The vision for Big Society Bank puts profit above compassion

When Big Society tsar Lord Wei said volunteering was incompatible with having a life it might have been thought the concept was sunk.  When Liverpool council withdrew from being a Big Society vanguard stating cuts to public services undermine local authorities’ ability to support volunteering, you might think the government would consign the idea to its ever-growing u-turn pile.  Instead it got relaunched with its very own bank.

Project Merlin (if they don’t want us to take the piss why call it that?) was dropped at our feet half-chewed and bloody like the dead mouse your cat offers as an apology for being sick in your slippers, showing bankers, like your cat, are ungovernable, have no concept of contrition, and frankly don’t care what you think.

Aside from all the deck chairs rearranged to look like banks will behave better in future, Merlin gave us the Big Society Bank.  Financed with an injection (loan!) of £200m ‘on commercial terms’ from the big four banks currently still propped up by tax payers money, plus cash from dormant accounts, the BSB is being spun as the propulsion engine of the big society, curing the pain of cuts to public services through the financing of social enterprises.

Except it won’t finance social enterprises: it will lend money at interest to intermediary organisations to lend on to social enterprises at interest, which in turn will be expected to make a profit to repay the loan and interest.

If ‘on commercial terms’ means at commercial rates which would be passed on, then what’s the point of setting up a new bank  for the social sector?  It is also uncertain how much can be used from dormant accounts until approval is sought from European state aid regulators, also because banks will potentially withhold a large percentage to mitigate against customers recovering accounts.  So it may be the heralded £100m or it might be ten quid, we’ll have to wait and see.

One useful thing may happen: there could be a concentrated focus on the social enterprise market. The difficulties faced by intermediaries and social enterprises can be listed under one heading: ‘incoherence’. There is an appetite both from investors and social entrepreneurs to do beneficial things in society, but it can be hard to bring the two sides together.  Rather than the BSB adding another layer to an already fractured and messy market, the funds might be better managed by a consortium of the existing specialist organisations that already do what the BSB proposes. Combine this with a one-stop co-ordinating body for intermediaries and social venture support services and we may get better results.

What struck me most about the vision for the BSB is the unquestioning endorsement of the way private banking operates, despite the horrors it’s brought, and the desire to replicate it in the social economy. It is possible for social enterprises to make a profit, but they can’t replace public services which don’t.  We have a public sector for a good reason: to protect the vulnerable.  I fear the BSB’s rush to chase profit will mean compassion is forgotten.