High-street banks will contribute £200m to the Big Society Bank, the Prime Minister, David Cameron, has announced.
The announcement, made during Prime Minister’s Question Time, forms part of a larger programme of agreements with the banks, dubbed Project Merlin, which focuses mainly on banks’ lending targets.
The Big Society Bank will receive that money over the next two years. It will also receive all money reclaimed from dormant bank accounts, which is expected to amount to between £60m and £100m in the first year of operation and more than £400m over the next few years, according to the Co-operative Bank, which will run the reclaim fund to collect the money.Previous unconfirmed reports had suggested that high-street banks might contribute as much as £1bn to the Big Society Bank.
Voluntary sector leaders cautiously welcomed the news.
"It breathes life back into the big society project," said Stephen Bubb, chief executive of Acevo. "It’s crucial that the sector gets access to capital. There are many organisations out there with good ideas needing capital to carry them out."
But Bubb said that the announcement needed to be married with fundamental public service reform if it was to ensure the long-term growth of the sector.
Caron Bradshaw, chief executive of the Charity Finance Directors’ Group, said she welcomed the announcement but it was "a drop in the ocean" compared with the financial squeeze being experienced by the third sector.
"There will need to be significant other sums available to the sector to fill the funding gap," she said. "Government must play its part in pressing for more investment in the sector."
Geoff Burnand, chief investment officer of Charity Bank, said the announcement was welcome, but it raised questions about what would be done with the money.
"We don’t yet know what the government wants to achieve with this money," he said. "How will its effectiveness be measured? This money has been dumped into the sector, but no one’s said how they think it will affect the social investment market over the next five years."