After weeks of speculation and secret talks between the leading banks and the government, Project Merlin finally saw the light of day in a statement £200m capital to support Big Society bank will be lent ‘on commercial basis’. That means that the money which the banks are putting into David Cameron’s big project will actually make them a profit. Yes, you read that correctly. It will be making them money. You’d be forgiven, on the basis of media reporting, for believing that this is a grand gesture on their part. The reality is far from it. In fact, why is this even news? In essence, they’ll lend money to charities and social enterprises that have ideas for commercial activities. Don’t they (and a host of other social investment institutions) already do that?
The banks, we had hoped, were responding to public anger at their role in the financial crisis, the subsequent bailout and its impact on public spending. Showing restraint on bonuses is fine – although a commitment that bonuses this year will not be larger than last year isn’t my definition of ‘understanding the public mood’.
Banks commit to maintaining the current level of support to communities that they currently estimate at £200m between them. That sounds like a lot (though it’s worth noting that it includes in-kind support such as employee volunteering schemes), but it represents less than 1% of their profits. Again I would question whether the banks really appreciate the public mood.
The Big Society bank – which we are still awaiting details of and precisely how it will work –does need capital. Charities and social enterprises are desperate for access to finance – in the form of grants, loans, patient capital and quasi-equity – and the bank could yet have a long term impact on how the sector operates. But the role of the high street banks in facilitating this will be, on the basis of today’s announcement, negligible.