Big Society fund launches with £600m to invest

 

Sir Ronald Cohen, chairman of Big Society Capital: "We're focusing on organisations that are charitable"

A new financial institution set up by the UK government to finance charities and community groups has been launched.

Big Society Capital has £600m, of which the majority comes from unused cash in bank accounts that had been dormant for more than 15 years.

The fund will back social enterprises that prove they can repay an investment through the income they generate.

"This is about supplying capital to help society expand," said Prime Minister David Cameron.

"Just as finance from the City has been essential to help businesses grow and take on the world, so finance from the City is going to be essential to helping tackle our deepest social problems," the prime minister added.

Start Quote

It is a bit of a drop in the ocean, given what is happening to the sector”

End Quote Dan Corry Chief executive of New Philanthropy Capital
Prisoners

Venture capitalist Sir Ronald Cohen, who is Big Society Capital's chairman, told the BBC that the fund's aim was to create a "thriving market for social investment".

He explained that many not-for-profit organisations relied on donations to finance themselves, and were unable to get a normal loan from a High Street bank because they lacked assets - such as property - that could be offered as a security.

The idea is to help out businesses that provide a benefit to society much greater than the profits they make.

Start Quote

If Big Society Capital does fulfil its promise, it will do no harm to the reputation of politicians and of bankers”

End Quote

"It will allow an organisation which today is trying to deal for instance with prisoners who are being released and ending up in unemployment then back in prison... to get the capital to increase the size of their organisation and to improve the lives of these prisoners," he added.

Mr Cohen explained that some of the return on the fund's investments would be paid by the government, which would give the fund a cut of any savings the Treasury made thanks to the charitable work.

For example, in the case of prisoners, if the scheme was shown to have reduced the reoffending rate of participants, then the government would pay the fund some of the money it had saved on locking them up, policing and healthcare.

The fund has already agreed investments worth £3.6m in five separate schemes, including:

  • the Community Generation Fund, which supports the development of renewable energy infrastructure, such as solar panels and biomass boilers, for local communities.
'Mask'

However, the importance of the new scheme should not be "over-hyped", according to Dan Corry, chief executive of New Philanthropy Capital and a former adviser to Gordon Brown.

Case study

Dai Powell

HCT Group is a social enterprise that offers school buses, park-and-ride facilities and some London bus services. Chief executive Dai Powell explains how it works:

"Social enterprise is a business that trades primarily for social purpose.

"We work in the market, we have to win contracts against the big commercial players, the only difference is what we do with the profits.

"[Big Society Capital] would enable organisations like ours [to grow]. In our sector, there hasn't traditionally been the same levels of finance as there has been in the corporate sector.

"The criteria on the investment is both social and financial. We can default on the investment if we don't provide the social aim.

"If we are very successful, we will pay between 10% and 13%... to the social investment fund, where the money will go back into social enterprise."

"I think Big Society Capital is a good thing, but it is a limited amount of money and it is a bit of a drop in the ocean, given what is happening to the sector, with the deficit-reduction programme really hitting the sector," he told BBC Radio 4's Today programme.

"It will mask the real problem: voluntary organisations who really do need grants and won't be able to cope with risk capital."

Mr Corry said that although there were many social enterprises that would benefit from the scheme, many charities would not, because they had no revenue stream that could be used to repay the funding.

"A lot of charities who are helping homeless people, for example, they don't get any revenue from that," he said. "For most of them, this is really quite irrelevant."

Labour's shadow minister for the cabinet office, Jon Trickett, welcomed the scheme, but said it needed to be viewed within the context of the pain caused by government spending cuts.

"The government should not over-claim at a time when over 70,000 jobs in the sector have been lost in the last year alone," he said.

"The voluntary and community sector stands to lose an estimated £1.2bn per year for the rest of this Parliament."

'Encourage charities'

The new investment fund is independent of the government and 60% of its shares are owned by the Big Society Trust, a private limited company comprised of executives from social, business and government roles.

Patrick Shine, executive director at FranchisingWorks: "Social enterprise is all about being business-like"

The rest of its shares are held by Barclays, HSBC, Lloyds Banking Group and the Royal Bank of Scotland.

The British Bankers' Association (BBA) stressed that people who had unclaimed money in bank accounts would still be able to get it back.

"Cash will be kept back for people who come forward and the BBA's My Lost Account scheme is there to help people search for their funds for free," said Angela Knight, chief executive of the BBA.

"We recognise people's growing interest in how their money is used and we are delighted to have been able to help make Big Society Capital work and enable banks and investors to combine financial return with social good."

 

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  • rate this
    0

    Comment number 321.

    I would like to ask the moderator exactly why my comment, 274, was removed. I checked the House Rules and I don't see how my comment broke them. All I did was to mention a concern about A4E and what happened there. I know this is Reactively-Moderated, so my comment was flagged by a poster here. Even so, I never broke a house rule.

  • rate this
    0

    Comment number 320.

    Having read the HMRC FAQs I can see how the money is not stolen but with the complexities of the reclaim fund monies put aside by say your Grandparents will only be borrowed without their, or your if it is your inheritance, permission. So will be asking to borrow the PMs Jag this weekend, oh no I don't have to he doesn't use it so its not stealing.

  • rate this
    -1

    Comment number 319.

    I can't believe you like money too, we should hang out

  • rate this
    +3

    Comment number 318.

    314. Sixp

    Bit like taking a fiver from someones wallet and giving it back if they notice. Not dodgy at all really."
    -

    It's nothing at all like that.

    It's actually no different to what happens to your money currently. Money in an account is used to finance loans to others. Money hasn't been "stolen" and it is returned upon request.

    Come on, this isn't hard. It shouldn't be facts < whinge!

  • rate this
    +10

    Comment number 317.

    £600 million might seem like a lot of money, but there are hundreds of thousands of UK charities, so, quite apart from the questionable nature of the source of this funding, its impact will be nil for 90% of the voluntary sector. Far more charities relied on providing services to local govt, etc, at cut-throat prices, and they're all going to the wall as a result of spending cuts.

  • rate this
    +2

    Comment number 316.

    The 'Big Society' is a good idea, however how many of you are prepared to be CRB check to take part? The current rules for dealing with the young and vulnerable mean you have to be CRB checked and I have not heard any mention of this in any of the advertising. Perhaps someone in the know can let me know if this will be the case.

  • rate this
    -1

    Comment number 315.

    36 "Be better to use the money to facilitate clawing back avoided tax"

    Tax has been avoided by people saving in pensions and ISAs. Is that what you meant? Shall we claw that back? Or did you mean tax evaded? Or if you meant other avoidance, can you give us examples?

    Or do you just chunter on about tax avoidance because it's the latest buzz phrase even though you don't understand what it is?

  • rate this
    -4

    Comment number 314.

    310.Statistician
    Unfortunantly that is a very good summary of the situation. The impartial facts (freely available) show that NO ONE IS STEALING ANY MONEY HERE
    --
    Bit like taking a fiver from someones wallet and giving it back if they notice. Not dodgy at all really.

  • rate this
    -5

    Comment number 313.

    If all the 'life's not fair' lefties bothered to do even a little bit of research before launching into their usual tirade against successful people, they would see that no individual will lose money as a result of transferring money from dormant accounts http://www.legislation.gov.uk/ukpga/2008/31/contents. Please also try and understand how banking works. You're naivety and ignorance is painful

  • rate this
    -19

    Comment number 312.

    Very decent plan, glad to see that finally the government wanting to force through something that might work! This big society thing might not be so bad after all. Would be nice to know what British society actual was though....

  • rate this
    +4

    Comment number 311.

    we used to have a community round here but the last tory goverment shut all our mines ,there is nothing now ,its jobs people want not soundbites

  • rate this
    +3

    Comment number 310.

    @301.Bossuk
    Unfortunantly that is a very good summary of the situation. The impartial facts (freely available) show that NO ONE IS STEALING ANY MONEY HERE as me and Mr Max have said repeatably. But people would rather ignorantly believe what they want to believe instead of weighing up all the facts and obtaining an informed and well thought out opinion on the matter.

  • rate this
    0

    Comment number 309.

    I am worried that this will turn out to be a money making SCAM because the government involvement. Who will be the real winners, I wonder!!

  • rate this
    +2

    Comment number 308.

    When I can choose to offer my time at either the local solar panel factory, local tree nursery, local food growing site, local resource recycling centre knowing what I do benefits myself and other individuals in my community both wider & local while not giving a free ride to anyone else irrespective of their cultural/social background then I will feel part of a worthwhile ‘big society’

  • rate this
    +3

    Comment number 307.

    287.JonE - "As long as charities have CEOs in charge of them this is a waste of money........"


    Your evidence/reasoning? Are you seriously proposing it'd be better if charity staff & volunteers just ran round like headless chickens all pulling in different directions...???

  • rate this
    +7

    Comment number 306.

    What happens when this money runs out and it will and fast.We are going to need much more help as this government is choking off the economy.
    I also think that this money belongs to some one some where even if its next of kin.

  • rate this
    +2

    Comment number 305.

    There's lies, damned lies and statistics!
    So, they take money that doesn't belong to them from private bank accounts. They lend that money to other people and then . . .? They pay the interest they take back into the account from which they first took the money?

  • rate this
    +3

    Comment number 304.

    whats the difference Dave uses our money to bail out the banksters anyway, its just a new way to do more of the same.

    281dothe maths
    I agree supprting Credit Unions more would help our current situation, but Dave can't take the credit for credit unions can he?????

  • rate this
    -3

    Comment number 303.

    This is a great idea and hopefully will reduce the large number of the idiotic "me, me mes" who demand their rights rather that getting on and helping. Well done Mr. Cameron

  • rate this
    +2

    Comment number 302.

    Wonderful idea but how do investors get a return on investment?

 

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