Big Society Bank delayed until 2012
July 2011
Big Lottery has had to step in and start funding some social enterprise projects as Big Society Bank will not be open for business in July
In a twist of irony for a government that has set itself targets for ‘thickets’ of bureaucracy, dealings with European regulators over the state aid rules, along with ongoing talks with British high-street banks have pushed back the launch of Big Society Bank. This emerged from remarks made by Sir Ron Cohen, the Cabinet Office’s adviser on funding social projects, at the Public Administration Committee’s (PASC) meeting, ‘Smaller government, bigger society’ which met on Tuesday, 14 June 2011.
The full transcript of the proceedings can be viewed online and provides a very helpful update on all the key issues surrounding Social Impact Bonds and Big Society Bank.
[i]
Background to Big Society bank
Stephen Bubb’s comprehensive article ‘
A new financial landscape’ in Caritas, March 2011 sets out the gestation and remit of what has been a long-awaited social investment bank and a useful summary can be found in the chapter 5 (page 37) of the Cabinet Office’s report,
Growing the Social Investment market: A vision and strategy.[ii]
State aid legislation and other hold-ups
Cohen told the PASC that the Big Society Bank’s opening target of July 2011 would be missed “by a matter of some months” because of delays from the Cabinet Office in steering it through the complexities of EU state aid in financing public service provision legislation (in place to prevent the warping of the rules of competition between member countries). He said he encountered exactly the same thing with Bridges Ventures, his own organisation, and that he was confident that not only would the necessary permissions be given but that “the EU will turn out to be a big proponent of social investment.”
He also explained that the other complications was that the government had no agreement with UK banks the £200m of funding they had agreed on as part of the Project Merlin settlement, and that these details were still being sorted out.
In the meantime and agreement has been signed with Big Lottery so that it could fund some of the projects that Big Society Bank would eventually take over.
Long-term delivery
When he was reminded that nine out of ten new enterprises end in failure, he countered with the response that everything ‘involves a risk’ and that failure in social enterprise was a form of philanthropy anyway. However, Cohen is a seasoned venture financier who does not set out to lose money. He added: “we see our objective as getting the social sector going. We have to preserve the value of our capital in doing it but we don’t have to maximise its value – we would like to be proactive.”
Cohen was confident of the Social Enterprise Bank’s long-term viability, explaining that real success could take ten or 20 years to materialise with cash positivity projected in seven years’ time.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from Cass Business School. She has been one of the judges for the non-profit category of the Chartered Institute of Marketing's Excellence in Marketing Awards for the second year running.
She has also acted as clerk to the trustees of a small almshouses charity and as a member nominated trustee to a pension scheme of a multinational publishing company.
Click here for other articles written by Clarissa Dann
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