Over the last nine Mondays I’ve examined the failure of New Deal for Communities (find 11 November 2014 for the first post). Similar stories can be told in many other places, where the implications of receiving grant money is not understood. We need to seriously consider alternatives to grants.
In the private sector, bank loans support businesses (except in the current recession!) and so they have a business plan that identifies a market and shows how the work will continue post-loan. I’m fed up with 3 to 5 year projects that do good work and then collapse because the money runs out, following no attempt to develop a market. An online presence can help develop a market and so there are fewer excuses than there used to be.
This cavalier approach to grants wastes everyone’s time. New Deal was a 10 year programme, which is a big chunk of anyone’s life. To get to the end and find all the work that went into it and the work we put into the Forum and Trust before New Deal, counts as nothing is frustrating.
All that work got us nowhere and the primary reason is careless and untrusting interventions from national and local government agencies. Grant aid does not work, surely there is enough experience out there to show this conclusively?
Three Approaches to Funding
To develop local projects, consider the relative merits of the three main approaches to funding:
- Grants have their place but must take a back seat. Burngreave New Deal demonstrates just how damaging grant aid can be in a neighbourhood. Everyone knows of grant-aided projects providing a brilliant local service for a few years and then collapsing as the grant source dried up. With grants you do not need to trade and you need no customers. Furthermore, people with no business sense administer projects, who do not understand how the economy or communities work. In the last analysis the grant providers do not care about communities; the only thing they care about is outputs and evidence the money is deployed legitimately.
- Loans are better than grants because they involve a relationship. If a business has customers and is trading, loans can be helpful. The lender has an interest in the success of the enterprise. In theory, they won’t make a loan unless they are certain the business will work. However, loans can be destructive because ultimately the lender will want to cut their losses when things go wrong. Far better to pull out than risk staying in. Again, they have no interest in business survival. let alone communities.
- The third option is equity, where the wealthy invest their money and their time in the success of a venture. This way they pass on expertise and identify viable projects; working together to fund and make the project work. Equity works where people understand the local economy and how to grow business. It implies equal commitment on the part of the investor. Not all equity is so committed, for example shares can be impersonal although they don’t have to be.
Questions
So, what do you think about grants? How can they be best deployed. I’d particularly like to hear positive stories of effective use of grants. I shall return to this topic and ask how we can do community development using loans and equity; small businesses as an alternative to community projects. And how all of this can be supported online. What do you think?
