Last week’s announcement about the next round of disbursements from dormant bank accounts made for encouraging news.
Let’s start by addressing the fact that I have an obvious interest, in that the organisation I run will have a role in managing some of it. But that’s not the only reason I am positive about it.
What struck me was that the range of initiatives which will be funded and the different ways in which the money will be used show how much has been learned and how much progress has been made since distributions from dormant accounts first started in 2011.
Up to this point, all the funds that have so far been distributed from dormant accounts in England have been given to Big Society Capital to use for social investment. The social investment market has grown substantially over the past six years, and hundreds of charities and social enterprises have been able to improve their impact as a result of investment they have received.
However, over the past six years this focus has also garnered criticism from the sector, especially at a time when other sources of funding have been drying up. Part of that criticism has been based on the confusion caused by focusing too much on social investment itself – and the social investment "market" – rather than the things that social investment can help to achieve.
So the focus on tackling specific social challenges with this new wave of funds, rather than focusing on a tool, is helpful. The government says that the next £330m will be used for housing vulnerable people, helping disadvantaged young people into work and dealing with problem debt, as well as providing support for local charities and social enterprises.
In a blog on the day of the announcement, Cliff Prior, chief executive of BSC, said that it will focus on how social investment can help in two areas: innovating and creating new solutions for housing those in need and addressing housing needs for the most vulnerable; and helping to build stronger communities and reduce poverty and inequality across the UK.
Being clearer about the problems that social investment can help to solve is increasingly possible because of what has been learned not only over the past six years, but by all of those involved in social investment over the past few decades. For investment to help charities and social enterprises to increase their impact, there must be viable revenue streams that can grow and be used to fund the organisation’s work over time and repay the investment. Learning suggests that these are areas where social investment can play a particularly powerful role.
And this learning is continuing, of course. Homeless Link, to pick one example, has recently launched a social investment fund that will further build the knowledge base around how investment can best support organisations tackling homelessness and the business models underpinning that.
The different ways in which dormant account funding will now be used to address those challenges and the increased flexibility also show how lessons are being learned.
In addition to £100m for BSC to complete the original commitment made to it in 2012, and made available on the same terms as before, a further £25m is available to be used to be "innovative in helping to increase the sustainability of the social investment market". Another £10m will be made available to Access – the Foundation for Social Investment as a grant to be blended with BSC funds to work in disadvantaged communities, helping to finance smaller unsecured investments, which are suited to what many charities and social enterprises need.
The funds that will be used to help disadvantaged young people into employment and to support financial inclusion do not need to be made only as investments – youth services and financial inclusion are specifically cited in the legislation that freed up the dormant accounts in the first place. So this could be revenue to fund the delivery of projects, capacity-building or a mixture of all the above.
A resilient social sector needs a healthy mix of finance and funding available on different terms for different purposes.
After last week’s announcement, the big question, as various sector commentators have pointed out, is what happens with the £2bn of other unclaimed assets – investments, pensions and insurance – highlighted by the Dormant Assets Commission last March. This provides a unique opportunity for government to further build on the learning about what works, and for us all to play a role in helping them.
Seb Elsworth is the chief executive of Access, a foundation that helps charities and social enterprises access social investment