The UK's banks have failed to take sufficient voluntary measures to support charities and communities, and should be compelled by law to do more, according to a new report from the Commission on Big Society.
The commission, set up by the chief executives body Acevo and chaired by the Liberal Democrat peer Lord Rennard, says in its report today: "The banks need to reconnect with the communities they operate in, rely on, and, in theory, serve. The Project Merlin talks were a historic opportunity for the banks to do that on a voluntary basis – but they did not take it.
"Their failure to do so is particularly disappointing, given the vast sums of public money that have been spent on keeping them afloat."
Project Merlin was an agreement, finalised in February, made by the government and four major high-street banks to boost lending, reduce bankers' bonus sizes and improve transparency.
The Commission on Big Society's report calls for a new law, similar to the Community Reinvestment Act in the US, which would "promote responsible lending to financially excluded and voluntary organisations".
There should also be new tax incentives to encourage this, it says.
Ralph Michell, head of policy at Acevo and secretary to the Commission on Big Society, said: "It seems as though in their talks with the government about how they could contribute to society, having being bailed out by the taxpayer, the banks were trying to negotiate hard so that they could do as little as possible.
"They should have been looking voluntarily at ways in which they could create a fundamental shift in how they deal with communities, by lending to voluntary groups and by supporting financially excluded people."
The commission was set up in December to suggest ways the government could further the big society agenda and how the voluntary sector could play a part in it.
Its members include the Right Reverend Richard Chartres, Bishop of London, Paul Boateng, the Labour former chief secretary to the Treasury, and the Conservative MP Nick Boles.
The report also says the government must not allow "over-rapid and poorly managed public spending cuts to damage the voluntary sector disproportionately and irrevocably".
"The effect of the way in which many local councils are cutting spending on the voluntary sector threatens to undermine big society principles," it says.
It says the government's plan to encourage public sector staff to set up mutuals to deliver services has the potential to improve services. It warns, however, that the plan might "lock in old ways of working and old ways of delivering services, and in particular, a 'professional knows best' attitude that disempowers the individuals and communities who use public services".
The report will make a number of recommendations, summarised below, to the Cabinet Office's Behavioural Insight Team, the Prime Minister, the Chief Secretary to the Treasury and the National Audit Office.
The recommendations include:
- the government should repeat the £100m Transition Fund, but target it at the most deprived communities
- the government's proposed guidance on councils avoiding disproportionate cuts to the voluntary sector should be given statutory force, with immediate effect
- the government should require local authorities to make public the degree to which they commission services from external providers
- there should be a step change in service-user involvement in commissioning, including voluntary organisations acting as facilitators
- the Prime Minister should take a greater role in holding departments to account for progress on the big society agenda
- all UK banks should commit to reinvesting 1 per cent or more of their pre-tax profits for social benefit
- a VAT exemption for services shared by charities should be introduced