Get it right, and the Big Society bank could be massive

4 April 2012

Michael Dugher is only half right when he tweets that you know the government is in trouble when it dusts down another Big Society announcement. The idea, in principle,
is a good one, or at very least it is an interesting and important experiment in finding new ways of funding public services. Sir Ronald Cohen, the chair of Big Society Capital, was once a close
ally of Gordon Brown and much of the thinking in this area happened in the New Labour era. There is no need for this to become a party-political battleground. The real question is, will it work? Or
is it another example of boom-time policy making that will prove unfit for purpose in harder times?

For a start, the government needs to get its message on this clear. Big Society Capital will not save charities now facing closure because of the withdrawal of local or central government grants.
This is about creating a whole new culture of social investment that should probably not be called charity at all. Those encouraged to invest under the new models developed by Big Society Capital
will be expecting a return. This is not philanthropy.

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Much of the explanation of the social investment proposed by Big Society Capital has been opaque, but there is a good explanation from Oliver Wright in today’s Independent.
Charities will not apply direct to Ronald Cohen’s outfit for loans. BSC will put its £600 million into specialist investment funds such as Big Issue Invest, which will in turn invest in
charities and social enterprises.

But it’s not even as simple as that. As Ronald Cohen made clear on the Today programme, what he really wants to see is
the development of a market in social impact bonds, which would pay out a proportion of savings made to the exchequer on social projects such as youth employment or prisoner rehabilitation schemes.

This scale of change proposed by the Big Society Capital model is massive. Traditional free-market Conservatives might ask why social impact bonds don’t already exist if they are such a good idea.
As with the government’s health and welfare-to-work reforms, the paradox is that the creation of market models involves the intervention of central government in unprecedented and untested ways.

The point is that no one knows whether this neo-liberal Utopianism will work. But its advocates will need to explain it more clearly before individual or corporate investors can be expected to sign
up with hard cash.

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Show comments
  • Guru McKenzie

    …the Big Society bank could be massive…

    Er, it won’t be !!!

    The Big Soc. is a triumph of brand over product

    The concept and the idea are not supported by sufficient funding and logistical support

    It’s a piece of snake oil spin that the public saw through very, very quickly

    It is being allowed to slowly die as its inventor skulks off to Calif.

  • E Hart

    The idea is laughable. Why would people who avoid tax, stockpile wealth and have little or no interest in redistributive acts be particularly interested in giving to charity? This is a prima facie case of hands in pockets. Indeed, a mathematician interested in starting a charity some time ago – contacted members of the Forbes 100 and solicited 25k donations from each – donations they wouldn’t notice. He received a couple of nice letters explaining why it wasn’t possible and got nothing. He asked a man at random in the street for a donation and received US$25.

    For this reason, I’m out. There is a fundamental contradiction in the idea that those who favour the inequitable would work to establish the opposite.

  • Fergus Pickering

    I hope you are right, Martin. Since this is financial stuff I don’t understand it at all and my wife has not yet explained it to me in ordinary English. Financial English is quite impenetrable.

  • Yow Min Lye

    “Big Society Capital will not save charities now facing closure because of the withdrawal of local or central government grants”.

    But surely, turning voluntary organisations into public money junkies and their volunteers into paid agents of the state – as New Labour did – cannot be called ‘charity’ either.

  • Ralph Savage

    I commend all efforts to bring private sector investment to do a public good; the real problem is and always will be the transient nature of policy decisions made by government. Unless they underwrite the risk that they themselves may at any time remove the central or local government funding from which these social enterprises must repay their loans, I don’t see how Big Society Capital can provide financial support at affordable rates.

  • Richard

    That makes it a bit clearer, but I still can’t say I understand it fully.

  • Archibald

    “There is no need for this to become a party-political battleground.”

    Martin, I don’t mean to be rude, but have you gone f**king mental? This is pathetic, petty childish Britain we’re living in, where the role of the opposition is to say whatever is proposed is shit – regardless of its merits – and hope that it fails even if they’d do something virtually identical. Politics in the UK ceased to be about what benefits the UK a long time ago, such that those rare politicians who work across party divides on certain issues are often denounced or bad-mouthed by their own parties. Parties care about power and their own ideologies regardless of if these views work in reality, Labour is probably the worst for this, and they would pick government failure to allow them power over great success for the UK every day of the week, every week of the year, despite often minimal differences in policy. This is why ‘none of the above’ is the largest group of potential voters in the UK. You really show know this already, you must be supping wine and listening to John Lennon’s ‘Imagine’ again.

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