Questions over whether Preston should "get into bed" with Liverpool over local bank

The pair – along with Wirral Council – have been developing the concept for the past two years and are now poised to apply for a licence to operate the joint venture, which would loan money only to businesses and individuals in the North West.

However, last month, Liverpool City Council was the subject of a damning report which led the government to conclude that there had been a “serious breakdown in governance” at the authority.

An inspection ordered by local government secretary Robert Jenrick highlighted a raft of issues that he said demonstrated a “dysfunctional culture” – including the “the awarding of dubious contracts”.

The report was commissioned shortly after Liverpool’s elected mayor, Joe Anderson, was arrested last December on suspicion of conspiracy to commit bribery and witness intimidation. He denies any wrongdoing, has not been charged and is no longer on police bail – but remains under investigation, along with four other individuals arrested at the same time. Mr Anderson stepped aside from his mayoral role shortly after his arrest.

At a meeting of Preston’s full council, Liberal Democrat group leader John Potter quizzed cabinet member for community wealth building Freddie Bailey over whether he had had “conversations” with his fellow Labour-run authority in Liverpool in order to “reassure Prestonians” about the city’s involvement in the bank. Preston has earmarked £1m for the project over the next two years.

Cllr Bailey said that the structure of the bank meant “there should be absolutely nothing to worry about” – and pointed to the ongoing nature of the investigation on Merseyside as a reason not to comment further.

However, Cllr Potter called on the council to satisfy itself about whether the situation in Liverpool would “affect the bank’s prospects”, adding: “Just saying, ‘Don’t worry about it’ isn’t really appropriate if we are spending £1m of Preston taxpayers’ money on it.”

Cllr Bailey was also pressed on the matter by the deputy leader of the Conservative group, Ron Woollam, who demanded “real reassurances” in the wake of the Liverpool revelations, including subsequent media reports suggesting that £100m may have been “squandered” by the authority.

“In view of [the] serious allegations that have been made and this risk of a lack of integrity, is it wise for the council to be getting into bed with Liverpool and Wirral councils to set up a jointly-funded community bank?” Cllr Woollam asked.

Cllr Bailey told the meeting: ”Any directors, once this bank is established, have to be vetted by the Bank of England.

“And once it’s set up, it will be a member-owned co-operative bank, which means that it will be the members that control this bank – not Preston City Council, Liverpool City Council or Wirral Council.”

As the Local Democracy Reporting Service revealed in 2019, the bank – to be known as North West Mutual Bank – could bring both staffed and automated branches to the streets of the region when it launches.

It will require £20m to be held as security by the Bank of England. The venture was registered with the Financial Conduct Authority in May 2020.

Upon Preston’s approval of the latest stages of the project last month, Cllr Martyn Rawlinson, cabinet member for resources and performance at Preston City Council, said that the small businesses that have been hit hardest by the pandemic “will need support to bounce back and thrive”.

“By working with a community bank, small businesses and community-focussed projects can get the best services and advice from an organisation that understands their work and the communities they serve.

“As we look to rebuild from the pandemic, it is important that we place people above profit and take bold and innovative action to bring real social value to the places we live by investing in small businesses and community projects that give back to their communities. The community bank is an important step in this journey,” Cllr Rawlinson added.

Meanwhile, in Liverpool, government commissioners will oversee a turnaround plan at the city council.

Mr. Anderson is not seeking re-election as mayor at next month’s local elections. He was questioned by police as part of Operation Aloft, an investigation into building and development contracts in the city.

The same probe saw Liverpool City Council’s director of regeneration Nick Kavanagh arrested in December 2019 on suspicion of conspiracy to defraud and misconduct in a public office. He has not been charged and denies any wrongdoing.

Mr. Kavanagh was dismissed from his post at the city council last month and issued a statement in which he said he had “always worked within the rules and regulations set out by the council constitution” and would seek to clear his name at an appeal or tribunal.

Following publication of the government-ordered inspection report, Liverpool City Council chief executive Tony Reeves and acting elected mayor Wendy Simon said that they took the findings “extremely seriously”.

They added: “We would like to reassure all residents and businesses that we will take action to address all of the issues highlighted. We know we need to rebuild your trust.”

The Labour Party announced last month that it would conduct its own review of the issues raised by the inspection. It will be led by David Hanson, a former minister in the Gordon Brown government.