When governments start chopping back on public budgets, in an effort to get the national debt down to manageable proportions once the immediate economic crisis has passed, isn’t there a risk that it’s the innovative, risky projects that will be first to go? If so, who is going to fill the gap? That was the question posed today by British social action pioneer David Robinson at the Chain Reaction conference that he organised to bring together social innovators, in the shadows of the capitalist citadels of London’s Canary Wharf.

Michael, who was speaking at the conference and worked in government for many years (he confessed to being “a recovering bureaucrat”), agreed that this was a big risk - politics makes it hard for government to invest in initiatives which are risky and where the payoff is longer than the electoral cycle (or the average ministerial attention span). Rather than trying to get government to do what does not come naturally, we think there is a real opportunity to address these problems through partnerships with philanthrocapitalists, who should be looking to seed and test new ideas. If backed by rigorous analysis to ensure that they really work, these pilots can then be scaled by government when proven. Yet this will take a big change in the way the British government works with private donors.

A man who may have a key role in figuring out how to do this, if the Conservatives win the general election that is due in less than a year, is shadow minister of the third sector, Nick Hurd, who was speaking on the same panel. ”There is a problem with money,” he said “which is that the government doesn’t have any!” Nick wants to harness the power of the voluntary sector to do more to tackle social problems like recidivism, ending “the fallacy that government has all the solutions.”  He pointed out that 70% of government funding to NGOs goes to organisations with an annual turnover of £1 million and seems to want to direct more funding to smaller community groups.

There is certainly a case for shaking up public funding of NGOs in Britain, which is prone to go to the usual suspects. But it is not as simple as small NGOs good, big NGOs bad. Shaks Ghosh from the Private Equity Foundation gave a frank assessment that “most charities are sub-scale and try to do too much”, which is why her organisation picks a few, high-performing NGOs that they support with money and expertise. Funding to help organisations to scale is just as important as supporting smaller pilots. (Critics who might dismiss Shaks’ comments as typical philanthrocapitalist sneering at the charity world should note that she is a respected leader in the nonprofit sector.)

It was clear from the discussion that, although there is a lot of innovation around social financing in Britain, there is still work to be done to figure out the respective roles of government, NGOs and philanthrocapitalists.  Britain is starting to move on from the old idea that the responsibilities of the winners in society are defined through the tax system alone. The politicans need to lead the debate about the role that giving should play in the new social contract between the rich and the rest of society.