“Catalyst: one that precipitates a process or event, especially without being involved in or changed by the consequences.”
The American Heritage Dictionary
Robert Peston put his finger on the spot in his tweets about the Government announcing a 91,000 reduction in the Civil Service. Their suggestion was that this would help tackle the cost of living crisis, but he points out that it will only do so by holding back the transmission of price inflation into wage demands.
It is understandable that considerable care is being exercised to hold back the inflation surge: if it pushes higher or longer than the Bank of England expects, it will also result in a huge rise in the cost of servicing the national debt. Meanwhile if it also pushes hard into the mortgage servicing costs, it will, as discussed in This Is Money this week, seriously deflate house prices – just as the next general election approaches. In this context cutting VAT or other untargeted emergency stimulus could exacerbate an already difficult position.
However, it is essential that carefully targeted support is given for those most in need, and in order to break the cycle of deprivation by empowering young people from disadvantaged backgrounds – an essential part of levelling-up. The way to do this, without incurring significant levels of additional public expenditure, is by Government learning how to act as a catalyst in order to leverage the huge contribution which could be made by philanthropy through the voluntary sector. So — please read on as we illustrate how this can be done.
Regular readers of our commentary will be aware of the essential role that inter-generational rebalancing should be playing if we are to achieve a more egalitarian form of capitalism.
Inspired by Sir Keith Joseph's call to ‘break the cycle of deprivation’, I first wrote to Margaret Thatcher on this topic in 1987 attaching a proposal headed ‘Popular Inheritance’. She wrote back with a long reply – those were the days when ministers responded in full – but no action was taken at that time. When the Government changed in 1997, I followed up with a similar proposal to Gordon Brown, and a couple of years later he announced the Child Trust Fund.
This being the best initiative we could expect to support inter-generational rebalancing, The Share Foundation was formed as a registered charity in order to make further contributions to the Child Trust Funds of young people in care. The main weight of contributions naturally came from the public purse at that stage, but it was an early example of how Government can act as a catalyst for targeting voluntary support.
When the Coalition came into power in 2010, they decided to cease funding Child Trust Funds, including those for young people in care. The Share Foundation teamed up with Barnardo’s and Action for Children, and we managed to persuade George Osborne to make £200 available to open a Junior ISA for each young person in care.
The Share Foundation has now been running this scheme for the past ten years, and took over administration of the equivalent Child Trust Fund scheme in 2017. It is starting to show how a relatively small Government contribution can deliver big results through partnership with the voluntary sector.
In 2021/2, the total contributions made into these Junior ISA accounts from sources other than central Government were 20% higher than the total of £200 Government initial payments over the same period. Meanwhile, The Share Foundation's incentivised learning programme, Stepladder Plus, is making a major contribution towards empowering young people with life skills in order to reduce the extent of their NEET status (‘Not in Education, Employment or Training’) after leaving care.
This programme therefore provides direct confirmation of how Government can act as a catalyst in order to leverage support for where it is most needed.
If the same principle were applied for those in a critical situation due to the cost of living crisis, how might it work?
Unlike Government schemes based on universal benefits, philanthropists need to know that recipients of their support are carefully targeted and, in these days of GDPR (Data Protection), that's where input from Government is essential in order to enable that targeting: as with the care system for The Share Foundation.
Let's take energy as an example. We know that people on pre-payment meters get charged at significantly higher rates than others, no doubt due to the risk of non-payment. Philanthropists could undertake to cover that risk, so that standard rates - or lower - could be applied, but they would want to be assured that they were supporting ‘can't pay’ situations rather than ‘won't pay’.
So, if Government agreed to provide details of all those on Universal Credit to the energy companies in order to provide this additional level of confidence, philanthropists could be invited to underwrite these lower charges. Charities such as the Trussell Trust would be in a strong position to co-ordinate this support — they are already deeply involved in food bank provision and helpline support for those most in need.
As another example, The Share Foundation would like to enable a more targeted version of the Child Trust Fund to be introduced for a much wider group than young people in care, and to encourage philanthropists to make provision in their wills to support this additional level of inter-generational rebalancing. But again, this would require co-operation from Government in order to identify those young people with no hope of receiving inheritance from their own families. Again, this calls for Government to act as a catalyst rather than the mainstream funding source.
The Government is deeply experienced at working with the private sector, both in the commercial and voluntary sectors. However, it invariably regards its position as controlling and directing the process, and an extensive process of contracting arrangements involving competitive tendering is commonplace, with the Government always taking the lead. If Government is to act as a catalyst as described above, it must accept a new mode of co-operative partnership, with the voluntary sector taking the lead.
Being a catalyst means enabling change without being changed by the consequences: are ministers prepared to accept this role?
Gavin Oldham OBE