The Social Investment Business revealed some interesting figures about Futurebuilders last week – chiefly, that it has £28m of unspent repayments sitting in its bank accounts, some of which has been there for at least five years.
Another revelation was that only another £85m or so is outstanding. For a fund originally billed as having £215m to lend, with mooted repayments of £400m, this is a bit of a comedown.
Of this £215m, £31m was never spent and returned to the Cabinet Office, and £29m was spent on management fees. At this point, the Social Investment Business, which manages the fund, has been unable to confirm exactly what happened to the rest. However, previous figures suggest around 20 per cent went in grants, and around 4 per cent was written off. There may also be further funding which was committed but not drawn down.
This leads to two questions:
1. What should happen to the cash?
In an age when charities are scrabbling for cash, it doesn’t make a lot of sense to sit on £28m for several years while you dither about what to do with it.
There is an obvious solution. This is money that has already been used by the Adventure Capital Fund for social investment. It’s in their bank accounts. Let the Adventure Capital Fund lend it out again.
This is the outcome that was originally intended for the money, before the current government intervened, and going back to that plan seems sensible.
There’s even a precedent. ACF has already agreed a similar deal with the Department for Communities and Local Government for the Communitybuilders fund, which it managed. That’s now a permanent endowment, with £27m. The new money could be merged into that fund, or used to create another endowment operating on similar terms.
2. Was Futurebuilders a success?
The second interesting thing raised by these figures is how little of the original Futurebuilders money was actually used for its intended purpose – loans to charities. Only about half, by the look of things.
The main problem here seems to have been one of annuality – the desire of government departments to spend all their money in a particular financial year.
Futurebuilders struggled to get the money out of the door fast enough, so it had to give a lot away in grants, and return a lot more cash to the government, unspent.
The management fees also look far too high. This may be in part because this was something that had never been done before, which is always expensive.
But I suspect the speed at which the money had to be spent was part of the problem here, too. It’s expensive to get something done quickly.
Also, of course, it’s possible that the government just overpaid. It would hardly be the first time.
Futurebuilders continually faced accusations that it was inefficient, distorted the market, and sacrificed financial rigour to get the cash out of the door. The fact that it cost £180m and is likely to get back around £130m rather backs up these accusations.
But it did, at least, provide proof of concept. And it has been a lot more cost-effective, and probably generated a lot more long-term good, than a £215m grants programme would have been.
I wouldn’t want to see another government fund created to do the same thing that Futurebuilders did, but I think it was good that it existed.