£135m will be made available for social investment over the next four years from forgotten bank and building society accounts, the government has announced.
However, ministers have been called to take action to decide the fate of further billions which remain in dormant savings and investment products.
Civil society minister Tracey Crouch (who retained her post in last week’s ministerial reshuffle) announced on 4 January that a decision had been made about how to spend a total of £330m of money that has been left untouched in bank and building society accounts for more than 15 years.
She said: “By unlocking millions of pounds from dormant accounts for a range of good causes, we can make a real difference to lives and communities across the country.”
Of the £330m, £280m will be spent in England. A total of £135m will go to social investment via social investors Big Society Capital and Access, the foundation for social investment. However, only £35m of this is newly announced money; the other £100m fulfils former prime minister David Cameron’s £400m commitment to Big Society Capital.
The remainder of the funding for England will support projects to help disadvantaged young people into employment (£90m) and to boost financial inclusion (£55m).
This leaves £50m which will be distributed in Scotland, Wales and Northern Ireland by the Big Lottery Fund. Each devolved administration will decide its own priorities.
This is the second tranche of funding to be released from the Reclaim Fund, which was established in 2011 following the Labour government’s Dormant Bank and Building Society Accounts Act 2008 which set the priorities for the funding. The first tranche was used to establish Big Society Capital, the world’s first social investment wholesale bank.
We will “innovate and break new ground”
Cliff Prior, CEO of Big Society Capital, said in a blog that the additional £25m will enable Big Society Capital to try more innovative approaches within its priority areas of housing and supporting communities. These approaches will include creating “exemplar funds” to demonstrate to commercial investors what the real risks are and providing new homes for vulnerable people where revenue streams may be uncertain.
He added: “What we can do through social investment is to innovate and break new ground.”
Prior said that Big Society Capital would also work with its sister organisation, the Access foundation, to fund “smaller, more risky and more innovative proposals”.
Seb Elsworth, CEO of Access, wrote in a blog: “We will focus our work in disadvantaged communities, learning how the tool of social investment can most usefully help in those places.”
We will focus our work in disadvantaged communities, learning how the tool of social investment can most usefully help in those places
Elsworth said the extra £35m to Access and Big Society Capital was “significant”, but signed off his blog by calling for more money.
“This £10m is a foot in the door with government – but we will need more to follow if we are to help more charities and social enterprises to develop enterprising models, build their capital base, become more resilient and grow or sustain their impact.”
The CEO of Social Enterprise UK, Peter Holbrook welcomed the release of further capital from dormant assets. He highlighted that enabling some of the money to be used for social investment was also welcome “given the ambition for this to increase the investors’ appetite for risk and subsequently enable greater innovation from across the social sector”.
An overly cautious approach?
Former civil society minister Rob Wilson, who lost his Reading seat in the last general election, hinted that the process of releasing the dormant assets money had not been an easy one. Reacting to the announcement on Twitter he said: “It’s great to see the fruition of years of toil & some terrific work from civil servants!” He added that the Reclaim Fund was “overly cautious”.
Since the scheme was initiated in 2008, almost £1bn of dormant accounts money has gone into the Reclaim Fund.
In addition, an independent Commission on Dormant Assets recommended in March 2017 that the scheme should be expanded to include a wider range of dormant financial assets, such as insurance policies, stocks and shares investments, and pensions. This could take the money available beyond £2bn.
Shadow civil society minister Steve Reed called for this £2bn to be released.
He said: “It’s welcome that cash-starved charities will finally get some funding out of a government that’s spent the past seven years cutting them to the bone. But he money on offer is just a fraction of the £2bn boost promised less than a year ago... The question on every charity treasurer’s lips today is where’s the rest of the money?”
The Department for Digital, Culture, Media and Sport said that “it is currently considering the Commission’s recommendations and will respond in due course”.