Dormant Bank and Building Society Accounts Bill [HL]

I take this opportunity to speak to my amendments and to apologise to the Committee because I did not manage to get to the Second Reading. I am not going to pretend that I was frightfully busy somewhere else; I am a rather late convert to the idea of a social investment bank and only came upon it after Second Reading. On Thursday, the Minister said that these resources, referring to the residual assets from these accounts, represent a once-in-a-generation opportunity which we need to make the most of. I could not agree more with that sentiment. We must try to leave a lasting legacy with the opportunity that we have with these residual assets. One of the great failures of government—I do not blame this Government but successive Governments; it is not a party point—has been not to address the problems of social deprivation. Many of our inner cities are a disgrace to a civilised society. In some of them we see a third generation of unemployed people, rampant drug addiction and many people making money through trafficking drugs. They are the scenes of crime committed by the people who live in these desperately deprived areas. But these people are also victims of crime to a great extent; and they have problems with debt, gambling and homelessness. It is a very sobering statistic that in some of the worst areas of Glasgow, life expectation for males is only 57. What has the reaction of the Government been? It has been purely to treat this as a financial problem; that is, if you give people enough money to live off, surely they do not have any problems. The problems that these people suffer from are much more complex. The only people really addressing them today are the charities, the faith communities and social enterprises. There is no silver bullet to all these problems, and I do not think that anyone would pretend that there is. There is no big one-off solution. We need to encourage these small and beautiful remedies being produced by these organisations and we must build on the small and diverse third sector. I know that my noble friend Lord Eccles does not like the phrase ““third sector””, but I believe that that is the only thing in these terms which works. Last Thursday, the noble Lord, Lord Newby, mentioned the British Bankers’ Association report which said that the funds available were likely to be about £250 million to £350 million. All Members received that circular from the BBA. We must remember that those sums apply to just the banks. I gather that the building societies also think that they will be able to produce something like £150 million, so de minimus we are looking at around £400 million. When you think of these associations representing the banks and the building societies, it would not be very intelligent of them to raise expectations too high. Let us face it, if the banks eventually came up with £200 million, they quite rightly would be seriously condemned. However, if, instead of the estimate of £250 million to £350 million, they came up with £400 million, everyone would look at them in a very generous light. We have to take those figures as being very conservative, and it would be quite wrong of the people concerned not to give a conservative figure. Perhaps we are not talking of as little as £400 million, we may be talking about as much as £500 million. We now have to look at why we need a social investment bank. I have identified three basic reasons for this: the first is discipline; the second is sustainability; and the third is added value. On discipline, as a generalisation, social enterprises tend to be run by people who are very long on humanity and compassion, but short on financial skills. That is not very surprising because many of them come from the public sector where the whole concept of income is applying for grants from the public sector. There are very few financial directors operating in these social enterprises. A social enterprise bank would lend money and make investments against business plans. It would require, as any venture capitalist would, budgets, cash flows, cash flow forecasts and monthly reporting of profit and loss on how the thing is doing. The whole third sector of social enterprises can benefit only from being run like businesses. A social enterprise bank would want to ensure that it received interest on its loans and got its loans and investments repaid, so that obviously it could lend that money again and the money could be circulated. That brings me to my second point of sustainability. An investment bank working among social enterprises would recycle money from successful investments and repaid loans to new ventures. Rather than just perhaps a five-year splurge of money that would come through the Big Lottery Fund, these organisations might well still be operating in 20 or 30 years’ time, and we would still have an investment bank dedicated to supporting social enterprises and bringing ever-increasing quantities of inward investment to a growing social enterprise sector, which is growing in size and importance in our society today. The third element is added value. I was tempted to use the word ““additionality””, but that is now seen in a different context here. We must bear in mind that if we are talking about a bank, we can see the amount of investment capital in the bank being enlarged quite massively. We are talking about multiples of the money that goes in. The Charity Bank became independent in 2002. It is registered under the FSA. I do not know what credit rating it has been given, but if that credit rating is good enough, there is no reason why the Charity Bank should not lend nine times as much as its initial capital to the people it serves in the community. Bridges Community Ventures started life with a £20 million grant from the Government, which enabled it to raise a further £20 million from private sources. Now it has proved itself to have such a track record that it has raised a further £75 million to invest. One of the advantages for rich venture capitalists is community investment tax relief, which gives enormous incentives for people to support organisations such as this. The social investment bank would be an independent investment bank. It would be able to raise bonds that would increase the funds available for social enterprises. In short, £100 of dormant account money put into the Big Lottery Fund would mean £95 for social enterprises—that is what I have put down here, but I think that my noble friend Lord Howard of Rising would say that it would be more likely to be £88 for social enterprises. That would raise all the problems discussed in Committee today on how much influence the Government would have and whether there are areas where this becomes a substitute for government expenditure. A sum of £100 put in a social enterprise bank means probably a minimum of £300 for social enterprises. If the bank is run in an efficient and serious enough way, it could mean £900. If we can increase the impact of the money from dormant accounts, we are talking about enormous value added, which could make a serious difference in this growing sector of social enterprises. There is a critical mass for a social investment bank, which is why I have put £250 million in my amendment; that is, half of £500 million, if we should be looking at that. I do not think that that is an unreasonable amount and there is no other way to get these multiples of the dormant account money which would make such an enormous difference to social enterprises. This is a unique opportunity to create something which would last, would have a massive impact and would produce much more than the original funds that come from the dormant accounts.