With the continued spotlight on The Preston Model, the city council is preparing to invest £1million – in setting up a bank.Advertisement
Council leader councillor Matthew Brown says the city will lead a ‘North West-based bank’ in what he says will be the start of a new type of managing money in the UK.
Speaking from his office in the Town Hall, Blog Preston sat down to quiz the Labour leader on why he plans to invest the council’s money in setting up a new banking institution.
He said: “The system was have for banking and finance in this country, is broken.
“We have vast inequality and we have banks which are much happier lending to each other, than they are in lending to people who need it and importantly to small businesses.
“I want Preston to lead the charge in setting up a co-operative owned bank which would help to serve the North West.”
Budget documents showed the city council has earmarked £1million to go into funding the bank, and Cllr Brown says it would have to be an effort beyond Preston to set it up as the start-up cost would be £20million.
Initial discussions have taken place with other councils in the North West, with Wirral Council said to be prepared to commit £5million, the Association of Public Sector Excellent wants to put in £1million and Cllr Brown said they are due to meet with the Mayor of Liverpool Joe Anderson about further Merseyside involvement.
Cllr Brown said: “We would need that money to set up branches in key locations in the North West, as well as funding staff and all the equipment needed for a bank.”
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Former banker Tony Greenham is advising the city council on the way forward with the bank and Cllr Brown says much of the inspiration is being drawn from America and Europe, in particular Germany.
He said: “If you look at what they do on the continent then a much larger percentage of people have their accounts with smaller community-owned banks.
“We think there’s a real appetite for the same to happen here, not just in the North West but I’m aware of the Midlands, Greater London and the South West also seeing moves to create these banks.
“The government also looks to support these, as the rise of Challenger Banks such as Metro Bank shows.”
The Preston-backed bank, which does not yet have a name, would also have an extensive online presence but Cllr Brown says having physical branches is a must.
This is perhaps shaped by his own experience in Tulketh ward, which he represents, where Lane Ends saw its final bank, a Lloyds, close in recent years.
He said: “Banks have abandoned our high streets. That is a commercial decision by the banks.
“Yes, there has been declining footfall because of online banking, but where does that leave the elderley, the disabled, those who want to see someone about their money and importantly small businesses?
“We need a bank that cares for its communities as well as needing to make money. The current system does not have that and we want to give people a credible alternative.
“Evidence from the Federation of Small Businesses says having local banks is the lifeblood of those. We want to support small businesses so it’s crucial.”
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The bank would have a board to govern it, and Cllr Brown says he’s keen for customers of the bank to be on the board.
It would be a fully licensed bank and also regulated by the Financial Services Authority with all deposits for customers secured up to the value of £85,000 as with other banks.
Asked why the council wasn’t happy with existing credit unions they have helped set up or a building society – Cllr Brown said a bank allowed them to lend to small businesses – a key part of the pitch for the new bank.
Challenged on whether the public could trust a Labour-led bank, after the financial collapse of 2008, Cllr Brown said he wanted to distance himself from New Labour politics.
He said: “Yes, Labour was in charge at that time, but it was not the kind of Labour politics that I, and many others, agree with.
“I think it’s clear to see that I and Preston have a different political philosophy and model we’re pursuing.
“I want to see this money from the banks recirculating around our local economies, not plumping up in some tax haven or offshore fund.”
Blog Preston also asked why, with council budgets more stretched than ever, the money was being put into a bank set up rather than protecting front-line services.
Cllr Brown said: “I think there’s this perception that councils shouldn’t have ideas.
“That’s wrong. As people may have noticed we have some pretty big ideas and this is a time for having different ideas and ways of doing things.
“People want to see something different and a fresh approach.”
Cllr Brown said there had been limited market research done at this stage, but that a lot of research had been undertaken into the models from Germany which pointed to being able to make a population level of 3million work for having enough customers for the bank.
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What do you think of the idea of a community bank? Would you bank with it? Let us know in the comments below