Backing the big society
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The Big Society bank has £600 million to prove a model that could transform entrepreneurship in the UK.
This week the Big Society moved from the realm of pleasing but woolly ideas into that of financial reality, with potentially big implications for entrepreneurship.
Big Society Capital has £600 million in its coffers, £400 million from dormant bank accounts and the rest from the four largest high street banks, as part of the Project Merlin peace treaty agreed with the Chancellor just over a year ago. It’s actually the result of over a decade of work, and has had the ‘Big Society’ label slapped on it rather opportunistically, but it does fit neatly into the current government’s social philosophy.
There is absolutely nothing woolly about the credentials of its management team. It’s being chaired by private equity godfather Sir Ronald Cohen, former chair of Apax Partners and a well-known advocate of social entrepreneurship. Its CEO is Nick O’Donohue, ex-JP Morgan global head of research, and CFO Keith Starling held similar roles at Gartmore Group and Credit Suisse.
The Big Society bank, as it’s popularly known, seeks to achieve both a social and financial return from its investments. That sounds like an excellent idea, and if it works, the concept can only spread, creating virtuous circles of entrepreneurship and raised aspirations in deprived communities and benefitting everyone through the resulting economic growth. So, what’s not to like?
Cynics could point to the difficulty of balancing social and financial objectives, which must be a bit like dancing on the head of a pin. Others argue that Big Society Capital is all well and good as a supplement to what the government and charities already do, but must not be seen as a replacement, since there some humane objectives that can never be served by commercial enterprises.
The funds will find their way to social enterprises through intermediaries, much of it in the form of debt. This raises a particular concern from Phil Shanks, housing director of the SAF Housing Real Estate Investment Trust, who writes in, ‘If the government really wants Big Society Capital to work it will have to provide a guarantee to secure the funding which services the loan.’ Without such a guarantee, the bank may be ‘left in the position of having to foreclose on a not for profit organisation’.
Despite these worries, Big Society Capital is an organisation that may have the resources and momentum to live up to its strapline – ‘transforming social investment’. It could go further than this and transfer entrepreneurship itself, at least in the UK, by opening the way for an increasing number of people, from all backgrounds, to take the plunge into business.