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Federal panel calls for tax rule overhaul, new spending to finance social groups

A government-struck panel is telling the Liberals that federal coffers should dole out hundreds of millions in new spending to unleash unconventional ways of financing key social services.

The expert group tasked with coming up with ways to help boost so-called social finance initiatives in Canada said the new spending should be on the same scale and scope as a $400-million venture capital program.

The new program would be a fund of funds — meaning it would infuse money into smaller funds across the country to help non-profits and charities gain access capital “with an emphasis on innovative approaches responding to regional and local realities and targeting those who live in the most vulnerable circumstances.”

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The report of the social finance panel says the federal investment should be repaid over time, with the money recycled into further spending so the fund “continues to build the social finance market and create positive outcomes for communities over the long term.”

The recommendation in the report made public Friday is among a dozen ideas the expert panel put forward as the Liberals prepare to release a social finance strategy. The government hopes their strategy could unlock billions in capital from investors looking for returns on investments in exchange for delivering social goods.

“Many of the measures we have recommended will require federal departments and agencies to commit ongoing resources to changing the way they work,” the report read.

In a statement, Social Development Minister Jean-Yves Duclos says the recommendations are a major step towards building a strategy that helps those most in need.

Governments find social finance schemes attractive because the financial risk for programs is shifted from taxpayers to investors, who underwrite experimental ways of delivering social programs.

The panel’s report said the upcoming strategy must help civil society groups build capacity to take part in the social finance market and help them gain a better foothold in the market to sell goods or services.

Officials have already started experimenting with procuring work from social enterprises to give them a better shot at landing the $20 billion in annual federal spending on goods and services.

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Social enterprises are typically small and don’t always have the know-how to win large and complex procurements.

Earlier this year, Duclos’s department decided to launch a pilot project to see if it could offer catering contracts of less than $10,000 around the national capital region to small social enterprises.

The expert panel “has been vocal in its desire” for early wins, and the catering project was an attempt to meet that desire, according to a briefing note obtained by The Canadian Press under the access to information law.

Employment and Social Development Canada says that to date, two contracts have been signed with one socially-motivated caterer that total just over $3,100.

The expert panel included a call in its report for a rewrite of tax rules to help non-profits set up socially-motivated companies or take part in social finance initiatives without fear of losing their tax-exempt status.

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