Big Society Bank raids dormant accounts for funds
15 February 2011

Minister for the Cabinet Office Francis Maude and Minister for Civil Society Nick Hurd have unveiled a new strategy to grow the social investment market which underpins Prime Minister David Cameron's 'Big Society' idea. The strategy explains the role of the Big Society Bank in attracting more investment from wealthy individuals, charitable foundations and ultimately socially responsible everyday savers in social ISAs and pension funds. It will ultimately be financed by an estimated £400million from dormant bank accounts, accessing up to £100million in its first year, as well as an additional £200million given by the UK’s largest banks. It will act as a wholesaler and use its balance sheet to co-invest, underwrite or guarantee investments along with private sources of capital.

The Big Society Bank will help economic growth by supporting Social ventures which already contribute to around 1.5% of GDP. In its strategy, the Government calls for the development of broader market infrastructure including piloting a social stock exchange and developing better measures to quantify the social value of investments made. Sir Ronald Cohen and Nick O'Donohoe will advise the Government and work with the banks on setting up the Big Society Bank. The three main strands of the Big Society are devolving power to citizens and communities, reforming public services and supporting social action. The Big Society Bank will help drive success across this agenda.

Francis Maude, Minister for the Cabinet Office, said: "The Big Society Bank will massively expand finance for social ventures, creating a new source of finance alongside philanthropy and public service contracts. It’s unthinkable for businesses to grow and thrive without capital finance but this has too often been the reality for charities and social enterprises.

“Our Big Society reforms mean charities and social enterprises will have the chance to deliver more public service contracts. Also, local people will want to use new powers to take over failing community assets like pubs and post offices. The Big Society Bank will be there to meet the increased demand for capital.

“The Big Society is about everyone getting involved which is why we want to make sure there are good opportunities for everyday savers to take part in social investment, eventually making social investments as part of their ISA, for example. We are also looking to the wealthy to make sure they have balanced investment portfolios as well as unlocking some of the £95billion charitable assets for social investment."

The products showcased included:

• Charity Bank, who are developing a solution for charities to issue unsecured bonds in a standard form and at scale;
• Finance South East with Resonance, who are launching a fund to attract business angels to invest in social enterprises;
• Fair Finance, whose successful lending to financially excluded individuals will roll out across London, by securing a significant injection of social investment.

The Prime Minister announced in July last year that 100% of dormant account funds for spending in England would be used for social investment. The Government is working to secure the State Aid approvals from the European Commission that are needed in order to capitalise an independent Big Society Bank with public money and to provide it with the flexibility it needs to grow the market. In advance of this, Government is working with the Big Lottery Fund on interim arrangements that will enable investments to be made as soon as dormant accounts money becomes available in the summer.