Government commitment to social investment bank falls short of expectations

Government is 'intending' to commit up to £75m to the social investment wholesale bank, it was announced today as part of the pre-budget report - a far cry from the £250m the sector hoped for.

The £75m will come from dormant bank accounts in England and will be 'subject to the final volume of funds and alongside funding other priorities', according to the Office of the Third Sector in the Cabinet Office.

Social Enterprise previously reported that around £250m in founding capital was expected from the dormant bank accounts, but some commentators were expecting as little as £40m.

Stuart Etherington, CEO of the National Council for Voluntary Organisations (NCVO), said the cash was a 'useful first step', but that it was not enough to set up the bank.

'It is vital the bank is sufficiently capitalised from the start to allow it to attract additional private funds,' he said.

'The commitment of 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.'

The funding decision has been made following a government consultation into the social investment wholesale bank. This closed on 7 October and received around 80 responses from grant makers and foundations, third sector umbrella bodies and frontline organisations, specialist financial intermediaries and the mainstream commercial sector.

The consultation responses, also published today, concluded that the social investment wholesale bank should be a 'mission-driven financial institution, operating independently from government and retail intermediaries and at a wholesale level to support the development of a strong and sustainable social investment market in the UK'. The full report can be downloaded below.

Liam Byrne, chief secretary to the treasury, and third sector minister Angela Smith said in a joint statement: 'We believe that social investment could make a huge difference to the third sector and other organisations with social impact. We are therefore committed to the development of a strong and sustainable social investment market that crowds in new players and new flows of capital.'

The Office of the Third Sector added that, in the coming months, the government will finalise the model for the social investment wholesale bank.

'We will also aim to begin the process of engaging with potential providers of this financial institution by Budget 2010,' a spokesperson said.