David Cameron launches 'big society' fund Press Association

David Cameron will attempt to breathe fresh life into his flagging "big society" initiative when he launches a £600m fund to support grassroots social projects on Wednesday.

The prime minister will announce that £400m from dormant bank accounts will be used to help finance the scheme, dubbed Big Society Capital. A further £200m will come from Britain's four largest high street banks – Barclays, Lloyds, HSBC and RBS.

The fund will help local groups take control of their post office and provide capital for charities and voluntary groups bidding for government contracts. There will be a strong focus on helping the long-term unemployed back into work.

Cameron, who has faced criticism for failing to define the big society, will hail the scheme as one of the world's most important social investment funds. He hopes it will show that the big society is more than just an election slogan.

Cameron declared on the eve of the Tory manifesto launch before the general election that he was inviting the British people to join his government as part of an open, big society. But many Tories said the idea, seen as the brainchild of Cameron's policy guru Steve Hilton, was ill-defined and difficult to explain.

Ministers say it has taken two years to establish the fund, which will be run independently of the government by the former JP Morgan global head of research Nick O'Donohoe, and chaired by Sir Ronald Cohen, the Apax founder.

The European commission had to declare that the fund did not break its state aid rules. There were lengthy negotiations with the high street banks who made £200m of capital available under the terms of the Merlin deal with the government.

The prime minister will say: "For years, the City has been associated with providing capital to help businesses to expand. Today, this is about supplying capital to help society expand. Just as finance from the City has been essential to help businesses grow and take on the world, so finance from the City is going to be essential to helping tackle our deepest social problems.

"Big Society Capital is going to encourage charities and social enterprises to prove their business models – and then replicate them. Once they've proved that success in one area they'll be able – just as a business can – to seek investment for expansion into the wider region and into the country. This is a self-sustaining, independent market that's going to help build the big society."

Cohen, the driving force behind the fund, said: "What we've done for business entrepreneurs we must now do for social entrepreneurs. We must give them the resources to innovate in the way we resolve social issues. Big Society Capital aims to transform the flow of capital into the social sector and to boost significantly its ability to improve people's lives."

Nick Hurd, the minister for civil society, said: "This is a time when we need to be doing more to back our social entrepreneurs. For many years, charities and social enterprises have been telling government how hard it is to access long-term capital. We have listened and within two years have delivered a new institution that will make it easier."