Posts Tagged ‘big society bank’

Bye-bye big society – Cameron lets the Treasury kneecap the new bank at the heart of his big idea

18/02/2011, 07:00:30 AM

by Atul Hatwal

For months now, voices within the Labour party have been cautioning against writing off the big society. Thoughtful voices that look beyond the immediate rough and tumble of partisan politics. It’s been a staple from the emerging blue Labour stable that Cameron was on to something.

With the prime minister’s speech on Monday, we finally got to see some of the detail.

While the lipstick and eyeliner turn the head, underneath the party paint, this is an LRF – a low resolution fox. Looks great at the bar, but up close, things are not so hot.  For all the allure of the pretty words, the raw material is flawed.

The commitment at the heart of the big society that will make the warm fuzziness real is the big society bank. The Tory manifesto was very specific on what this bank would do:

“…provide new finance for neighbourhood groups, charities, social enterprises and other non-governmental bodies. This will provide social enterprises with the start-up funding and the support they need to bid for government contracts”.

As the government has faced-off against the big charities about cuts to grants, the story missed by most of the media is that the big society bank is being set-up specifically not to deliver their manifesto pledge.

The charities aid foundation, a leading sector finance provider, has signalled the danger:

“We are concerned that if the funds are only made available on a commercial basis the interest rates could be too high for many charities and social enterprises…”

The operative words are “on a commercial basis”.

Over the past few years I’ve worked with many charities on their financing arrangements, several that were in the room on Monday, and one thing is crystal clear: a commercial return is impossible to deliver on most public service investments.

The consultation paper is vague on what the rates of return will be, but in the current social investment market, “commercial basis” means a minimum 25% on a typical investment. Factoring in the inherent risk associated with a sector that is feeling the full weight of the cuts and the size and financial track record of the organisations involved, this can easily head north of 40% – that’s if they consider the investment at all. (more…)

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