UK Announces Social Investment Bank
Monday, 26th March 2007 at 12:42 pm
Millions of pounds untouched for years in UK bank accounts are to be put into a central Social Investment Bank to be used for charities under plans announced by the British Government.
The UK Government plans to introduce primary legislation as soon as possible to allow unclaimed assets in dormant bank and building societies to be handed out.
Britain first outlined the proposal in December 2005 and has since been working with banks and building societies to design a scheme.
It is thought that anything from £400 million to £1 billion could be available from dormant bank accounts and injected into the UK Not for Profit sector!
Dormant accounts are defined as those untouched for 15 years. Account holders will be able to reclaim cash if they discover money in an account has been handed out.
The Commission on Unclaimed Assets has issued a detailed blueprint for using the unclaimed capital released from dormant bank accounts to create a new financial institution – the Social Investment Bank.
It says the funds will be used to step up the fight against poverty and social exclusion.
The Commission says its first priority though is to re-unite people with their cash, a right that they will retain whenever they come forward to it.
The Commission’s report concludes that the creation of a Social Investment Bank (SIB) could lead to the emergence of a thriving social investment market capable of fostering the inclusion of marginalised communities in the mainstream economy while enhancing skills and financial management across the charitable and voluntary sectors.
The Commission’s Chairman, Sir Ronald Cohen says a unique opportunity exists to create a new Social Investment Bank to act as a bridge between the social and financial communities, able to leverage its resources with money from private sources and the capital markets, and put them to work in our marginalised communities.
The Commission of Unclaimed Assets key findings and conclusions are:
1) If the third sector is to continue to grow and meet its goal of supporting marginalised communities in a way that neither the state nor the private sector can, it urgently needs greater investment and professional support. Suitable capital should be available for organisations at all stages of development, from charities without trading revenue all the way to social enterprises that reinvest some or all of their profits in their mission and commercial businesses with a social purpose.
2) An independent Social Investment Bank should be created using the capital from dormant accounts to develop the social investment market on a scale that can support the UK’s vibrant and diverse but under-capitalised third sector, including social enterprise, community development and voluntary organisations. To be effective and able to operate credibly in capital markets, the Social Investment Bank will need founding capital of at least £250 million, with an annual income stream of £20 million for a minimum of four years.
3) The Social Investment Bank should be small, adaptable, innovative, and able to take risks. It should bring together the best of the financial and social sectors. It should act as a “wholesaler of capital” working through existing and new financial intermediaries, assisting their development and encouraging their growth.
4) The Social Investment Bank would undertake four initial activities:
a. Capitalise existing financial intermediaries and fill gaps in the marketplace where lack of capital is restricting social impact;
b. Develop the provision of advice, support and higher -risk investment so as to accelerate the growth of demand for repayable finance;
c. Develop programs of sustained investment in specific markets such as community regeneration and financial inclusion;
d. Support existing and new intermediaries in their efforts to raise private capital. These activities should attract significant additional finance into the sector.
5) The most effective way of providing significant capital to the third sector is by facilitating access to private finance as well as to the broader capital markets. Since financial returns are likely to be below mainstream rates of return, the Commission recommends that tax incentives should be used more broadly to encourage the flow of capital into social investment. Community Investment Tax Relief (CITR) should be significantly extended.
6) The Social Investment Bank should be an independent institution answerable to the third sector, with a governance framework that is effective, representative and compliant with best practice.
You can download the full report of the Commission of Unclaimed Assets