David Cameron's Big Society bank becomes reality

10 April 2012
WEST END FINAL

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David Cameron's vision for a Big Society bank became reality today, with the first investment set to help disadvantaged young people into work or education.

The bank, now relaunched as Big Society Capital, is set to receive £600 million in equity capital in the coming months - £400 million from dormant bank accounts and £200 million from the big four UK high street banks.

It is aimed at giving socially orientated financial organisations greater access to affordable capital, so they can in turn help charities, social enterprises and voluntary groups.

The Big Lottery Fund is to make the first investment, worth £1 million in principle, to the Private Equity Foundation, which provides children and young people with basic skills, emotional support and help to gain employment.

The four banks - HSBC, Royal Bank of Scotland (RBS), Lloyds and Barclays - have now formally committed to invest £200 million in Big Society Capital as part of the Project Merlin agreement.

The rest will be funded from unclaimed assets left dormant in bank and building society accounts for more than 15 years.

But the Government first needs the European Union to approve plans to allow the new body to use the dormant accounts, under state aid rules.

Cabinet Office Minister Francis Maude said it was a "grindingly slow, tiresome process" but he believed there would be "no show-stopper problems".

He added: "In the unlikely event that they said no, we would need to look again at how we get the dormant bank account money, the unpaid assets - around £400 million in total - how we continue to get it into the social investment market."

Sir Ronald Cohen, non-executive chairman of Big Society Capital, said he was "convinced" he would get the go-ahead from the EU.

He said the new body demonstrated that Britain was "on the cusp of a revolution" in social investment, and although it was a "10- to 20-year project" he expected to see results within five years.

The organisation could support "myriads of efforts" such as helping teenagers to find work, exploring ways to deal with homelessness, and raising capital to support "chaotic" families, he added.

Mr Maude said: "There are few moments like this when something happens that can really change the world.

"We've all heard about a small charity or social enterprise sweeping away entrenched local social problems. But we have not seen a significant commitment to help social innovations grow and be implemented on the national stage until now.

"Big Society Capital will undoubtedly change this and unlock the money that charities and social enterprises need to grow when a big opportunity comes along."

In a joint statement, the heads of the four banks said they were "delighted" to support the project.

"This is a ground breaking initiative with the potential to be the catalyst for creating a sustainable social finance model in the UK," they said.

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