'Preston Bank': Have the shutters come down on the idea before it even opens its first branch?

A Preston City Council meeting heard that the authority was still committed to the concept, which would see the creation of an institution dedicated to providing banking services exclusively to businesses and individuals based in the North West.

However, Preston is currently the only local authority to have earmarked any cash to get the initiative off the ground, having reserved £1m for the purpose in recent budgets. But it is expected that it will cost £20m to launch the embryonic bank, known as the North West Mutual.

The hunt is now on for other councils to pitch in and plug the gap apparently left by two of its original backers - but opposition politicians in the city claim that a plan they had always criticised is now in tatters.

Liverpool City Council and Wirral Council signed up to the project back in 2019, but Wirral withdrew a £5m commitment to the bank from its spending plans last December, while there is no mention of the scheme in Liverpool’s current capital investment programme which was approved in February.

Questioned by Preston’s Conservative opposition group about exactly which local authorities were now supporting the bank, Labour's cabinet member for community wealth building, Freddie Bailey, acknowledged that the proposal had “hit some roadblocks”.

He said that Wirral was facing financial pressures, while Liverpool City Council was also “having some difficulties''. The latter authority is currently being overseen by government commissioners after a damning report last year highlighted a series of governance failings.

Cllr Bailey said that Preston was searching for other possible sources of “external funding” - including from fellow councils - to enable the bank to open its doors, because the authority still believed it would bring “huge benefits” to the city, the county and the wider region.

“There [are] not a lot of institutions in the public sector that have a lot of money. But because we are still trying to sell this as...an incredible idea that will, in theory, unlock investment and potential within the North West region, we are still committed to [it].

“At the same time, we have not…spent that money [the ringfenced £1m]. Obviously, we have open minds and…we are being flexible, but we just believe at this moment in time, this project is still viable - and will still have as much impact as…when it was created,” Cllr Bailey added.

The North West Mutual’s website says that the facility would be an “ethical and supportive bank which will keep savings safe, lend to businesses that are creating jobs” and help “ordinary people own a home”.

Community banks are usually built on inclusive principles, meaning that they offer everyone in their region access to a full current account - including the more financially vulnerable who might otherwise struggle to get that service from traditional financial institutions.

However, Preston’s opposition groups have never been convinced that the numbers have added up for the North West Mutual - and have repeatedly called for Labour to pull out of the proposed bank.

Speaking after the recent full council meeting where the matter was disussed, deputy Tory opposition group leader Harry Landless - who raised the issue in the chamber - told the Lancashire Post that he had wanted to know whether the plans were “dead in the water”.

“[If so], why don’t they admit to it and we could use the money we were putting aside for the bank for other causes - or are they going to insist on [allocating] money in the capital programme to try to resurrect [the idea] with other councils?

“They have been heralding it for ages, saying it’s the way forward and a superb thing - but as the years go by, it seems to be a non-starter,” Cllr Landless added.

Liberal Democrat group leader John Potter said it appeared that the project was “all but over” if key partners were walking away.

“The idea was a novel one, but as soon as we saw the confidential details, we knew that this was unlikely to be successful and [would] not bring in the benefits the Labour group was saying in public.

“The Preston Liberal Democrat group was the only party to [propose to] remove the capital investment from Preston City Council’s budget in 2021 and 2022 - and our decision has been vindicated”.

“We proposed using that funding to start green projects in the city in our efforts to tackle the climate emergency. Hopefully, the Labour group will see sense and follow our lead again,” Cllr Potter added.

However, also speaking after the meeting, deputy city council leader Martyn Rawlinson stressed that while it seemed “unlikely” that Liverpool and Wirral councils could be involved in the community bank at the moment, the authority was still “exploring other options”.

Addressing the full council, Cllr Bailey said that it would be easy for Preston to hope that “someone else” would take the lead in driving forward an idea like the community bank.

“But my view…is that the world shouldn’t be full of sheep, it does need shepherds. What we want to do in Preston [is] to be that shepherd that [is] guiding sheep - and hopefully, one day, [the bank] will be up and running.”

As the Post revealed in 2019, the bank could bring both staffed and automated branches to the streets of the region if and when it launches.

The £20m start-up costs reflect the level of security which would have to be held by the Bank of England. The venture was registered with the Financial Conduct Authority in May 2020.

Liverpool City Council and Wirral Council are both still listed as “supporters” on the North West Mutual’s website and both were approached by the Post and offered the chance to comment on their current commitment to the bank.

COUNTING THE COST

£20m – investment needed to launch North West Mutual bank

£1m – the cash Preston City Council has reserved for the project

£5m – the amount Wirral Council had committed, but has now withdrawn

Sources: Preston City Council and Wirral Council

BANKING IN NUMBERS

2 in 3 – UK bank branches closed between 1990 and 2020.

13 percent – proportion of free-to-use cash machines that closed between 2019 and 2020.

75 percent – proportion of UK population that has an account with one of the “big four” banks.

1m+ – number of people in UK without a full bank account.

Source: ‘The Road the Resilience’ report, RSA, 2020