There has been phenomenal growth in the charity banking market supplying loans and blended finance. Where the sector once welcomed retired majors and former politicians, it is now the preserve of financiers.
As the welfare state shrivels, philanthropy has been overtaken by entrepreneurship and grants. In addition, government has entrusted hundreds of millions of pounds of public money to boards of mainly ex-bankers at social finance organisations who seem to have little idea of what to do with it.
Around a decade ago Sir Ronald Cohen’s Commission on Unclaimed Assets begat the concept of a wholesale bank for social investment. This lead to the creation of the Big Society Trust, which in turn established the social investment wholesaler Big Society Capital, which is part-funded through money from dormant bank accounts and part-funded by the four major banks. BSC in turn co-funds Access – the Foundation for Social Investment, which awards money to a host of financial intermediaries.
The process is expensive, aimless and ineffective and it fails to get the funding to those who need it most. The comfortable, new business of money-recycling seems slow to learn and adapt. It is worth looking at New Philanthropy Capital’s research for Access to see just how leaden their thinking is. There is something like £2bn of ground-bait swirling around in the social investment pool, but the minnows find it difficult to swallow. I would love to see a simple analysis of, say, the big six social investors that shows the money put in, interest earned, money spent on end-users, and the combined operating cost of all the layers.
Meanwhile, the government plans to devolve £1.6bn a year of third sector funding to between one and five main contractors. Let’s hope they commission sector-wise social innovators, working in true partnerships, rather than the usual suspects.
Gordon Hunter is director of Lincolnshire Community Foundation