Doug Prentice – Power to the people…! A Co-operative funding model with a difference.

• 2nd Oct 2015
• Community Wealth Building

Power to the people…!

It is now a widely accepted truth that local authorities need to do things differently. The severity of the reductions to budgets means that they need to think more innovatively, work in closer partnership with other sectors, and reshaping the relationships with residents to encourage them to be more active in their communities. Co-operative Councils have been doing this for a while and have pioneered a number of ‘different’ ways of doing things such as unlocking social value in their procurement processes, spinning out services to Mutuals and collaborating with residents to develop effective community initiatives. We are therefore keen to introduce Co-operative Councils to a funding model with a difference – and the good news is that is a (very!) co-operative difference.

Whilst most local authorities consult with residents and service users in the provision and delivery of their services and may use Participatory Budgeting, Geo Capita have made it possible to go further and deliver projects – potentially even large scale capital projects – using local cooperative structures. This model gives local people and service users a stronger voice in budgeting and service provision, whilst also generating financial benefits to the local community which private sector procurement does not.

So what is it?

The formal name for the mechanism that we have developed is Public Private and Community partnership (PPC). But basically it is a way of financing local projects using a mix of private and public sector investment alongside community collective investment. Not only does this create a far superior and sustainable form of funding than PFI, but through the creation of a community collective it also has the potential to release financial returns to local people who are community member investors and generate charitable donations which can be used to target those sections of the community most in need.

Whilst the PPC model is ideal for use by co-operatives, it is by no means restricted to one model. It can also be used by Community Benefit Societies, Community Interest Companies, Development Trusts, Charities and similar bodies.

What can PPCs be used for?

The PPC partnerships can be used to deliver local projects such as social and affordable housing, housing refurbishment, renewable energy, emissions reductions, energy efficiency retrofit,low carbon transport projects, social care services and youth services.

What is in it for councils?

The much closer alignment of private sector finance with community collective investment can deliver large scale capital projects for Councils at the same time as securing additional community benefits.

The process ensures normal Council procurement processes are complied with and also provides risk transfer to the cooperative (under Council supervision), and further does not suffer from the PFI problem of remote private equity funds extracting huge lifetime returns from infrastructure projects at the cost of the local taxpayer – the local people participate in the project through co-investment and earn the same returns.

Spinning out does not mean losing control of a service but in fact delivering the service in partnership with your local cooperative – this is the PPC model.   The parent Local Authority can retain effective control of key issues such as legal, procurement and quality control whilst delivering community benefits and also securing the funding from community and social impact investors. For Councils considering spinning out services to the private sector or special purpose vehicles, if the main motivation for considering this is imminent funding cuts, then spinning out to local PPC cooperatives can achieve the cost savings but also deliver financial benefits back into the local community.

The PPC funding approach also has a number of wider benefits such as helping workless people into jobs at lower cost, increase local SME business growth to create new jobs, and significantly increase private sector investment in employment and skills.

What is in it for communities?

People in communities are given the opportunity to have real control over things that happen in their community and become part of a collective with their neighbours to improve their area. As community investors they have will then receive financial returns which will make them more economically resilient. Additionally, local groups and charities in the area can benefit from the PPC model as the collective can give charitable donations to projects in the community. For example in the case of a renewable energy project, the donations could go to families in the Council area who are in fuel poverty. Typically the coop works in collaboration with the Council and makes these payments to needy families identified by the Council.

How can Geocapita help?

So in summary the key benefits are:

• project delivered at no cost to the Council (Council can also contribute if it wishes)
• fully compliant
• no residual risk lying with the Council (due to process, community participation and performance insurance)
• local people who are investors in the community share financial benefits
• poorest members of the local community benefit from the common profits of the project.

Since this is a new area local authorities may not have much experience of spinning out services, attracting social investment or establishing community collective benefit groups but we can assist the authority and their local cooperative group in this process and importantly potentially in funding for spin out projects.

To see how this model can work in practice please visit our case study: Edinburgh Council’s approach to supporting a range of common interest groups such as co-operative societies and social enterprises.

 

To learn more, you can visit our website at: www.geocapita.net

If you would like a more detailed conversation about any ideas you might have please contact Doug Prentice @ djpp@geocapita.net