Reality check: The Big Society Bank

In 2009, the Conservatives announced a policy of using dormant bank account funds to finance a new charity bank as part of its broader Big Society concept. The policy has survived the coalition government's horse-trading and remains a central component in the vision of a stronger and more effective third sector.

The Co-operative Bank will run the Big Society Bank and, according to the Cabinet Office, will "invest its funds through existing financial intermediaries, like social investors and community lenders, who in turn will increase access to finance for frontline, social organisations". Predictions show the Bank should start operating with between £60m and £100m of funds, although the total value of the UK's 500,000 dormant bank accounts is closer to £500m, according to the Co-op.

With such a small amount of money in the initial pot, it is difficult to see how any major changes will come about. The structure of the fund needs to be looked at to ensure it is delivering real value to the sector, once the Bank and its fund distributors have deducted their fees.

The government views the bank's creation as a stimulus for entrepreneurialism and investment in the sector by encouraging innovation. Investment in innovation typically means the funding is restricted to the 'next big thing' rather than providing core funding for organisations already doing a good job. At worst, this restricts funding for small charities; at best, it drives mission drift and challenges the core purpose of the organisation.

In July, the Prime Minister explained the Bank would be part of his move to revolutionise the funding environment: "These unclaimed assets, alongside the private-sector investment we will leverage, will mean the Big Society Bank will - over time - make available hundreds of millions of pounds of new finance to some of our most dynamic social organisations."

The Prime Minister, in a great moment of spin, quite rightly makes the case that a revolution in the funding environment can only happen over time. More importantly, this change must work in parallel with a change in best practice mindset in the charities these organisations fund.

For small charities, there are significant hurdles to overcome in securing funding to deliver existing programmes. These charities, which comprise the majority of charitable organisations, are already under-represented in the allocation of funds, despite working with the most marginalised communities and often with stronger outcomes than larger charities in the same cause-type.

A move to a loans-based mentality for trustees will also require a new set of skills being developed. The role of trustees will shift from one of balancing typically unrestricted funding models and delivery of services to one which looks to also generate a return back to the bankers. Who will provide the investment needed to up-skill the small charity board in this brave new world?

The key to building a strong, strategic charity sector is building capacity through the learning and sharing of the skills needed to allow our organisations to thrive. It is these skills that will grow the donor pool, see charities better able to retain staff and deliver positive outcomes to their beneficiaries.

The Foundation for Social Improvement will be among the organisations lobbying the government to ensure that in giving with one hand, Whitehall does not take away other valuable funding streams with the other. The Big Society Bank may bring someb benefit, but if it is being viewed as a substitute for real public-sector investment in building stability, it will be a small step forward and a monumental leap backwards.

Pauline Broomhead is chief executive of The Foundation for Social Improvement, an organisation which helps small charities unlock their potential through the provision of free consultancy and fundraising support.

For more on the Big Society and how charities might help deliver it within this period of austerity, click here

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