Monday, October 3, 2011

Business as Usual is Not About to Resume

I had breakfast today with a friend and former Barcap investment banker who confided in me, over fresh cappuccino at the Commonwealth Club, that he was 'deeply pessimistic' about the future of the UK economy - and therefore also quite worried too about the charity and social enterprise sector in which we are both now active.

His view, and it isn't new, is that we all - including him during his time in the bank - grew convinced that we had, somehow, hit a new economic paradigm - one of continual growth. Of course, we know the rest of the story. We were, in reality, living beyond our means for a very long time, all fuelled by the Emporor's New Clothes of debt.

I am not so tribal or stupid to blame this all on Labour as the Tories are doing this week. All of us fell into the same trap. Sure, Labour could have modified it but their OTT spending was matched comfortably by excess elsewhere. We were all at it. Yes, all of us. Consumers too. Charities even. We all grew on the back of a surging economy. A doubling in the number of charities, no less.

We're now faced with not just a couple of years of pain before things perk up - but, probably, a decade's worth at least. There are no big levers to pull. Rates are as low as they can go. There's no oil or Big Bang to spark or soften the blow of an economy in which demand is now at a super-low. Neither is there money for tax-cuts. In fact, there's very little to lift things - that's the problem. The bottom line is that our economy in 2011 just isn't strong enough to support us at the level to which we're become accustomed.

This applies to public spending too. One in every four public pounds is borrowed. Yet the debate hasn't moved on from the 1980s in the minds of some of the defenders of the current system.

Take those people in Stroud last week who successfully got a court order to stop a social enterprise being formed to take forward former NHS services. They think those same services are 'safer' in the NHS. Folly. If we want to keep social and health provision at ANYTHING like current levels, we have to make a diminishing sum of money work a lot harder.

Getting it out of public sector monoliths is the first step in doing this, as we're trying to show with Stepping Out. Putting that money to work alongside community and individual resources is the new name of the game. People trying to 'save' public services need to realise that.

As we finished our cappucinos, my former banker friend ventured that our children will probably be 25% poorer than we were in our pomp. Public services 25% less well funded and so on. We're not used to that. And it will probably be this possibility - more than any other- that shapes public sector reform over the coming years.

Regardless of whether we like it, this means markets. These could be very open ones - like the Tories seem to instinctively go for - or, as I prefer, more managed markets that are regulated to guarantee diversity of supply and competition on quality as well as price.

We said goodbye. He has been chastened by the experience of recent years. But I have too. I grew a social enterprise when it was easy. I wouldn't like to try to repeat that feat today. We have a generation of leaders now who aren't used to coping with decline - and who lack the skill-set associated with it.

2012-20 will be a very different era for charities and social enterprises. Much less secure but possibly richer in opportunities for the well-positioned and most capable.

But for the rest, my friends' pessimism seems very well placed.

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