09/12/09

By Andrew Holt

Alistair Darling announced in his Pre-Budget Report today that the Government would commit up to £75m for the creation of a Social Investment Wholesale Bank and that the bulk of funds would come from dormant bank accounts.

The bank will supply funds to existing and emerging financial retailers (such as Charity Bank and Triodos), who would then provide finance packages to charities.

Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said: "This is a useful first step. We are pleased that the bank will be set up as a wholesaler and that it will be independent of government.

"It is vital the bank is sufficiently capitalised from the start to allow it to attract additional private funds. The commitment to up to £75m from dormant bank accounts is important.

"But we have always argued that this alone will not be sufficient and that government should look to additional ways of capitalising the social investment bank."

On the announcement about a Social Investment Wholesale Bank, John Low, chief executive of the Charities Aid Foundation, said: "This is could be a very significant step forward for UK charities and social enterprises seeking access to capital to enhance their social impact.

"We are delighted that Government has responded to calls from CAF and others in the Sector and plans to create an independent mission-driven bank operating exclusively at a wholesale level.

"Although we welcome the commitment of £75 million from the Dormant Bank Accounts Scheme, this alone will not be sufficient to establish a viable and sustainable wholesale investment bank.

"Together with further investment levered from elsewhere, it is vital that a continuing flow of funds from unclaimed assets is secured so that the true potential of this initiative can be realised for the benefit of society as a whole."

Urban Forum welcomed the Chancellor's announcement that the government will "explore options" on better disclosure of how banks provide services to disadvantaged communities.

In the Pre-Budget Report Alistair Darling also said the government believed that ". . . the banks have a vital role to play in supporting communities and tackling financial exclusion".

But Urban Forum, members of the Better Banking campaign, believe that the government must go further and that measuring levels of investment - such as third sector lending figures in disadvantaged areas - is critical to better social and economic policy making.

Urban Forum Chief Executive, Toby Blume, said: "'We're delighted that the government has accepted our call for banks to improve information on how they are meeting the needs of deprived communities.

"Greater transparency is crucial but this is just the first step. Disclosure is the foundation for a healthy and responsible banking sector, but it's not enough. We will continue to press for further measures to ensure our banks meet the needs of all our communities."

Urban Forum and the Better Banking Campaign are advocating four proposals to deliver public benefit from the banking crisis: disclosure, a credit cap, a Community Reinvestment Act and an obligation on banks to reinvest a proportion of their profits in deprived communities.

Looking at the Chancellor's Pre-Budget Report as a whole, Low said: "The Chancellor didn't have much good news for charities who are likely to see their income drop further in the coming year and be among the last to come out of the recession. Charities will also now be hit by rises in National Insurance and VAT costing them and their employees hundreds of millions of pounds."

Seamus McAleavey, chief executive at NICVA, commented: "The real bite though is yet to come. I expect a programme of more serious cuts after the next Westminster Election when spending levels will probably be kept flat for three years producing real cuts of around 9%. How that is handled and where those cuts fall will be crucial if public services to those most in need are to be effective."

But Low concluded: "Regardless of this Pre-Budget Report and the deep recession, the UK continues to have one of the most generous tax environments for charitable giving. As tax rises these benefits become even greater, especially for higher-rate taxpayers."

The weblink to the Social Investment Wholesale Bank consultation responses and Pre-Budget Report can be found at: www.cabinetoffice.gov.uk/third_sector.aspx

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