Crowdfunding Pulls U.K. Government Projects Off Scrap Heap

This week, U.K. Chancellor George Osborne delivered another gloomy national budget. In the context of ongoing austerity, local government in particular has had to tighten its belt and rein in spending, with things such as cutting library opening times or closing local projects. By 2015, on top of existing cutbacks, they will have to slash £3.5 billion ($5.3 billion) from their budgets, while a freeze until 2014 on the local tax they can charge is making it tough to replenish empty coffers. As a result, funding for civic improvements -- from parks to sport centers -- has plummeted.

But one British social enterprise claims it has an answer: Help the public fund projects they want to see continue -- via the Web.

Hence Spacehive, which claims in its first year it has funded £1 million ($1.5 million) of projects via crowdfunding alone. And it says it has a further 300 projects in its pipeline across the U.K., with 12 councils having already pledged money for Spacehive-spawned projects, while five more have been inspired to launch their own similar crowdfunding campaigns.

[ Is the role of government CIO unnecessary? Read U.K. Government: Who Needs A CIO? ]

"Crowdfunding enables everyone to get what everyone wants," Spacehive's founder and CEO, Chris Gourlay, told Information Week. He said Spacehive's early experience shows unpopular ideas, or projects not led with enough energy, will fail, while popular projects that hit their funding targets are guaranteed to succeed. Spacehive is backed by British businesses including Deloitte and Hogan Lovells, as well as public bodies like the country's professional association for architects, RIBA, as well as the Big Lottery Fund, which channels money from the state lottery to good causes.

Examples of what's been generated include Mansfield District Council in the East Midlands pledging £1,000 ($1,520) to install a free public Wi-Fi network covering the whole town, something that eventually leveraged a total of £35,000 ($53,000) from local people, businesses and corporations, while Berkshire County Council pledged £5,000 ($7,600) toward a £60,000 ($91,000) project to transform a disused retail unit into a hub for young entrepreneurs.

Users upload a project and then encourage local people and businesses to pledge cash alongside the council. The model is philanthropic, so those who contribute don't legally "own" anything; they just enjoy the benefit of the scheme once delivered.

This is all something of a novel approach for people more used to their city government doing everything, say the people behind Spacehive. But that's rapidly changing in these tougher times, they claim. "To some extent, Brits have trouble emulating the American culture of 'get up and do things for yourself,'" Gourlay said.

"Councils have typically always funded local amenities, so the concept of doing things off your own back is a new one. But the prevalence of new technology and social media has changed the game. Everyone -- from kids to pensioners -- is online, while the ability to share innovation and sell an idea to the masses via the Web has opened up a whole feast of opportunities," he said.

By 2016, Nesta, the U.K.'s innovation charity, has predicted crowdfunding to be a long-term source of capital for those seeking to finance social, creative or business ventures in the U.K.

Gourlay agrees: "The use of Web-based funding is blurring the lines between the state and the private sector and enabling real innovation to flourish." As does Britain's Housing and Local Growth Minister, Mark Prisk, who said, "Crowdfunding will help ensure vital regeneration projects get off the ground and encourage more people to shop local once again."

In terms of technology, Spacehive is built on cloud technology with an emphasis on its own RESTful based API, running on Microsoft .NET, MVC and Entity Framework Code First. It uses pre-authorized payment services run through Go Cardless and PayPal, offering "split-chained payments," meaning people only get charged when a project hits its funding target.

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