“We want to make it easier… for people who can see a way things can be done better,” said Hurd. He added, “The prize is quite substantial if we get this right, if we can prove to savers that this is a genuine asset class… then you can begin to think in serious sums of money.”
The Big Society is the government’s plan to catalyze local resources– social enterprises to improve the well-being of the British people by providing new solutions to social problems as well as take over where the government has slashed public service budgets.
The details of the Big Society bank will be announced at the beginning of December and will be capitalised using unclaimed bank deposits, 15 years old. These deposits in the UK amount to £400 million. The UK’s Financial Services Authority in conjunction with the Co-operative Bank will decide just how much of that money will be used for initial capitalisation, considering protection of existing depositors. Previously expected to open in Quarter 2 of 2011, Hurd said he expects the bank to be operational instead in Quarter 3.
The bank is to have independent authority but the minister did mention that priority would be given to projects with youth focus. It will act for the government as a keystone investor but the bulk of its activity will be to “act strictly in a wholesale capacity” with existing intermediaries to change the perception of social investment to encourage others to invest in socially responsible business practices.
“We have to tread carefully because government,” said Hurd, “can cause serious damage.” Typical of right-wing political parties, the UK government wants to decentralise governance.
Hurd said that the bank will act by issuing Social Impact Bonds the like currently being used to fund a program to reduce reoffending rates at Peterborough prison. The key to the bonds is that the government puts aside money it expects in cost savings to pay based on the project outcomes to pay investors. The size of the returns depend on the size of the return to society: in the case of the prison, the amount of reoffending that’s reduced.
Hurd also defined the responsibility of the public, in terms of the Big Society Bank, “Please make sure when this bank comes on stream, it’s got some things to invest in.”