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Revealed: Banks to profit from Big Society


5:10 pm - February 9th 2011

by Don Paskini    


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In the latest attempt to save the floundering Big Society, David Cameron announced today that “the big society bank will be taking £200m from Britain’s banks to put into the voluntary sector.”

Sounds good, right? Money being taken from banks and given to charities?

But here’s the small print:

“Fourth, they will support the establishment of the Big Society Bank to act as a sustainable provider of wholesale finance to social investment intermediaries, including, subject to objectives, business plan and structure, the injection, on a commercial basis, of £200 million of capital (and, thereby, funding) over two years, commencing in 2011.”

So instead of millions being “taken” from the banks, the money will be provided on a commercial basis.

The banks will end up making a profit out of loaning money to charities which are desperate for cash as a result of the government’s savage cuts in public spending.

What an utterly pitiful and desperate policy.

(hat-tip @tobyblume from Urban Forum)

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About the author
Don Paskini is deputy-editor of LC. He also blogs at donpaskini. He is on twitter as @donpaskini
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Reader comments


Oh and bear in mind that the Big Society bank is not about giving money to fluffy kitten charities. The sole purpose of this bank is to provide the start up funds for “charity, voluntary and independent sector” providers to take over public services.

So if you fancy providing the cataract surgery at your local NHS hospital you:

1) set up a social enterprise using Big Society Bank money to pay for your smart uniforms, equipment and lawyers; then
2) get your lawyers to use competition law to force your local NHS hospital to stop doing cataracts and give you access to their theatres

The Big Society Bank is Cameron’s privatisation bank.

2. DisgustedOfTunbridgeWells

“So instead of millions being “taken” from the banks, the money will be provided on a commercial basis. ”

Do you prefer on an uncommercial basis?

You know, theft from the shareholders then?

@3

Do you prefer on an uncommercial basis?
You know, theft from the shareholders then?

No taxed. That’s legal, but it is not “commercial basis”.

5. Luis Enrique

hang on … a charity can approach a bank to borrow money at the moment, and if their credit is good, they get charged the going commercial rate.

so what’s this Big Society Bank doing? Perhaps it’s doing concessional lending – that is, below commercial rates, on non-commercial terms. (this is just my guess, otherwise I can’t see why it would exist). If so, somebody is stumping up £200m and getting lower returns on it than they could get elsewhere. That opportunity cost – whatever it is – represents what the banks are giving up to invest in Big Society.

5/Luis Enrique: The banks could loan the BSB money at a commercial rate. The BSB could loan the money to charities at a reduced rate. The government would then only need to pay the difference in the resulting repayments, which would be relatively small.

Potentially a very cheap way of giving affordable loans to charity at relatively little direct cost to the government, without the need for the government to directly force the banks to provide lower-interest loans.

And it’s the government, not the banks, paying the opportunity cost on the money in that case.

7. Luis Enrique

cim,

that’s just a rather convoluted means of having the government subsidize loans to charities … is there any reason to think that’s what’s going on?

@cim/Luis

Don’s quote suggests that there will be a circuitous funding mechanism: “Fourth, they will support the establishment of the Big Society Bank to act as a sustainable provider of wholesale finance to social investment intermediaries…”

To me, intermediary means that there is somebody between the Big Society Bank and the recipient.

@Cim/Luis/Charlieman

I think the intermediary institutions will be exactly those that do this lending to charities/soc enterprises at the moment. See, for example, http://www.futurebuilders-england.org.uk/

What Futurebuilders, an operating name of The Social Investment Business does that is different to high street banks is fund organisations without collateral. They do so – you’ve guessed it – to organisations aiming at delivering public services via contracts from the public sector. I got 200k loan at commercial rates, though with a two year repayment holiday, to open a community nursery; I wangled the eligibiity criteria (delivering public services) by arguing that because we would claim Nursery Education Grant for some sessions, and also because peopel would claim working tax credit (childcare element) we were in effect a public delivery agent, but the reason I went there was simply the collateral issue; I didn’t want to put my own house at risk for a venture I was doing for philanthropic reasons rather than personal income, so I set up a Co Ltd by G without shares to fit the bill. There was also a small development grant which helped a bit (just to get architects ad planning stuff, and some more support from F’builders officers than you’d get from a bank, though we didn’t really need that.

All in all it’s a good scheme but it’s a bit rich for Cameron to say this is all new. It’s been happening for ages and is well understood as a way forward in the voluntary sector. The money is coming from commercial banks rather than from a) the treasury b) Charity Bank (50/50 split, I think) but it’s all the same stuff really, and the Tories could simply have let the Treasury keep on funding it rather than have this huge hiatus (Futurebuilders is closed to applications now). Defaults have been very low because only decent, well governed bodies with decent business plan get the money anyway. That’s well-known in Treasury, but there was a political choice to cut it so that it could be rebranded as this new stuff.

The person who wrote this article clearly knows absolutely nothing about how the bsb will work (or for that matter how the social investment wholesale bank that labour planned was meant to work). The article suggests that banks bill earn interest on the money leant to voluntary organisations. It could not be more wrong. In reality, unclaimed assets will be reclaimed from the banks (by the coop), this money will then be passed onto the bsb. The bsb will then distribute this money through intermediaries to voluntary orgs. The loans and interest will be paid back to the bsb who will use the money to finance more organizations. At no point do the banks get the money passed back to them! Indeed, one of the main worries is that the banks will not give up the unclaimed assets they have. There are enough problems with the bsb for this website not to have to make up total crap!

Nick, the £200 million is capital the banks are putting in over two years and is in addition to the money from dormant accounts. The dormant accounts will provide £60-100 million? Can’t see the problem with this capital being provided on a commercial basis. Maybe Don thinks the banks get the capital from the tooth fairy. The money from dormant accounts is actually on the low side because the money lying around in dormant accounts that people have just forgotten about is in the billions.

Right you are! Should have looked a little more carefully. Apologies!

I agree though, the principal problem is that the estimates for dormant bank accounts are much too low

Forget about Lord Oakeshott standing down in disgust:

Lord Oakeshott quits over George Osborne’s banking deal
http://www.guardian.co.uk/politics/2011/feb/09/lord-oakeshott-quits-banking-deal

Try the assessment in the FT instead:

Just the facts: how Project Merlin stacked up
http://www.ft.com/cms/s/0/dc932182-3499-11e0-9ebc-00144feabdc0.html#axzz1DVZyRkGE

savage cuts….how amusing

We DEMAND : RIGHTS NOT CHARITY!

Black Triangle – Anti-Defamation Campaign In Defence of Disabled Claimants

http://www.facebook.com/blacktriangle1

@Tim no it wouldnt be ‘theft’ from shareholders since we have been led to believe that its to finance some charity based idea?..anyway whats wrong with ‘theiving’ from them. the’yve been doing it to everyone one else for years..

someone’s job is to kick homeless people, then claims wear and tear on their boots…

RACIAL DEMOCRACY VOTING WYSIWYG
“One Race One Vote”
“Integrate the Segregated”

Racial Democracy redefined as “VOTING WYSIWYG” with “Race Codes” by the Race Equality Inspectorate.

Could you be a representative of your “Racial Constituency” ?

Can “VOTING WYSIWYG” work with “BIG SOCIETY”?

http://raceequalitysecretservice.blogspot.com/2011/01/racial-democracy-one-race-one-vote.html


Reactions: Twitter, blogs
  1. Liberal Conspiracy

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  2. Mark Worgan

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  3. Chris Butler

    RT @libcon: Revealed: Banks to profit from Big Society http://bit.ly/gHzukX < anyone suprised ?

  4. Andy Bean

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  6. ---

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  7. ally

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  8. Toby Blume

    RT @donpaskini: @tobyblume thanks for that, have done a quick article for @libcon about the Big Society Bank con http://bit.ly/gHzukX

  9. overhere

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  10. Don Paskini

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  11. steve...

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  12. Hannah Horton

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  13. Stuart Plummer

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  14. richard caulfield

    RT @donpaskini: @tobyblume thanks for that, have done a quick article for @libcon about the Big Society Bank con http://bit.ly/gHzukX

  15. sunny hundal

    Turns out Cameron's plan to take £200m from banks and put into Big Society involves giving that back to banks http://bit.ly/gHzukX

  16. Ed Gerstner

    Ha! Turns our #BigSociety is just a cash cow for the Tories' friends in the City. How nauseatingly unsurprising. http://j.mp/f0b6hM

  17. salardeen

    RT @libcon: Revealed: Banks to profit from Big Society http://bit.ly/gHzukX

  18. Neil Hawkins

    Big Society Bank is a load of bollocks http://j.mp/dMKzbz

  19. Simon Barrow

    Turns out Cameron plan to take £200m from banks & put into Big Society involves giving it back to banks http://bit.ly/gHzukX @sunny_hundal

  20. Pucci Dellanno

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  21. Jim Medway

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  22. twuncut

    RT @libcon : Revealed: Banks to profit from Big Society http://bit.ly/gHzukX <<>> vile.

  23. Dave Conroy

    RT @donpaskini: @tobyblume thanks for that, have done a quick article for @libcon about the Big Society Bank con http://bit.ly/gHzukX

  24. Chris Patmore

    RT @sunny_hundal: Cameron's plan to take £200m from banks and put into Big Society involves giving that back to banks http://bit.ly/gHzukX

  25. Ian 'Cat' Vincent

    Revealed: Banks to profit from Big Society
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    One to add to those two articles yesterday… RT @catvincent Revealed: Banks to profit from Big Society
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  27. Pauline Hammerton

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  28. Nick H.

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  29. Noxi

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  30. Juliet

    Revealed: Banks to profit from Big Society | Liberal Conspiracy http://t.co/J9s6Ayq via @libcon

  31. Brian Moylan

    Revealed: Banks to profit from Big Society | Liberal Conspiracy http://t.co/6dswMDQ via @libcon #ukpolitics #tories owe the #bankers

  32. Liz K

    RT @libcon: Revealed: Banks to profit from Big Society http://bit.ly/gHzukX

  33. Brian Moylan

    Revealed: Banks to profit from Big Society http://bit.ly/gtZHz3 via @LibCon | #BigSociety: #tories owe the #bankers as #sponsors #ukpolitics

  34. ligomersall

    Revealed: Banks to profit from Big Society | Liberal Conspiracy http://t.co/AYxNQWu via @libcon

  35. Brian Moylan

    Revealed: Banks to profit from Big Society | Liberal Conspiracy (@libcon) http://bit.ly/gtZHz3 #BigSociety = #tories repaying #sponsors

  36. Antique Glassware | DEPRESSION GLASSWARE

    […] the item for profit.  If there is no demand for the item, the chances that you will see a profit from it are slim.  However if you are less interested in making a […]

  37. The Big Society Bank and the myth of lending risk « Though Cowards Flinch

    […] Peston’s only repeating what I pointed last week , when the new £200m investment from the mainstream banks got its first […]

  38. Sarb S. Athwal

    @sunny_hundal Big Society? and the Banks are still at it. http://bit.ly/gn8fVA

  39. Move Your Money UK

    The Big Banks are set to profit from the #BigSocietyBank http://t.co/a9S7T9u1 @LibCon

  40. Nell Crowden

    The Big Banks are set to profit from the #BigSocietyBank http://t.co/a9S7T9u1 @LibCon

  41. Diversity in Soc Ent

    The Big Banks are set to profit from the #BigSocietyBank http://t.co/a9S7T9u1 @LibCon





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