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Europe gives Big Society Capital an early Christmas present
The commitments and safeguards put in place by the UK ensure that state aid linked to this innovative project in the social sector remains well-targeted and does not result in undue distortions of competition.
The European Commission has given the go ahead to Big Society Capital, declaring it an ‘innovative project’ that does not breach state aid rules.
The EC has agreed that up to £400m can be provided by the UK government for the creation of the new social investment company.
Commission Vice President Joaquín Almunia, in charge of competition policy, said: "The commitments and safeguards put in place by the UK ensure that state aid linked to this innovative project in the social sector remains well-targeted and does not result in undue distortions of competition."
The Commission said the object of Big Society Capital (BSC) was to invest in social companies, mainly Social Investment Finance Intermediaries (SIFIs) that have difficulties in procuring affordable funding from the markets. It found that the gift of £400m in dormant bank account money to BSC was “in line with EU state aid rules, in particular because BSC's business model contains a number of safeguards to ensure that its investments do not distort competition at the level of the SIFIs”.
“Moreover, SIFIs are required to re-invest the capital by lending to frontline social sector organisations under strict conditions, to avoid crowding out private investors and distorting competition.”
The Commission has approved the measure for five years. In addition, any increase of the initial capitalisation of BSC through dormant account money beyond £400m – and any increase of BSC's total balance sheet beyond £600m – will need to be notified to the Commission.
BSC is now just waiting for approval from the Financial Services Authority, which it expects to get early next year, before it can become fully operational.
The state aid approval follows increasing interest and support across Europe for social enterprise, including the launch of the Social Business Initiative in November.
Minister for Civil Society Nick Hurd said: “I am delighted that that the European Commission has approved our State Aid case and cleared the way for the government to capitalise Big Society Capital with up to £400m of Dormant Accounts money.
“We want to make it easier for social entrepreneurs to access capital. This announcement is an important milestone on that journey.”
Nick O’Donohoe, Big Society Capital’s chief executive, said: “We are very pleased to have been given the green light by the EU Commission far more quickly than we could have hoped. We believe this reflects the general engagement in Brussels around the social investment agenda. We anticipate clearing our final regulatory hurdles in the new year and being open for business by the end of the first quarter of 2012.”
The announcement from the EC can be found here.