Good and less good things about the Big Society Bank
The independence of the Big Society Bank is good, but its large size may be a problem, says Rod Schwartz of ClearlySo
As the Prime Minister, David Cameron, launched his latest defence of the big society programme last month, he cut a distinctly solitary figure, standing against a sea of hostility. Yet lost amid this debate were some encouraging details about the Big Society Bank.
He was unveiling the government’s new strategy document on the bank, mindful of the concern that has been mounting about the progress of this particular grand scheme.
The 63-page document shines a bit more light on the details: the bank, we are told, will be wholesale; it will not make direct investments in front-line social enterprises but will seek to fund services provided by intermediaries; it will be independent and will have freedom to construct its own investment strategies; it will not give grants; and it will be expected to cover its own costs.
It will also benefit from £200m in start-up capital from the high-street banks, to complement £100m from dormant bank accounts.
We also have more details about the timing. It was originally planned to have it up and running by April this year, but rumours of delay have dogged its development. The new document promises that "aspects of the bank" will be operational by April, with the first funds expected to be released in the middle of this year.
Most of this seems positive, and I’d profess myself to be mildly in favour of it. We should remember that this project is the first of its kind. This is a chance for the UK to take a leading global role and create something that could be replicated elsewhere.
The independence of the bank is to be welcomed, as is the government’s expressed desire not to distort the market by competing with existing intermediaries.
While some might be frustrated by apparent delays and vagueness about detail, I prefer to view these in a positive light. It’s refreshing for a government to admit, for once, that it does not know everything. It appears to be open to consultation and willing to learn from those players who are already in place.
Even so, there are still questions that remain unanswered – in particular, in relation to the final size of the bank. The £200m from the banks – "at commercial rates", whatever is meant by that – seems, in wider investment terms, like pocket change. However, the social enterprise sector is still in its earliest stages of development.
Considering that about £200m was the total devoted to social investments in 2010, this new bank will be huge. While this prospect has caused excitement across the social business and enterprise sector, we must be cautious. There is a danger of snuffing out the fire with too big a log. I hope to see the bank work with the sector that is already there. If it stomps in with the big boots of government, it risks distorting work already begun.
Remember, the social business and enterprise sector was growing long before the Big Society Bank. It’s important that this entity serves to accelerate processes already under way. If the bank assumes a dominant position in the sector, it risks inflicting more harm than good.
Rodney Schwartz is chief executive of social venture capital website clearlyso.com