbate the present instability.
Companies and charities with ideas on developing and refining this business manifesto are invited to contact the editor. If it commands sufficient support, it can be submitted to political parties as they draw up their manifestos.
COMMENTS