PM launches Big Society Capital

David Cameron's Big Society is about to get its own £600m loan fund. But do communities thrive on business terms?

by Dave Waller
Last Updated: 23 Jul 2013

The PM today launches a £600m fund to boost grassroots charity and social projects, with £400m coming from bank accounts that have been left dormant for 15 years. Say what you like about the Government and its financial priorities, but it knows how to dig for change down the back of the sofa when it needs to.

The idea behind the fund is to give some much-needed muscle to the PM’s Big Society campaign and prove that it’s more than just an ill-defined slogan, intended to help everything from charities seeking to expand their activities to local groups taking control of things like their post office (if that doesn’t sound too much like Richard Briers and Felicity Kendal wielding pitch forks in a stamp raid). 

The blurb is that having traditionally helped business to grow, the City will now be providing capital for ‘society to expand’. A further £200m will come from Britain's four largest high street banks – Barclays, Lloyds, HSBC and RBS ­– under the terms of the Merlin deal. The government would pay the fund some of the return on the fund's investments by giving it a cut of any savings the Treasury made thanks to the charitable work being financed. So if a prisoner support charity winds up reducing the reoffending rate of participants, then the government would pay the fund some of the money it had saved on putting them away.

So is it any good? They’ve certainly got the right heads on board – with former JP Morgan global head of research Nick O'Donohoe in the hot-seat. Meanwhile chairman Sir Ronald Cohen, founder of Apax Partners, has long pushed the philanthropic potential of investment activity.

Cohen says that the fund's aim was to create a ‘thriving market for social investment’. Which is where the skeptics will start asking the question of whether this is the right kind of language to use around charities and communities. To be eligible for the fund, a venture has to be able to demonstrate the ability to bring in a profit. Now it’s never a bad idea to force charities and social enterprises to tighten up their operations and prove their business models, but most charities and nascent social enterprises don’t deal with the kind of revenues required to dance with risk capital. And will those who do wind up getting seduced by the power of cash into making promises they may not be able to keep?

Still, it’s hard to argue with any way to pour more cash into circulation. The fund has already agreed investments worth £3.6m in five separate schemes, including Think Forward Social Impact, helping young people into work and education, Franchising Works, which trains the unemployed how to run a franchise business, and the Community Generation Fund, helping to develop renewable energy infrastructure for local communities. The only other question: isn’t £600m a Small Sum for a Big Society?

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