Dormant bank account bill leaves questions unanswered
Legislation has finally been introduced to Parliament that will see money from dormant bank accounts used to fund social works.
Estimates of how much the dormant bank and building society accounts bill will unlock vary widely from £400m to £2.8bn. Many social enterprises hope that £250m will be used to provide risk finance and investment to the sector -but there is no guarantee.
Since the dormant funds were first discussed, in the 2005 pre-budget report, the government has consistently said the priorities for spending in England should be youth services and financial inclusion. (Wales, Scotland and Northern Ireland will decide on their own priorities.)
However, extensive consultation in 2007 led to a groundswell of support for the idea of a social investment bank or ‘wholesaler’ to finance existing third sector lenders, allowing them to increase their reach. Of the 60% of consultation respondents who answered questions about the ‘wholesaler’ almost 80% were in favour.
Still, 63% of respondents agreed with the priorities as they currently stand. Only 11 % -a percentage that exactly correlates with the percentage of respondents from social enterprises -believed the ‘investment wholesaler’ should be given as much weight as the other two priorities.
The Community Development Finance Association’s deputy chief executive, Sarah McGeehan, said the progress was pleasing but ‘slower than expected’ and that the association was determined to keep pressure on the government to make sure the wholesaler proposal came to fruition.
The resources had come from the financial services sector and so should go back into risk finance and investment ‘instead of being used to prop up public services: said McGeehan. ‘That is a spend model, whereas a social investment vehicle recycles money -this is an opportunity for the government to create an endowment which is incredibly attractive: McGeehan said.
The bill proposes that grants for youth services and financial literacy be distributed through the Big Lottery. The government has not decided who will run the social investment wholesaler but it has suggested it could be contracted out by the Big Lottery to a third party.