The new Dormant Assets Bill is working its way through the House of Lords and will shortly move to the Commons.
It is an exciting prospect that up to £800m of additional unused funds, held dormant in an expanded range of assets, will be made available for good causes.
The substance of the bill defines the mechanisms by which these funds will be made available from different asset classes. It doesn’t focus much on how the money will be used.
Until this point, funds in England made available from dormant bank accounts, to which current legislation applies, have been used for three purposes, which are defined in the 2008 act: supporting young people, financial inclusion or funding a social investment wholesaler.
One of the provisions in the new bill is the removal of these specific purposes from the whole dormant asset regime, to be replaced with the ability of the secretary of state to define how they should be spent in England through secondary legislation (this has been the approach of the devolved nations all along).
One of the great strengths of the dormant asset regime to date is that it has allowed funding to flow to interventions that require long time horizons to realise significant systems change.
The new approach will allow the government to be more flexible and responsive in allocating this important resource, taking into account the changing needs of the country, especially as we emerge from the pandemic.
However, it also risks the allocation of dormant asset funds becoming more political, with a focus on short-term impact rather than longer-term change.
Bill Gates famously said: “Most people overestimate what they can do in one year and underestimate what they can do in 10 years”.
Looking back at the Dormant Assets Scheme over that time horizon gives us a sense of what systems change can look like.
Big Society Capital opened for business as a social investment wholesaler in 2012 with £600m of capital (£400m of which was from dormant accounts). Its mission was to transform the social investment market in the UK, through working with a wide range of partners and fund managers.
Since then, thanks to the co-investment BSC has been able to leverage, the social investment market has grown sixfold.
It is now worth over £5bn with more than 5,000 charities and social enterprises having benefitted from access to capital to help them grow their impact.
For some organisations, this means access to capital to help them grow and scale.
For others, it’s about having access to some cash when it is most needed.
Nottingham Counselling Service borrowed £40,000 from Key Fund to help it bridge a funding gap and adapt to a new market.
The charity provides an essential service, specialising in working long-term with people who present complex and enduring problems such as anxiety, depression and abuse.
Each week, NCS helps up to 150 people. More than 90 per cent of its clients report significant improvements in their wellbeing. Without a social investment ecosystem that makes this sort of finance available, the work of organisations like NCS would be under threat.
More recently, dormant account money has been supporting similarly ambitious systems change agendas: through Fair 4 All Finance to grow the affordable credit market by 10 times, and through Youth Futures Foundation to build a movement for change by identifying what works and why, and investing in evidence-generation and innovation to tackle youth unemployment.
My own organisation, Access, is using dormant account money to blend grants with loans, to further expand the range of charities and social enterprises that can access the finance they need.
The bill suggests that the secretary of state will consult before deciding how to use the funds.
The charity and social enterprise sectors should be ready to be active participants in any such consultation once the bill becomes law.
However, in participating in that consultation we should resist the urge to see dormant assets as a short-term fix for the sector’s financial challenges, severe as they are – especially in the aftermath of Covid-19.
This is partly because, as enormous as the sum appears to be, it’s nowhere near enough to make a sustained impact on the sector’s revenue.
The total amount likely to be freed up is roughly equivalent to what the National Lottery Community Fund distributes each year.
But it is also because we would risk losing the ability to fund the sort of longer-term systems-change work, which is so hard to resource at scale. Other foundations are limited in their resources and most government funding tends to have shorter-term horizons.
There is a significant potential prize for our sector to use this precious resource to tackle complex and long term systems-change challenges. It is a resource we should all strive to use wisely.
Seb Elsworth is chief executive of Access, a foundation that helps widen access to social investment for charities and social enterprises