Part of the transition to a steady state economy requires maximizing the opportunities for local economies to invest in themselves, specifically in socially useful, equitable and resilience building enterprises. SSM also believes Local Government will play a key role in building many aspects of a truly sustainable local/regional economy. To this end, as part of our ongoing engagement with Manchester City Council, we recently requested Finance Scrutiny Committee to do an ethical audit of the Council’s investment’s, both to question what investment’s might be identified as detrimental to social and ecological well-being, but also to explore options to increase the returns from public investments by directing them towards the creation of social and ecological value in the local economy.
A preliminary report was presented to the committee yesterday detailing the Council’s short term investment’s and banking provider, with a further report on the Greater Manchester Pension Fund to follow. The Council’s banking contract and short term investments are only of interest to banking type organisations as they assist with liquidity, with greater scope for direct long term investment in social and ecological value creation residing with the Pension Fund and other longer term investments. However with UK council banking contracts totalling £30 billion, where Council’s bank has the potential to significantly influence the character of the financial sector for the better and direct investment to more socially useful areas.
The Move Your Money campaign has been doing a lot of work on this, encouraging Local Authorities to move their banking and investments to organization’s which lend more to the real economy and produce more social value.
There are significant barriers, as reported here, council risk aversion, coupled with CIPFA and DCLG guidance and the Council’s use of the advice of private ‘Treasury Management Advisors’, favours the 4 ‘too big to fail’ banks which consistently fail to hit SME lending targets.
Challenger banks such as Triodos, Metro bank and Handelsbanken do not have formal credit risk ratings and Treasury Management Advisors currently refuse to put them on approved lists to receive council deposits.
The report of the Parliamentary Commission on Banking Standards called for a review of DCLG guidance which by advising Councils to only deposit with banks with high formal credit ratings, puts smaller banks at a competitive disadvantage despite government commitments to encourage new entrants in the banking market.
MYM have been campaigning for changes with these regulatory bodies but they also stress that Local Authorities were granted ‘powers of competence’ to manage their financial affairs by the Localism Act in 2011, and that DCLG, CIPFA and Treasury Managment Advice is only advice. It need not prevent Councils from including other considerations in it’s final investment decisions. All of this was presented to Committee members yesterday by SSM. Councillors were also provided with the Local Authority Toolkit published by MYM, a comprehensive guide to what Local Authorities can do to get more social value from their investments.
The Council will be tendering for a new banking contract shortly, following The ‘Co-operative’ Bank’s withdrawal from providing banking services to Local Government. It will require real commitment and genuine buy in from residents, councillors and council officer’s to prevent public funds leaking out of Manchester through a ‘too-big-to-fail’ bank and ensure they are re-invested locally in the real basis of future prosperity for the region. The returns however are genuine, worthwhile and lasting; local prosperity and the rebuilding of a fairer banking system.
If you are interested in getting involved in this campaign get in touch with SSM by emailing: firstname.lastname@example.org