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 481.

    478. ClaudeBalls
    So which are the simple lies and which the complex truths?

  • rate this
    +2

    Comment number 480.

    I find it fascinating that some British citizens can leave a total of £600M lying in bank accounts for 15 years or more. More fascinating that there is not a law requiring banks to remind them of their deposits, perhaps at 5-yearly intervals.

    What will happen when these citizens or (their heirs) read this, check, and demand their money back? Will they rename it Big Society Bankrupt?

  • rate this
    -2

    Comment number 479.

    446 "Sigh" taking without consent is stealing no matter how you try to justify it. That is the definition of stealing."

    If you read the Act quoted at #441 you'd see that the money still belongs to the depositer. It has not been taken. Nor is there an intention to permantly deprive the owner.

    You are arguing out of sheer ignorance and a refusal to read up on the sbject.

  • rate this
    +1

    Comment number 478.

    There's an old adage in politics. A simple lie is more persuasive to many than a complex truth. All you have to do is to read boards like this to see it writ large. The problem with this, of course, is that most of our problems are complex and therefore require complex solutions. So what chance have you got?

  • rate this
    0

    Comment number 477.

    455.Statistician - "......We gave solid facts but no one is interested in truth and common sense."

    Agree with the need for facts to be sacrosant, but it really is time this business about "common sense" existing in any meaningful sense was done away with:

    http://www.newscientist.com/article/mg21128210.100-the-human-paradox-that-is-common-sense.html?full=true

  • rate this
    +2

    Comment number 476.

    473. Dr Bob Matthews

    Read the article again... it's not theft. The money can be reclaimed.

  • rate this
    +1

    Comment number 475.

    455. Statistician
    You are correct in your description of normal banking procedures. What seems to concern many people, however they express it, is that this proposal is substantively different and therefore falls outside those procedures.

  • rate this
    0

    Comment number 474.

    okay guys i hate politicians because they all lie, cheat and steal and now they will spy on me as well.
    but the money in the accounts will still be available to the depositor if they ask for it back. in this case it is not theft. where that money goes however is something that will undoubtedly be highly dubious and probably only benefit dave's pals

  • rate this
    -1

    Comment number 473.

    I cannot see any merit whatsoever in State sponsored theft. Should you find money in the street & do not hand it over to the Police it is theft, i.e. you are depriving the legal owner of his money. The banks of course think differently, they find accounts with no movement for X years & hand over the capital, having probably of course pocketed any interest. how very convenient fro Dave & his chums.

  • rate this
    +3

    Comment number 472.

    If it is OK to take possession of dormant bank accounts, how about taking possession of dormant land? If it's not being actively farmed or built on, let's take it for the nation. Of course, that's different, because that land is owned by Cameron's rich friends and not OAP's with dementia.

  • rate this
    +1

    Comment number 471.

    Is it me or is everyone sick to the back teeth of these Government hairbrain schemes that cost us the taxpayer for them to invent.

    Things are simple:

    Jobs for the young
    pensions for the old
    No money for the lazy
    decrease tax on Fuel
    buy back utilities and run for non profit
    Big business pay teh tax they should
    support uk manufacturing and farmers

  • rate this
    -1

    Comment number 470.

    Down to raiding bank accounts now.

    You can always trust the tories eh.

  • rate this
    +4

    Comment number 469.

    After all this time, the "Big Society" Masterplan is revealed. Dormant bank accounts are to be raided for charity. With a 0.01% "Banking Levy", it's rather insulting. What about the burgeoning accounts of investment bankers ? "Tax the Wealth", yeah right ! And what message does this give to people ? I'm not impressed. At least Lara Croft raids the tombs with style. Cones Hotline anyone ?

  • rate this
    -13

    Comment number 468.

    Why are people complaining?

    If the money is uselessly sitting there... put it to some use. £600 million may not be a lot in the greater scheme of things - but it's better than nothing.

    It's not confiscated... just used until it's reclaimed. Where's the problem?

  • rate this
    0

    Comment number 467.

    458@Bossuk
    It may well be that many of us suspect any and all "ideas" for "improvement" that come from the Tories& Business.Tories and Business care only for profit and seek at all times to destroy those who are not in their "club" I would not condem a rabid dog on the word of a business owner. Business and Tories have no moral compass.Their code is greed and devil take the hindmost.

  • rate this
    +2

    Comment number 466.

    I think Mr Cameron needs to worry about a lot bigger fish than the big society.

    For the psast 5 years everything i pay has gone up between 5-10% per year with food and petrol even more and NO Wage rises or bonuses.

    If this continues there will be serious issues in this country! resolve this Mr Cameron

  • rate this
    0

    Comment number 465.

    455. Statistician
    I guess ignorance wins in this particular discussion. We gave solid facts but no one is interested in truth and common sense.

    No solid facts at all. Theft is an intention to permanently deprive the owner. Taking all the money out of someone's account would seem to fit that definition. If no evidence of the account exists, how can anyone claim the money back?

  • rate this
    0

    Comment number 464.

    Oh dear i really dont think i can take anymore!!!

    This would be a good idea if only we knew where exactly mr dictator cameron would send these funds.

    i smell another rat or am i just synical? judging by your lots posts, no.

    at least this measure does not infringe on the tiny shred of liberty i still have perhaps that in its self is a cause of celebration.

  • rate this
    0

    Comment number 463.

    450 See Dubya - Under BCOBS regs Banks are required to send annual statements as a minimum to account holders. They also have a requirement to keep Customer Data (incl address) up to date through JMSLG Anti Money Laundering Rules. Therefore you should know about any accounts you have.

  • rate this
    0

    Comment number 462.

    @459.Dai

    I see. When I look at the stuff I'm involved with it either doesn't generate income or it's a straight forward charity thing and could not benefit.

    I don't really see a connection between this activity and fixing 'broken Britain' yet. If BS takes off that may emerge. The enthusiasm to volunteer is there I think.

 

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