The Big Society Bank has been 'launched' - but what are we still waiting to know?

After a gestation period of more than a decade, the Cabinet Office recently announced that the Big Society Bank - recently rechristened Big Society Capital – had been ‘launched’ .

It would be fair to say that this launch was a media-focused announcement rather than an actual opening for business. EU and FSA approvals are still pending, and the Bank’s holding website itself states: “Big Society Capital is currently in the process of being set up and is not yet open for business”. The major component of the announcement was the unveiling of Big Society Capital’s board of directors and board of trustees – whose membership focuses on various City and Social Finance grandees and a couple of SocEnt and third sector trade-bodies. In June, prior to this announcement, an interim Big Lottery Fund-run £5m ‘Big Society Investment Fund’ had been established, and the recent ‘good and the great’ announcement was topped up by the heralding of a £1m investment in the Private Equity Foundation’s work on NEETs through this interim arrangement.

It’s likely that this buzz of activity will continue over the coming months as the government seeks to bolster the wider ‘big society programme’ by playing up its most solid component. However, underneath this, the answers to a range of key questions remain unclear, and so therefore does assessment of whether Big Society Capital will fulfill its huge potential.

It remains unclear how much money the Bank will eventually have available to it, and the scale of this is obviously crucial in determining its eventual impact. Estimates of the amount of ‘unclaimed assets’ vary but have stretched into the billions. Current estimates sit around £400 million. In addition to this, approximately £200 million will be available to the Bank through Project Merlin, the agreement between the Government and Britain’s major high street banks that followed the bank bailouts of 2007-2008.

Another key key question is the cost of finance. The Project Merlin banks have talked about the £200m being available at commercial interest rates, which would simply duplicate finance that is already available to social enterprise (but too expensive) and go against the whole concept Cohen (who understands this) has been trying to put together.

Scope is another key issue that has yet to be ironed out. Within what geographical reach will its capital be allowed to be deployed, and how will that be policed? For example, what about a solar lighting company (social benefit) that has its operational base in the UK (geographical fit) but manufactures in China and sells in Africa? Does that put it in or out of scope? What sectors will be allowed? How will social impact be measured / distinguished? What prevents a conventional business (such as Unilever or Pepisco) from applying and claiming a social benefit? Will it only be available to organisations with certain types of legal structures, e.g. CICs or Co-ops? What about charities? Or businesses with an embedded social purpose?

A further question is how long it will take the social investment sector to adapt. The Big Society Investment Fund calls for proposals from investment intermediaries who are based in the UK and focused upon England. Assuming that the Bank will take a similar scope, it would be fair to say that there are not many of these currently in existence - Bridges Ventures, Unltd, Venturesome, and new entrants like Merism Capital come to mind. How many will be needed to make this work? How long will it take to create them?

Beyond that, if the funds need to find a home within the SE sector itself, the scale of recent investment does not suggest this will be easy to do. Investments like HCT’s £3m ‘social loan’ to and Cool2Care’s £500k investment from a consortium of Big Issue Invest, Venturesome and CAN Breakthrough are news in the sector because they are - for social enterprise - big and rare. This suggests £600m will be very hard to deploy within the sector without investment in significant capacity building to both expand the sector and to improve investment readiness. While May’s interim proposal for the Big Society Bank did recognise this, it remains to be seen how the institution - which is seemingly being set up to run as a wholesale investment bank - will be able to rise to this challenge.