Big Society Bank Busting

I hate to have another anti-government post, but after seeing the news yesterday I felt compelled to have a say on the proposed 'Big Society Bank' (BSB) being created by the government.  At first, along with the green investment bank being created this sounded like a good idea.  However having looked at the detail of the proposals I have some major concerns over whether this is really the best way to promote social entrepreneurialism in the UK.

One immediate area of funding is the proposed raiding of dormant bank accounts with money that has most likely been forgotten about.  In theory this is a good idea, if you forget about an account then you obviously have too much money, or don't know how to look after it.  However there are also genuine reasons for dormant accounts- people moving abroad but planning to return in the future etc.  Is it fair for the government to just 'claim' this money? I'm not sure.  If Switzerland decided to do this they would raise a staggering amount overnight but also create an uproar with financial and political problems, I don't see why this would not be the case in the UK too.

The more worrying source of funding is from so called Project Merlin.  In return for paying their bonuses this year the big banks have promised that they will also provide funds for the BSB.  Great! I hear you cry, except this isn't a donation, this is just another loan, at commercial rates and as far as I can tell their loans will be protected by the government too.  This is hardly a great corporate act of social responsibility, it is lending money at commercial rates a.k.a what banks do all the time (or should do anyway).  I'm not sure I am comfortable with this greenwashing.  Even if the cause is good, if the money is coming from money markets anyway, why can't the BSB bypass the banks and go straight to the markets?

There is also a problem with where the money is going.  The proposition is not for the BSB to provide funding for social enterprises and volunteers which will form the backbone of the Big Society.  Instead the BSB will give the funding to other investment funds which will then decide who to lend the money to.  Seems like an unnecessary extra layer of administration that will only add costs that will ultimately be passed on to the people taking the loans- the people who are supposed to be encouraged by these policies.  So to recap, social entrepreneurs who can't get funding from mainstream banks can get funding from investment trusts who have been funded by the BSB by, er, the mainstream banks that wouldn't lend to them in the first place... at the rates the banks charge plus fees from the BSB and the investment fund.  Not the best example of market efficiency really.

I am all for opening up sources of funding for social entrepreneurs, I am all for the concept of Big Society and removing social control from central government.  The BSB unfortunately does not seem like the best vehicle to promote this however.