By Alastair Davis

WHATEVER shape Scotland’s economic recovery takes, one thing is for certain. As public spending is squeezed, unemployment rises and financial hardship increases, our most disadvantaged communities will be hardest hit. In this context, demand for community, wellbeing and people-centred services - the types of services which are typically provided by the third sector and social enterprises – will be greater than ever.

Given this impending crisis, it was good to see the Scottish Government’s recent Economic Recovery report placing Scotland’s third sector at the heart of planning for recovery and renewal, recognising its critical contribution to the goal of a wellbeing economy in Scotland. While it didn’t specifically mention social enterprises, we would argue that they are absolutely central to the third sector’s capabilities.

In acknowledging the state’s reduced ability to meet society’s needs, the report envisages a crucial role for this sector in providing a level of community resilience, supporting young people, employability, health and wellbeing. And yet, importantly, it also correctly highlights that without further investment and support, the third sector and the many crucial services supporting some of our most disadvantaged communities might not survive.

Given the need to attract further investment, the potential scrapping of one of the very tools designed to encourage more capital flow into these communities couldn’t have come at a worse time.

Social Investment Tax Relief (SITR) was introduced in 2014 as means of making it easier for community interest companies, community benefit societies and charities to raise finance.

The scheme offers tax relief on investments in businesses which meet the criteria, with the aim of unlocking and connecting private capital with communities.

In fairness to its doubters, the scheme has had its issues. However, those issues are not insurmountable. And while the scheme is by no means perfect, it’s currently the only tax break specifically aimed at social enterprises.

Across the UK, SITR has already leveraged at least £14 million in private investment to help more than 75 social enterprises deliver essential services. The figures for Scotland are obviously much lower, but it has still made a meaningful impact during its short existence.

SITR enabled Social Investment Scotland to create SIS Community Capital, a pioneering social investment fund which raised £400,000 entirely from private investors, to support seven social enterprises based in Scotland, which are all making significant social and environmental impacts within their local communities. SITR was also used to help set up the inaugural profit with purpose fund for SIS Ventures, raising £1.3m of private capital to invest in impactful enterprises.

As things stand, SITR will come to its conclusion in April 2021. Standing alongside the social enterprise community and our partners including Big Society Capital, SIS is calling upon the UK Government to extend accessibility to SITR for a further two years as part of an amendment to the Financial Bill passing through parliament.

Such an extension would allow time to make any necessary reforms and create a scheme which is future-fit and able continue directing private money to disadvantaged places and causes. In fact, Big Society Capital has estimated that SITR has the potential to generate at least £300 million in investment over seven years if reformed.

To scrap the scheme at this stage would send entirely the wrong signal about support for a sector which, if appropriately financed, could play a significant role in Scotland’s recovery and renewal.

Alastair Davis is CEO, Social Investment Scotland