Tuesday 21 July 2009

Government and backbone?

So we now have the Government's Banking White Paper. You might say it is hardly worth rushing to read this wimpish document but I couldn't possibly comment. And the banking and financial institutions have shown their response by a rushed return to bad practice: bonuses are back as though nothing ever happened. I think this is what is called taking the p...?

A radical White Paper would have seen a stronger regulator (the FSA having done a pathetic job preventing collapse should have been summarily removed) and announced immediate steps to establish a Social investment Bank and introduce a Community Reinvestment Act.

My friend that great Canadian, Andrew Robinson, of CCLA (investment advisors and investors By Appointment) pointed out to me that the Bank of England once had within its remit the need to ensure "financial fairness". No longer. The FSA has no such obligation (and it shows). The Treasury does but little evidence of how it does this. Did this aspect issue in the White Paper?

What is happening? We have a "consultation" on a SIB which majestically glides over how much money will be available and ignores the issue of using unclaimed assets to set up the Bank as both the DWP-ACEVO task force and the Unclaimed Assets Commission recommended.

I realise logic and politics are sometimes strange bedfellows but what is the point of asking questions about the role of a Bank without saying how much it will have. If it's a pittance (i.e. £50m) then very little you can do apart from some micro finance, if it is £250m as Ronnie Cohen and we believe, then you get leverage with private capital and can make larger loans. For example Futurebuilders has recently invested c£5m in SCOPE and been in discussions with another big charity on a £10m loan. On the back of a £400m investment fund we have levered in £50m from the private finance sector.

Can we now assume that the Government have backed off making the Banks cough up any of the unclaimed assets or just a small amount to fund youth projects?

What a waste. Here was a chance to leave a radical legacy - a Bank that invests into our communities and social enterprise, money that comes back to be reinvested and supports strong sector growth and capitalisation .

Perhaps I'm too pessimistic and I will be surprised. I do hope so. I know Angela and Liam are strong backers of the Bank, and indeed a Community Reinvestment Act. Let's hope they have the strength to take on the vested interests of the FSA, Treasury and Banks who have fought a fierce regard action against all this. Indeed one of the FSA officials who came to a sector event told us they were strongly opposed to a CRA, thus putting themselves fairly and squarely behind the right wing of the Republican Party and in opposition to Obama who thinks the CRA has been a great success in the States.

Last night I was at dinner with M. Hugues Sibille, the Managing Director of Credit Cooperative, one of France's bigger banks, but part of the social sector. We were discussing how to take forward the idea of a European Social Investment Bank. We are to set up a Steering Committee and Hugues has had a bright idea on a Chair which we will pursue (no names even in my blog!). There is great interest in this idea. Indeed we will be talking to the Young Foundation who are also looking at how the EU might invest in social innovation. So an idea that has origins in the UK is now taking route in Europe at the time when our Government seem to be back tracking ?

Access to capital is the next big battle for our sector. Not the final frontier, but close too. Will our friends in Government join us in this battle?

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