Soapbox
Looking at ways in which the social inclusion agenda can incorporate big business
Soapbox, Yorkshire Business Post 10th July 2007
To read the article http://www.yorkshirepost.co.uk/business-columnists?articleid=3016635
Steve Waud, Director of the £2.5 million Business Enterprise Fund, asks:
Imagine this scenario. The Bank of America, which has a couple of offices around the UK but no High Street presence, decides to invest £200,000 into Chapeltown in Leeds. Now, if you saw a plaque on a wall recording this £200,000 investment, wouldn’t you say ‘That’s odd - what made them do that?’
Well, that’s exactly what I saw in America recently when touring New York State, visiting some of the most disadvantaged communities there. Walking around one of the Puerto Rican sections of the Bronx, I saw a plaque on the wall saying that one of our own UK high street banks (which shall remain nameless), had invested $200,000 locally.
Why? Because in America the banks, along with other corporate organisations, get tax relief if they invest in these communities, under the Community Reinvestment Act (CRA).
Whole areas of the States have been revitalised because of this policy. Credit Unions have been able to get finance to reach out into these communities that the main banks had red lined – or excluded – from getting funding.
The Act has had a tremendous impact since it was introduced in the Seventies. It gives banks and other corporate bodies significant tax breaks when investing in disadvantaged communities – and those communities can use the money as they themselves decide because the funds have to be channelled through accredited CDFIs (Community Development Financial Institutions). It means that large swathes of buildings which were derelict or in the grip of drug barons and gangs have been taken back and restored, people are moving back in, reinvesting in the area, setting up businesses, and generally recreating hope and prosperity.
Here in West and North Yorkshire we have our own very successful CDFI – the Business Enterprise Fund – launched in 2004 by Bradford Chamber, whose Chief Executive, Sandy Needham, joined the study tour in the US with me. Part of the tour took us to Harlem where we saw how the tax boost of the Community Reinvestment Act means that many enterprising new arrivals in the country can access finance to get businesses up and running – and how the rebirth of the area has even persuaded ex-President Bill Clinton to set up office there.
Our visit was inspiring, and I’ve come back with a number of ideas we’re already putting into practice. First and foremost I want to celebrate the entrepreneurs whom we’ve seen struggle against all the odds to make a success of their businesses – we’re planning to throw a big event and have a very special awards ceremony for them. Then I want to set up peer group support for entrepreneurs, and persuade a great many more businesses to give pro bono support to disadvantaged communities. I want to establish a peer mentoring system, and to see a website entrepreneurs can use to get practical advice and showcase their successes.
Perhaps more than all, I want to see our banks and other big institutions having the carrot of tax relief to free up some of their funds for our own most needy communities. In the US, the relief is worth up to 25% of the money invested, spread over five years. For example, an investment of £100,000 would entitle the investor to tax relief worth £5,000 each year for five years.
These tax-led investments are practical, effective, and get results quickly, creating and safeguarding jobs, and helping to reverse downward spirals of under-investment in the communities and areas which need finance most.
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