An independent "social bank" should be set up to make good use of hundreds of millions of pounds lying dormant in bank and building society accounts, a commission said yesterday.
The Commission on Unclaimed Assets, headed by Sir Ronald Cohen, best known as a champion of the AIM market, said a new Social Investment Bank should make the money available for charities and voluntary organisations seeking to relieve poverty.
The money would not be given as hand-outs, but to capitalise the bank, which would offer a broad range of flexible financial products such as loans to charities, as well as development grants.
The commission said the bank's founding principle would be to apply the financial rigour of the private sector to community organisations. This would enable them to build and sustain their capacity to make a long-term impact.
I should also use its financial base to attract additional capital and resources to the voluntary sector.
The commission was set up last November to look at ways of using "orphan" money lying dormant in bank and building society accounts that have not been touched for years.
It is not known exactly how much money is available, but it is thought there is at least £400 million in bank accounts untouched for more than ten years. Some estimates put the total value of unclaimed assets as high as £5 billion.
In a consultation paper published, the commission said under-capitalisation and inadequate technical support for charities, voluntary organisations and community groups is preventing them from effectively addressing the chronic under-investment in disadvantaged communities.
It proposed making money available to groups that focused on issues such as financial inclusion, community regeneration and young people. By funding these organisations properly, a last-ing contribution could be made to tackling deprivation in the UK.
Sir Ronald said: "Given that investment and entrepreneurship go hand-in-hand in the third sector as much as in the mainstream economy, attracting capital and resources to finance social activity is key to its success.
"That is why we are proposing setting up the Social Investment Bank.
"The UK has arguably the most sophisticated financial centre in the world. We should use our collective expertise to develop a recognised asset class for social investment."
But the commission also stressed that there would first be a rigorous campaign to reunite account holders with their money. People would always be able to claim their assets, including any interest due, regardless of when they came forward.
The commission has already been consulting with the Government, banks and building societies, charities and voluntary groups. It will now hold a wider consultation, before publishing a final report ahead of next year's Budget.
Chancellor Gordon Brown announced in his Pre-Budget Statement last December that an agreement had been struck with the banks and building societies to use unclaimed assets in dormant accounts to fund new youth and community facilities.
Adrian Coles, director general of the Building Societies Association, said there is an estimated £50 million to £70 million in building society accounts alone that has not been touched for 15 years, where the society has lost touch with the account holder.
Dormant National Savings & Investments accounts and unclaimed money from Premium Bond wins should also be included in the scheme, he added. This could amount to £1.8 billion, it is thought.
"It is important to remember this still belongs to account holders," he said.