Preston City Council is preparing to launch its own local fund to stimulate the city economy.Advertisement
Up to £500,000 is earmarked to be invested in community interest companies or charitable trusts operating in Preston.
The council’s Labour administration says it took the decision to move some of the council’s reserves into setting up the fund.
Previously the money would have been invested with banks, pension funds or investment firms – but the city council says it wants to lend the money locally.
Known as the Investment Strategy Fund there would be up to £150,000 given to each community interest company, social enterprise or charity.
The document explaining how it works states: “In order to be eligible to apply to the fund the application must come from a Community Interest Company or Charitable Trust based/or to be based in Preston and/or where the impact of the Cabinet Project is going to be in Preston.”
Cabinet member for resources, councillor Martyn Rawlinson, said: “Now the authority are putting its money where its mouth is, by starting to move away from traditional investment options and creating an investment fund for local projects. While the essence of the campaign is to encourage individuals to reconsider their banking habits and think about what their money is achieving while it’s in someone else’s hands, it was the Move Your Money ‘Local Authority Guide to Banking for Social Good’ that initially inspired us.
“All Councils have cash reserves for various reasons from short term cash flow to longer term liabilities on property or pensions. Despite this, Local Authority banking and investment has never been the most diverse field. The number of institutions that most councils bank with can be counted on the four fingers of Homer Simpson’s left hand (and still have one free to open a beer!). There are few banks that can handle the multitude of day to day transactions that move through council accounts. If you couple this with the collapse of interest rates since the credit crunch (and the hysteria caused by some councils lost investments in Iceland, although not Preston) then the options for secure and productive places to put taxpayers’ money are limited.
“The Move Your Money guide for councils encourages breaking this mould and seeking out new and more ethical institutions to handle local government resources. While challenger banks and new publicly backed financial vehicles are emerging, there are no immediate solutions for councils wishing to abandon the high street brands. Also, councils that are still wedded to ultra safe investments for their reserves and balances can expect less than a one percent return.
“This reality is just not acceptable when the local economy is struggling. Councils that continue to invest internationally are selling their residents souls to the devil. Preston Council is creating a fund capable of supporting local institutions, at a lower interest rate than the obvious sources. Beneficiaries could be charitable, community based, anchored in the local area, job-creators looking to expand within the locality, social enterprises, worker co-ops, green industries, Living Wage employers etc. Whatever the nature of the investment, the money will remain in the local economy, working for local people and creating a higher return for taxpayers than foreign gilts.
“Of course there are risks, that’s why we are starting small, but the social returns are worth it, and managed carefully these calculated risks will pay off financially too, for all concerned.”
There were concerns the scheme could conflict with the Growing Places Fund run by the Lancashire Economic Partnership (LEP) but the city council says their scheme is just focused on Preston.
The fund was approved by the city council and went through the council’s overview and scrutiny committee in the last week.
You can find out more about it in the report presented to the council’s committee.
What do you think of the idea? Would you apply for your business? What would you use the money for? Let us know in the comments below