Liberals prepare to spend $50M on social finance plan, but no strategy for now


OTTAWA – The Liberals are taking their first $50-million step in a plan to finance experimental ways to deliver social services.

The money will be spent to help small social-service organizations understand how to apply for a much bigger pot of money starting next year.

Federal officials have been working on a strategy for social finance, as it’s known, for years, hoping to bring private funding, incentives and discipline into social services governments provide themselves or directly fund.

Private backers partner with a group or organization to fund new ways of helping people improve their job skills or health, for instance, with public dollars flowing in if the partnership produces measurable results _ shifting the financial risk off the public purse.

The Liberals have promised $755 million over 10 years to help groups that provide services such as housing the homeless or training hard-to-employ people with new skills. There is also the $50 million over two years to teach those organizations about a process that they have rarely, if ever, had any experience with.

The government said Wednesday it is turning to 17 existing social-finance organizations, which will move the $50 million to smaller groups to make sure the larger fund, when it launches in 2020, doesn’t sit idle because no one knows how to apply.

“These large organizations will provide expert services and will provide funding to help other, smaller organizations those that do the real work on the ground develop their expertise and their ability to be innovative and strong,” said Social Development Minister Jean-Yves Duclos.

“These organizations are looking for ways to make a difference not only from an economic, but also from a social and environmental, perspective. I am very hopeful and very confident that they will.”

But a larger strategy that would align various government regulations, including tax rules, is not being set. Instead, the government announced a new advisory council Wednesday to help guide federal efforts.

Internal work to make federal rules friendlier to the sector has taken a rocky path, according to multiple sources with knowledge of the behind-the-scenes talk who have spoken to The Canadian Press under condition of anonymity to detail private events.

“It’s never been done before so the federal government has no experience in doing these things,” Duclos said. “It’s natural that people are talking about different mechanisms. That’s not only natural, but it’s a great thing because it’s going to make sure that these historic investments are going to be very impactful across Canada.”

Problems appeared to arise late last year when officials from Employment and Social Development Canada and the Finance Department disagreed sharply about how the government should use the $755 million.

The last version of the plan suggested a fund manager and secretariat be housed inside ESDC with an advisory council of external experts making funding recommendations. Duclos said the government is considering different options, with conversations taking place with outside organizations.

Sources say the Canada Revenue Agency also quickly rejected any rewrite of the tax code to allow non-profits to run socially motivated companies that would turn profits, which could then be reinvested, without fear of losing their tax-exempt status.

Documents previously obtained by The Canadian Press under the access-to-information law suggested such a change would put small, for-profit businesses at a competitive disadvantage.