How will the Big Society bank change charity funding?

The Coalition government has re-launched the Big Society agenda through a haze of negativity.  David Cameron’s driving vision of community empowerment and public service reforms seem continually overshadowed by spending cuts but parking that to one side, a Cabinet Office spokesman has indicated “…the government is determined to open up new sources of funding for charities and voluntary groups…” Surely, that must mean good news for third sector organisations?

The concept of the self-sufficient, independently operated Big Society bank would help generate income for charities, non-governmental organisations, social enterprises and voluntary groups using money from dormant bank accounts and help co-fund projects. In addition to this, further capital will be invested from four high street banks which in the long term will make available millions of pounds to finance.

As grants and other funding streams decline, the economic crisis encourages donors to think about their contributions, Cameron committed to the Big Society concept and many third sector organisations concerned the government is not supporting the sector as much as it could do, we can see changes, concerns, questions and trepidation ahead on the charity funding horizon.

The government’s strategy document for the Big Society bank makes it clear that it will not be dishing out grants but invest in funds that will make the direct investment. With four banks being the support pillars and needing to cover their own costs, what will they get back in return?  And this is where some concerns have been raised.

Some charities may have thought that the funding landscape would get easier and more accessible with another source of funding appearing. But will this really happen?

If the banks that have invested need to see a financial return, will that be a higher priority for their respective board members and CEO’s or will the boardroom be more focussed on seeing the social impact? If the former is the driver then what interest rates will be charged by the banks for them to see that return?  At this moment in time we understand this rate has yet to be determined. 

But with financial return on the agenda does this mean funding must operate in a commercial way, in which case we believe that some third sector organisations wouldn’t be able to afford to get funding. The potential impact of this for a charity could be devastating.

If the Big Society bank is focussed on seeing a ROI, could that impact on charities where there is limited [financial] return thus favouring those charities with a commercial facing outlook.  Does this mean that those charities with the corporate skills and infrastructure, experience, training and adaptability will survive?

On the other hand will the Big Society vision mean that those groups providing services to those hardest to reach, in the most deprived parts of the UK will be favoured?  In which case funding to those outside these parameters may decline and organisations become more reliant on other funding streams.

So what can we conclude at this stage:

  •  Charities shouldn’t assume that funds will be more accessible
  • Yes, charities should realise it is a new funding stream
  • Look at adapting to a new type of funding model – one that needs to see a return and potentially reviewing internal procedures to ensure the charity has the best opportunity to succeed in applying for funds.
  • The sector requires further information from the Big Society bank to understand which charities will benefit and in which areas.

It is yet to be seen exactly how the Big Society Bank will change charity funding, Challenge Wales is waiting with baited breath,  and a lot of questions and concerns remain unanswered but it does look like it could be positive news for some of us at least.

Comments on a postcard please to Mr Cameron, No. 10, London.

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