The Government has launched a £600m Big Society Capital bank to “help society expand” by supporting social enterprise projects. But, as is all too often the case, the devil is in the details.
Around the time of the 2010 General Election, talk of the ‘big society’ seemed to engulf political journalism despite being, as Guardian journalist Simon Hoggart wrote, “Surely the vaguest slogan ever coined by a political leader. Nobody knows what it means.”
Following the coalition government’s election win, the big society appeared to slowly slip down the agenda. Until this week that is, with the announcement of a £600m bank that aims to put into practice the policy that arguably won the Conservatives their place at No. 10.
“For years, the City has been associated with providing capital to help businesses to expand”, Prime Minister David Cameron claimed yesterday.
“This is about supplying capital to help society expand. 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.”
Big Society Capital, as it’s called, aims “to build a sustainable social investment market to help social sector organisations increase their impact on society”.
Summoning £400m from dormant bank accounts, with an extra £200m provided collectively by the ‘big four’ high street banks – Barclays, Lloyds TSB, HSBC and the Royal Bank of Scotland, the fund will invest in social investment finance intermediaries (SIFIs) to help fledgling social organisations expand and prosper.
“Big Society Capital is going to encourage charities and social enterprises to prove their business models – and then replicate them”, Cameron added.
“Once they’ve proved that success in one area they’ll be able—just as a business can—to seek investment for expansion into the wider region and into the country.
“This is a self-sustaining, independent market that’s going to help build the Big Society.”
The announcement has been met with scepticism by many. Julian Parrott, partner at Ethical Futures, told Blue & Green Tomorrow that whilst the Big Society Capital was, in principle, a “welcome development”, it was “really only a halfway house”.
He adds, “At present [it] is still in the realms of specialist lenders such as Triodos, Unity and Ecology Building Society and not mainstream banking.
“The ‘socially motivated investors’ still seem to be the ultra-wealthy and philanthropists or the depositors in the aforementioned organisations.
“I would like to see much more work into ways to move access to this sort of investment down to a much more manageable, personal scale so everyone could put a social impact investment in their ISA.”
Tying into this, the big society has not been short of criticism. In a Guardian article from 2010, Hilary Wainwright wrote, “Without economic democracy, decentralisation of political power will reinforce inequality, shifting power not “from the state to working people” but to those who already have the money, social networks and time to make the system work for them.”
An editorial piece by the same newspaper said how the big society “contains some decent notions, but they quickly fray when stretched into an overarching philosophy”, whilst David Blanchflower described it as “nothing more than a thinly disguised cover for a Thatcherite attack on the state” in The Independent.
Another dubious point that seems to have been overlooked by the mainstream media is the people running the fund—namely, Nick O’Donohoe and Sir Ronald Cohen.
O’Donohoe was a member of the executive committee at JP Morgan Chase, where he worked for 15 years. The company received significant criticism for its role in financing American energy company, Enron, during its demise in 2001.
JP Morgan Chase was ordered to pay $2.2 billion in fines in 2005, as well as several other sums before that.
Sir Ronald meanwhile, is the founder of Apax, a private equity firm whose dealings have come under scrutiny on a number of occasions.
Choosing these two men to front Big Society Capital, given their pasts, doesn’t really scream “society expansion”.
It’s hoped that the bank’s foundation will make it easier for social enterprise groups to gain access to long-term capital. Only time will tell.
Other government projects such as the Green Investment Bank and the Green Deal have similarly promised much but encountered stumbling blocks or disappointed. It’s important that Big Society Capital keeps its head above water both financially and morally.
Fears of alienation at an individual or community level are anticipated. Indeed, in the search for social equilibrium, private sustainable investment emerges as one of the most effective solutions.
Ask your IFA about social investment or, if you don’t have one, fill in our online form and we’ll guide you through the process.