a local authority guide to banking for social...

A locAl Authority guide to bAnking for sociAl goodHow councils can change their banking to boost the local economy and deliver value for residents

2 | A locAl Authority guide to bAnking for sociAl good

A locAl Authority guide to bAnking for sociAl good | 3

contentsForeword 4

executive summary: How you can use your money twice 5

tHe beneFits: wHy wHere you put your money matters 8

tHe cHallenges: overcoming barriers 11

How to move your money 14Moving your council’s transactional banking services 14Moving your council’s investments 15supporting local and community development finance initiatives in your area 18banking for social value 20

nine questions to ask 22

next steps 23Where to go for further information and resources 23sharing your good examples 23how Move your Money can help 23What Move your Money will be doing next 23

witH tHanks to 24

appendices 25Appendix A: council banking a list of potential actions 25Appendix b: Where can i move to? 28

glossary oF terms 29

metHodology 30


in the last two years of my three terms on

islington council, i was chair of our audit

committee. looking back now, i did not fully

realise that this role had the potential to add social

value to our everyday financial business. i could

have looked at how to use the public’s money

twice – finding safe, profitable, efficient banks to

invest our money with, as well as ensuring that

this taxpayer money was working effectively to

support our local community and economy.

it is increasingly important for councils to find

new ways of working – doing more with less – so

it’s good to know there are a few new stones

to turn over. this toolkit will help you to look at

your council’s banking arrangements and guide

you through the process of moving your money

to alternative banks. it is time to unpick some of

the myths and processes behind how councils

make financial decisions – and to understand

the plethora of alternatives available to councils

that want to ensure their financial arrangements

support their strategic objectives.

there is no better time to take a good look at your

council’s banking. the Parliamentary commission

on banking standards released its landmark report

on 19 June 2013, calling for sweeping reforms,

including changes that affect local authority banking.

it’s time to bank on something better.

laura willoughby mbechief executive, Move your Money

“If as bank customers we want to change the

culture of banking, then we should start by

supporting those banks who are delivering that

change. Putting your money where your mouth

is would deliver far greater and more durable

change than any amount of banker-bashing.”

Andy Haldane, Director of Financial Stability,

Bank of England1

foreword

1. http://ftalphaville.ft.com/2012/10/30/1237921/haldane-occupy-and-the-path-to-reform//


in the wake of the global financial crisis, the political

agenda at home and abroad has been dominated

by attempts to reform our financial sector. yet, five

years on, new banking scandals and crises continue

to emerge, and customers continue to be subjected

to scandal after scandal – from bankers’ bonuses

to ongoing mis-selling revelations – all at the hands

of five banks who enjoy an 87% share of the uk

current account market.2

Move your Money launched at the start of 2012 to

encourage british citizens to move their money to

ethical, local and mutual alternatives to the big five

banks. in 2012, more than 2.4 million customers

answered this call to action – moving their money

to a range of providers such as mutuals, credit

unions, building societies, ethical banks, peer-to-

peer lenders.3 in doing so, they are helping to build

a financial sector that actually works in the interests

of britain’s economy and communities.

alistair mcclean from newcastle switched his personal and business accounts from barclays to Handelsbanken last year. He said:

“The UK banks had no idea who I was or what

my business required, I was just a numbered

income stream to them. Ridiculous bonuses and

the Libor fixing scandal simply pushed me over

the edge. These bankers are so arrogant that they

think themselves above the law.”

“Switching banks was so straightforward that

I actually enjoyed telling Barclays why I ditched

them. I wanted a bank that would treat me as

a human being, and would use my money for

socially responsible projects.”

however, Move your Money wants to build on

the lead of these 2.4 million individuals and look

to british businesses, charities, faith institutions,

public bodies and local authorities that are

responsible for enormous sums of money invested

in british banking. We, as well as their customers,

members, residents and taxpayers, want to make

sure that institutions are moving their money too.

local government has a unique role to play in shaping

the future of british banking. local authorities are

significant customers for financial institutions,

investing billions of pounds of public money every

year. on top of this financial clout, councils are

also community leaders, developing policies and

partnerships to support residents and develop their

local economies. they are also innovators, investing in

projects and programmes for social good.

by moving even just some of your council’s money to

alternative providers, you can use your money twice,

creating a local multiplier effect. banking with the

right providers ensures that your investments benefit

the local and uk economy and add social value, all as

well as fulfilling the government’s requirements of a

banking provider – security, liquidity and yield.

executive summAry:how you cAn use your money twicemove your money is leading a growing movement of ordinary people, businesses and organisations that are fed up with the big banks and want to build a better banking system.


the range of benefits that come with investing with

alternative financial providers include:

• boosting the impact of your taxpayers’ money

locally – by supporting institutions that provide

local jobs, invest in local businesses and offer

affordable loans to local residents;

• supporting your council’s broader strategic

priorities, by putting your money into banks with

responsible investment criteria;

• investing into financial service providers that can

offer affordable, low-cost credit to residents –

providing real alternatives to predatory payday

lenders and access to banking products for

people who are financially excluded by the big

five high street banks; and

• actively helping to diversify the uk financial

sector, by boosting real alternatives to the “too

big to fail” banks, and ensuring there is real

competition and choice for consumers in the uk

banking sector.

Moving your money can be a challenge, requiring

members and officers to ask their organisations to

look at their finances in a new way. but we believe

this is an untapped area of potential that would

allow councils to make a real difference to residents

and local communities, without incurring additional

expenditure.

leicester city council withdrew millions of pounds from barclays in June 2012, after libor rigging came to light. deputy mayor rory palmer stated: “I have been appalled by what Barclays did and

we’ll not be investing our money with them. I

think the people of Leicester would share that

discomfort, so we are taking steps to end our

association with Barclays.” 7

the toolkit will help them understand:

• the local benefits to be gained by moving your

council’s money;

• the alternative providers that exist and the

services they offer;

• the processes involved in moving your money –

including legal and procurement considerations.

In 2012, alternatives to the big five banking

groups grew their market share by over

20%. This is a trend that could continue

into 2013, as account-switching becomes

quicker from September. Account transfers

will have to be completed in seven days

and up to 14 million people have said they

would move.4

Local government is a major investor in UK

banking, directing more than £31 billion

into banks and money market funds,5 and

managing a public sector pension fund of

some £180 billion.6

The local multiplier effect (sometimes

called the local premium) refers to the

greater local economic return generated by

money spent at locally-owned independent

businesses, compared to corporate chains

or other absentee-owned businesses.

Localisation advocates cite the multiplier

effect as one reason why consumers should

do more of their business locally.

bAnk on something better:

executive summAry (continued)


given the scale and complexity of local authority

financial requirements, we know that not every

council can move all of its money. however, every

council can use this toolkit to consider moving what

it can, where it can. Move your Money is calling on

local authorities to:

1. review banking procurement criteria and move

transactional banking services.

2. review investment advice and move council

investments to alternative providers.

3. support local banks and community

development finance initiatives in your area.

4. demand greater transparency and social value

from council banking, investment and financial

services providers.

2. Packaged and current accounts uk June 2012 – Mintel.

3. http://www.guardian.co.uk/business/2012/dec/22/banking-thousands-

customers-switch-accounts

4. http://www.sas.com/offices/europe/uk/press_office/press_releases/

uk-retail-banks-account-switching.html

5. http://www.publications.parliament.uk/pa/cm200809/cmselect/

cmcomloc/164/164i.pdf

6. http://www.thisismoney.co.uk/money/pensions/article-2331996/some-

councils-losing-three-times-fees-firms-manage-uks-180bn-public-

sector-pension-funds.html

7. http://www.telegraph.co.uk/finance/newsbysector/

banksandfinance/9395438/leicester-to-pull-millions-from-barclays-

over-libor-scandal.html

executive summAry (continued)


it matters to your residentsthe dominant five high street banks are currently

failing to provide for swathes of british citizens,

with low levels of lending, extortionate charges and

a continuing pervasive culture of mis-selling.

on top of this, there are 1.54 million british adults

without access to a bank account, and a further

9 million who are missing out on the benefits of

transactional banking.9 combined with branch

closures, the mainstream financial services sector

is not working in the interests of some of the most

vulnerable in our society.

At the same time, we have seen an explosion in

the level of activity of payday lenders and the home

credit market. both are cashing in on financial

exclusion and economic uncertainty in the uk,

selling easy access loans at extortionate levels of

interest.10 With the introduction of universal credit

meaning everyone now needs a bank account,

councils have even more reason to ensure that

banks are providing a good service to some of the

most vulnerable members of your community.

it matters to local businesseseven at the most local level, the too-big-to-fail banks

– lloyds, rbs, hsbc, santander and barclays –

have consistently failed to meet small business

lending targets. that is despite £16.6 billion more

of taxpayers’ money being handed to them, via the

governments ‘funding for lending’ scheme.11

there has been extensive research into the impact of localised spending on local economies. a 2005 study by the new economics foundation and northumberland county council found that every £1 spent with a local supplier is worth £1.76 to the local economy. but it is only worth 36p if it is spent out of the area. this makes every £1 spent locally worth almost 400% more.12

building societies, local banks and credit unions are

all alternative financial providers that keep public

money in the local economy – lending to local

residents, and providing local jobs and branches.

it matters to achieving your strategic prioritieslocal government finance is under considerable

strain at the moment. Against a backdrop of

funding cuts, councils are working hard to get a

return on investment and to fund and maintain

the services valued by local communities. With

interest rates at a record low, local authorities are

being forced to look at new and innovative ways to

invest their money.

the benefits:why where you put your money mAtterswhere you put your council’s money matters. you need security, liquidity and good returns on your investments, and a high level of service from your bank. but there is more to banking than a good rate of return. banks are, and always have been, important to your local economy – lending to local businesses, providing facilities and services on the high street, and creating local jobs. investing public funds into local, mutual and ethical banks is a cost-effective way for you to have a demonstrable impact on your local communities and economy.


£

£1 SPENT = £0.36 LOCAL BENEFIT

£

£

LOCAL MULTIPLIER EFFECT

TOO BIG TO FAIL

£1 SPENT = £1.76 LOCAL BENEFIT

LOCAL STAKEHOLDER BANKS

TOWN HALL

£


the challenge lies in managing risk to ensure

a good financial return on investment, at the

same time as delivering on your council’s

corporate objectives. for many, this will include

commitments to growth and supporting the local

economy, strengthening local organisations and

encouraging greater sustainability.

choosing to bank with institutions with local and

responsible investment criteria, or a track record of

providing affordable loans to residents, is an easy and

cost-effective way to ensure that your organisation is

doing everything it can to deliver against these goals

and achieving the vision for your area.

it matters to the uk financial sector as a wholethrough strong local leadership, local authorities

have an opportunity to support alternative providers

and new forms of finance. rather than waiting for

political action at the national level, local authorities

can take immediate action, actively supporting real

competition and diversity in the banking sector.

the parliamentary commission calls for greater diversity in banking stating: “Diversity of provision in the retail banking

market matters. The Commission sees value

not just from more new banks with orthodox

business models, but also from alternative

providers. Diversity of provision can increase

competition and choice for consumers and make

the financial system more robust by broadening

the range of business models in the market. The

UK retail market lacks diversity when compared

to other economies, and this has served to

reduce both competition and choice to the

obvious detriment of consumers.” 13

this diversity and competition will only be furthered

the benefits (continued)

£9.3 billion has been paid so far in

compensation to British bank customers

who were mis-sold Private Protection

Insurance. That is, an average of 8,280

people in every local authority area who

have been mis-sold PPI and there are many

more claims to come.8

An example of an alternative provider

is Svenska Handelsbanken, which was

founded on the principle of lending only

to a local area that could be viewed by

climbing to the top of the local church spire.

Handelsbanken is currently opening a new

bank branch in the UK every 10 days. It is

devolved banking, with an impressive 95%

of loan applications approved at the local

branch level.


by significant financial investments into alternative

providers. local authorities are uniquely placed to

lead on this issue. your organisation controls large

sums of money and has a public leadership role at

the local level.

8. this is a MyM calculation. According to the financial conduct Authority

£9.3 billion has been paid out in claims by April 2013. Payments average

£2,600 (the telegraph 2 March 2013) making that an average of 8,280

claims per local authority so far.

9. http://www.consumerfocus.org.uk/news/the-best-of-british-banking-

consumer-focus-calls-on-banks-to-ensure-the-successes-of-the-basic-

bank-account-are-not-swept-away-in-a-race-to-the-bottom

10. http://www.guardian.co.uk/money/2013/jun/21/wonga-increases-apr-

1600?intcMP=srch

11. http://www.guardian.co.uk/money/2013/jun/03/funding-lending-

scheme-uk-economy

12. http://www.neweconomics.org/press/entry/buying-local-worth-400-

per-cent-more

13. http://www.parliament.uk/business/committees/committees-a-z/joint-

select/professional-standards-in-the-banking-industry/news/changing-

banking-for-good-report/ see Para 56.


We know that local authorities have made changes

to their finances for ethical reasons – especially in

relation to pensions. but this guide is about all your

financial relationships and not just about ethics.

At the heart of this guide are your local economy

and the community you represent. We are actively

supporting alternative lenders that share council

values and pledge to support the local economy.

even if you can’t move everything, look at how

you can influence your existing lenders and deliver

social value from the relationship.

from our conversations with members and

officers, we know there are some common barriers

and misconceptions about decision-making on

financial matters in the council.

security, returns and local benefitfollowing the banking crisis, an understandable

culture of risk aversion has developed within local

government and economic policy more generally.

one of the unintended consequences is that local

authorities may not have maximised opportunities

to lead local economic development and growth, as

the uk recovers from recession.

for example, local government investments in uk

building societies have declined from £10.3 billion

pre-crash to just £1.8 billion today,14 as financial

advisors and treasurers seek a declining pool of

AAA-rated funds and the safety of government-

supported too-big-to-fail banks. building societies

perform a key role in funding housing construction

and mortgage lending at a time of record housing

shortages. there are no rules preventing councils

from investing in these institutions.

investment policies represent a double-edged

sword. current practice has minimised risk without

considering the local economy. the financial health

of a council is inextricably linked to the success or

failure of the local economy to provide jobs and

services to residents. An investment strategy that

ignores the fundamental importance of supporting

of the local economy is not sustainable long term.

local authorities do not need to invest only with aaa-rated funds. by doing so, they exclude options that benefit the local economy.

Fiduciary dutythe legal duty placed upon institutional investors

to act in the best interests of beneficiaries is

known as ‘fiduciary duty’. fiduciary duty should

not be considered as a barrier to adopting a holistic

approach to fund management or investment,

where this delivers long-term benefits for taxpayers

and beneficiaries.

shareAction is campaigning for further clarification

of the meaning of fiduciary duty.17 the campaign

aims to enable responsible financial management

encouraging fiduciary investors to adopt a holistic

view in their beneficiaries’ best interests – considering

social, economic and environmental issues.

for example, fiduciary duty should expressly

enable fund managers, advisors, and investors to

consider the long-term impacts of investments in

oil companies on the climate – including the future

impact of climate change on investment and fund

performance, taxpayers and pension fund holders.

the chAllenges:overcoming bArriersmove your money is encouraging local authorities to scrutinise where they hold investments, moving what they can away from too-big-to-fail high street banks and into more socially responsible alternatives.


the report of the Parliamentary commission

on banking standards recognises that by

recommending that institutions place their deposits

with banks with high credit ratings, dclg has

effectively created an unequal playing field for small

banks without formal ratings. this is despite the

fact that the government “stresses the importance

of encouraging new entry into the retail banking

market”.20 the report recommends a review of

dclg guidance, so that other measures can be

used to determine a bank’s strength – pointing out

that banks with strong pre-crisis credit ratings ran

into serious difficulties during the financial crisis.

dclg and cipFa non-statutory advice has created an un-level playing field penalising small banks. it does not prevent an authority from including other considerations in its final investment decisions.

external treasury management advicetreasury management advisors advise local

authorities where to invest public money. the

treasury management sector is dominated by

sector, which has a 70% market share, with

only Arlingclose providing competition. treasury

advisors often direct public investments towards

major investment banks such as JP Morgan,

deutsche bank, goldman sachs, hsbc, rbs and

barclays. they also recommend money market

funds including blackrock and rbs global treasury

– many of which are domiciled in ireland for tax

minimisation purposes.21

A large council investment spread may have

more than £250 million invested in one year, with

investments of £10-30 million invested in multiple

institutions. even smaller authorities have significant

sums invested. but do councils have any idea

what these banks and funds invest in? the local

government Association (lgA) advises that council

should deposit no more than 5-10% of total funds in

any one institution or sovereign state.

Fiduciary duty does not stop local authorities from ensuring their banking and investment functions support their wider policy ambitions for the community.

service level requirementsMoving transactional banking services may have

some short-term implications for council service areas

such as information technology (it) and payments,

but these can be managed relatively easily.

for example, lambeth council met with Move

your Money in July 2012, and deferred a decision

to move council banking services from natWest/

rbs until a planned oracle it system upgrade had

been completed,18 as this might have interfered with

it changeover. As most banking contracts have a

one-to-two-year optional extension clause, councils

generally have sufficient contractual flexibility to

ensure continuity of service in such cases.

dclg and cipFa advicelocal authority ‘powers of competence’ to

manage their own financial affairs were granted by

the localism Act 2011.19 Whether advice comes

from the department for communities and local

government (dclg) or the chartered institute of

Public finance and Accountancy (ciPfA), advice

is just that. it does not stop an authority including

other considerations in its final investment

decisions.

Break-out fact: Building societies account

for 87% of net mortgage lending in the UK,

as well as having increased their loans to

individuals in 2012 by 20%. In 2013, several

major building societies have already

announced significant profits growth in 2012

of between 21-49%. Yet, on average, they still

offer better savings rates than the banks.16


the chAllenges (continued)


by placing the majority of surplus council funding

with too-big-to-fail banks and off-shore registered

money market funds, councils are effectively

limiting investment flows into the local economy –

disregarding the potential to use their money twice

by creating a local multiplier effect with their money.

by supporting local, mutual, ethical banks,

councils can make money available to grow local

businesses, creating demand and jobs. Advice from the Parliamentary Commission to review DCLG advice to local government regarding the importance of risk ratings should give councils the confidence to pursue strategies that meet their own objectives. As stated above, a large number of the financial institutions that failed during the financial crisis had AAA ratings affirmed in the weeks leading up to collapse.

external treasury management opinion is just that – opinion.

members not engaged in procurement until decision timeMove your Money has found that, compared

with other areas of council procurement, financial

contract procedures often involve elected members

relatively late in the procurement process, reducing

scrutiny and democratic oversight. local authorities

are obliged under eu law to tender transactional

banking contracts via the official Journal of the

european union (oJeu) procurement portal, which

sets legal tender requirements depending on the

value of the banking contract (which is determined

by the number of accounts required and volume

of transactions).

eu procurement law does not preclude local

authorities from establishing transparency, social

value, and community reinvestment objectives

as part of the contract tender criteria. We would

encourage members to get involved at an early

stage in reviewing the procurement criteria pre-

tender (see Appendix A).

social impact, equalities and other scrutiny measures

that are commonly applied to other areas of council

spending are often not applied, or deemed irrelevant

to financial services. this divorces council investment

decisions from outcomes councils care about. With in

excess of £210 billion under management across local

authority investments and pension funds, there are

substantial opportunities better to align council policy

objectives with investment.

lambeth council scrutiny committee met with move your money in July 2012 to discuss a move to socially useful banking and recorded the meeting as follows:

“On behalf of the (Lambeth) committee, the

Chair thanked moveyourmoney.org.uk for

their petition which had generated this timely

discussion. He [Cllr Paul McGlone] had no doubt

that the Cabinet Members and officers would

take the discussion and suggestions into account

in weighing up the financial elements of the

banking contract (security, liquidity and yield)

with ethical and social factors, including on

the decision on whether to extend the current

contract or retender.” 22

14. https://www.gov.uk/government/uploads/system/uploads/

attachment_data/file/7544/2215595.pdf

15. http://www.bsa.org.uk/mediacentre/press/monthlystats_dec12.htm

16. http://www.thisismoney.co.uk/money/saving/article-2282212/ybs-

profits-increase-21-influx-savings-customers.html

17. http://www.shareaction.org/response-uk-parliamentary-commission-

banking-standards-report

18. http://www.lambeth.gov.uk/moderngov/ielistdocuments.

aspx?Mid=8091

19. http://www.local.gov.uk/localism-act

20. http://www.parliament.uk/business/committees/committees-a-z/

joint-select/professional-standards-in-the-banking-industry/news/

changing-banking-for-good-report/

21. http://www.matheson.com/images/uploads/publications/ireland_as_

an_international_fund_domicile_Web_March_2013_-_long.pdf


aspx?Mid=8091

the chAllenges (continued)


1. review banking procurement criteria and move

transactional banking services.

2. review investment advice and move council

investments to alternative providers.

3. support local banks and community

development finance initiatives in your area.

4. demand greater transparency and social value

from council banking, investment and financial

services providers.

this approach has received support from the bank

of england’s director of financial stability, Andy

haldane: “if as bank customers we want to change

the culture of banking, then we should start by

supporting those banks who are delivering that

change. Putting your money where your mouth is

would deliver far greater and more durable change

than any amount of banker-bashing.”23

1. moving your council’s transactional banking services

“It’s hard to pinpoint any tangible benefit the

Council receives, despite the size and value of

its contract with RBS.” 24

lambeth councillor paul mcglone, cabinet member for Finance and resources, london borough of lambeth, commenting on 5 July 2012 on the council’s £2.4 billion agreement with natwest.25

whattransactional or retail banking covers things

like processing wages, collecting council tax

and other day-to-day banking services. these

contracts are procured using the official Journal

of the eu (oJeu) contract process, usually every

four to seven years, on the basis of the ‘most

economically advantageous tender’ (MeAt).

A typical local authority banking contract is

awarded on the basis of something like 60%

weighting on price and 40% on quality of service.

on this basis, lowest price usually wins and there

is little opportunity or incentive to compare service

levels, or to take account of the wider value or

costs a provider delivers to the local area.

Howin order to open up banking contracts to a wider

range of banking providers, the first step for

most councils will be to review procurement

criteria, increasing the weighting for ‘quality of

service’ or even adding a ‘social value’ criterion,

to take the bank’s contribution to the local area

into consideration. depending on local priorities,

and your council’s strategic objectives, this could

include sustainability, investment criteria, local

provision for residents and support for local

growth and job creation.

such changes are supported by policy drivers such

as best Value duty,26 the Public services (social

Value) Act27 and the localism Act,28 which all

establish a duty and a basic framework to consider

the impact of council procurement and investment

on people and place.

how to: move your moneymove your money is calling on local authorities to follow these four steps:


see table 1 and Appendix A for specific actions

you can take to start moving your transactional

banking services.

regardless of which provider you select, you

can demand social value as part of the contract.

see ‘using social clauses in your banking and

investments’ at the end of this section.

2. moving your council’s investments

whatdepending on the size of your council and

investment priorities, a balanced treasury

management strategy could include investments

in building societies and local, mutual and

responsible banks that directly support the local

economy, complimented by a range of ethical

money market funds and longer-term investments

in socially useful activities, ranging from

infrastructure projects to house building.

Howthe first step is to review your council’s

investment/treasury management strategy. you

can find the most recent copy of your council

investment strategy at www.room151.co.uk/

investment-strategies and search by local authority

to see where your council’s money is invested.

strategies are developed on the basis of opinion

from external treasury advisors such as sector

and Arlingclose. financial advisors provide narrow

interpretations of duties to councils – stating that

social and ethical concerns are irrelevant to where

they invest.31 it is questionable whether citizens

would agree.

opinion is opinion and, although external treasury

expertise is valued, it is essential that your authority

builds up in-house skills so you can effectively

exercise strategic oversight over your investments

and scrutiny over the advice you receive.

your council can weigh up the management of

risk against social, economic and environmental

imperatives to support socially useful investment

that directly benefits local priorities and reflects

these in its investment strategy.

council investments and risk ratings are reviewed

and can be modified on a daily basis, to respond to

and manage evolving markets or risk to reputation.

this presents a real opportunity to start making a

difference right now.

see table 1 and Appendix A for specific actions

you can take to start moving your council’s

investments.

see Appendix b for a list of alternative investment

opportunities.

In March 2012, Brighton and Hove Council

was criticised for ’supporting Barclays’

in a misleading article featured in The

Argus.29 Brighton had recently incorporated

an ethical investment statement into its

investment strategy and an ‘approved

counterparty list’ (the list of banks meeting

investment safety requirements to accept

council deposits) had made its way into

the press – prompting a council response,30

clarifying that no money had actually been

deposited with Barclays Bank. The council

had simply retained the option of investing

in Barclays, subject to its ethical investment

policy – which clearly favoured investments

with other banks.

Surrey Heath Borough Council has

developed its own in-house treasury

management expertise and, as a result,

has made a positive choice to invest £15

million of its £27 million total funds in UK

building societies.



tAble 1: specific Advice from mym consultAtion with locAl Authority members

transactional banking services council investments (treasury management strategy)

why should we review?

• Procurement to focus on quality

of service, to reduce add-on costs

resulting from poor contract

management by provider.

• shorter contracts allow frequent

review, scrutiny & costs benchmarking.

• review of bank investment policies at

procurement stage ensures social value.

• data reporting monitors the impact

of bank lending/non-lending on local

economy & society.

• A balanced treasury management

strategy would include investments

in building societies and local, mutual

and ethical banks that directly support

the local economy, complimented by

a range of responsible money market

funds – depending on council size and

investment priorities.

• by asking banks to report on lending

activity, council can monitor elements

such as sMe lending to small business,

mortgage lending and financial

exclusion – and adjust investment

priorities to meet strategic goals.

• review approach to risk rating and its

impact on smaller banks.32

required information

• confirm which bank the council

banks with, the contract expiry date &

optional extension time frame.

• Question: does the banking provider

reflect the council’s values?

• obtain a copy of the current banking

procurement tender criteria from

finance, to scrutinise and review.

• find the most recent copy of your

council investment strategy at

www.room151.co.uk/investment-

strategies and search by local authority

to see where council money is invested.

• Question: do these banks and

investments reflect the council’s

values and policy objectives?

• speak with finance to confirm the

current treasury management advisor

to the council.

• find out when the existing treasury

management contract expires.

timing • bank contracts typically last four to

seven years, often with a one-to-two-

year optional extension. contract

tender dates vary, but the majority are

tendered July-october and awarded

January-february, commencing at the

end of the financial year in April.

• Procurement criteria should be

reviewed six to 12 months in advance

of contract tender – to allow council

officers time to implement the

requested changes.

• treasury management contracts are

typically renewed every three years.

• council investments (risk ratings) are

reviewed (and can be modified) on a

daily basis, to respond to and manage

evolving market or reputational risk.

how to move your money (continued)


transactional banking services council investments (treasury management strategy)

suggested actions

• suggested 40% price component in

contract criteria (not to exceed 50%).

Quality of service to be 50 (not below

40%).

• introduce a 10-20% weighting for

social impact.

• term of banking contract limited to five

years’ duration.

• optional one-to-two-year contract

extension clause will allow market

testing to gauge competitiveness of

fees and charges, allowing for cost

benchmarking with other councils.

• request voluntary annual bank lending

data reporting.

• compare the uk corporation tax profile

of tender banks.

• council should weigh management

of risk, with social, economic and

environmental imperatives, to support

socially useful investment that directly

benefits local priorities. this policy

should be reflected in its treasury and

investment strategy.

• review council’s treasury management

strategy to consider a socially responsible

investment approach.

• benchmark treasury advisory service

fees and charges with other councils

prior to the next contract cycle.

• request that banks accepting deposits

provide lending data.

• treasury management advice is ‘opinion’.

develop skills and resources in-house to

deliver socially useful investment. you

will still ensure fiduciary duty.

• support a diversified finance sector,

moving what you can, when you can, and

depositing funds with smaller banks and

building societies.

• compare uk bank corporation tax

profiles. As an alternative to off-shore-

based money market funds, consider

cclA Public sector deposit fund a

uk-domiciled fund with a responsible

investment policy.

measurable benefits

• increased financial support for local

business, creating jobs & growth,

improving business rates retention.

• create a culture of data sharing via

enhanced transparency of bank

investments, to inform social return

on investment.

• benchmarking against surrounding

local authorities (via procurement hubs)

to ensure value for money for council

and taxpayers.

• supporting banks that deliver local

investment, jobs & growth means

reduced demand for council services &

increased business rates retention.

• Where council money is invested

matters. it can steer millions of pounds

of taxpayer funds into the productive

economy if placed well.

• increased transparency of treasury

investments will assist the council to

align investments with its strategic plan.



3. supporting local and community development finance initiatives in your area

beyond moving your transactional banking

accounts and reviewing investments, there are

other ways to support positive, alternative, financial

activity in your local area. under the localism

Act 2011, local authorities were granted ’general

powers of competence’,33 establishing freedom to

develop and deliver financial services, or to invest

locally and stimulate the economy. there are a

number of new ways to invest for social return.

start a local credit union or support an existing onecredit unions are local, mutual, saving and lending

schemes. they help to provide affordable loans and

encourage savings for all residents. in early 2012,

regulations restricting credit unions were relaxed,

enabling many to grow at unprecedented rates.35

As well as supporting the foundation of new credit

unions in your area, you can help existing unions by:

• depositing funds of up to £10,000, allowing

your credit union to loan more, at low cost, to

local residents;

• ensuring the council and its contractors offer

payroll deduction as a staff benefit, to boost the

credit union’s membership and help it grow;

• helping them to set up branches, find

premises, get their message out to the public

and raise their public profile;

• promoting the credit union in other council

communications, such as at the bottom of rent

statements, on inserts to council tax bills and

on posters.

invest in schemes that focus on lending to local

business and social enterprises

• community development funding initiatives (cdfis). cdfis lend money to

businesses, social enterprises and individuals

who struggle to get funding from high street

banks and traditional loan companies. councils

can help to set up new cdfis or invest in

existing organisations.

• peer-to-peer lending (p2p). not all lending

happens through banks. there are a growing

number of peer-to-peer lending programmes

that could be encouraged in your community.

you can even set up your own. Another

approach is to develop an Angel investors

network in your area, to encourage use of the

government enterprise investment scheme.

the scheme encourages business angels to

invest up to £150,000 in new business through

tax incentives. you could help to stimulate new

business by encouraging potentially interested

local residents to come together to hear about

challenges for local businesses and then use

the event to match-make.

lancashire county council invested £100,000 into local businesses using Funding circle, a marketplace where people directly lend to small businesses, bypassing the banking system. Funding circle has already lent in excess of £55 million as the industry booms. on its website, the so-called peer-to-peer lender boasts an average gross return for investors of 9.1%. lancashire county council said it hopes the partnership will grow to a ”multi-million pound commitment“. ”This is

a groundbreaking new way to fund business

growth and a first for any council in the UK,” said councillor michael green.37

• micro-lending. small loans for start-ups

or social-enterprises. you could replicate a

number of initiatives. Alternatively, grameen

bank’s micro-lending system, or fair finance

and similar organisations, could deliver a

service in your area.



30. http://www.brightonhovegreens.org/news/briefing-the-facts-on-

barclays-bank-investment-allegations.html

31. http://www.shareaction.org/enlightened-fiduciary

32. http://www.parliament.uk/business/committees/committees-a-z/joint-

select/professional-standards-in-the-banking-industry/news/changing-

banking-for-good-report/

33. http://www.local.gov.uk/c/document_library/get_

file?uuid=41d97374-9f2c-43d8-9c66-23376a9f082d&groupid=10171

34. http://www.parliament.uk/documents/banking-commission/banking-

final-report-volume-i.pdf

35. http://www.ft.com/intl/cms/s/0/0c3fceba-3acc-11e1-a756-

00144feabdc0.html

36 http://www.ntmabs.org/policy-research/mobile-phone-banking/132-

scotcash-cdfi-glasgow

37. http://www.bbc.co.uk/news/business-20291408

38. ccbank.co.uk

39. http://www.neweconomics.org/publications/entry/stakeholder-banks

• a council-funded bank. one example is

cambridge & counties bank, which is a

partnership between two established and

respected institutions – trinity hall college

and cambridgeshire county council Pension

fund. they have become banking specialists

for small to medium enterprises (sMes) within

the uk and are dedicated to helping businesses

of this type grow, while providing consistently

high-quality banking services and support. the

bank’s partners each own a 50% stake.38

• develop and support crowdfunding

initiatives for businesses and local not-for-

profits. introducing local businesses and

organisations to new ways to raise investment

and funds could help them access new ways

to resource their work. you can find out about

crowdfunding for investment and donation at

ukcfa.org.uk

• pre-pay card accounts. councils can offer

pre-pay cards for people on universal credits

and direct payments, to reduce the impact of

financial exclusion from transactional bank

accounts. there are a number of providers in

the market.

for further information on alternative banking,

the 2013 new economics foundation Stakeholder Banks39 report sets out the benefits of alternative

banks, focused upon local and regional lending.

23. http://ftalphaville.ft.com/2012/10/30/1237921/haldane-occupy-and-

the-path-to-reform

24. http://www.lgiu.org.uk/2012/08/16/move-your-money-uk-on-ethical-

banking-in-local-government/


aspx?Mid=8091

26. https://www.gov.uk/government/publications/best-value-statutory-

guidance--4

27. http://www.socialenterprise.org.uk/news/new-guide-the-public-

services-social-value-act

28. http://www.local.gov.uk/localism-act

29. http://www.theargus.co.uk/news/9586694.brighton_council_

invests___5m_in_bank_greens_oppose/


The report of the Parliamentary Commission

on Banking Standards stresses the importance

of community finance organisations and

recommends that the big banks should be

providing them with support. It wants “to ensure

that the community finance sector becomes

strong enough over a period of years to work as a

full partner with banks so that issues of unbanked

individuals and communities are addressed”.

(Paragraph 299, s47)34

Scotcash, the CDFI created in 2007 with

assistance from Glasgow City Council, has helped

more than 5,000 people access low-cost loans and

banking services – saving them up to £410 on the

repayments of an average loan over 12 months.36

Bradford Council offers a pre-pay card for people

on direct payments. Previously, service users had

to open a dedicated bank account and provide

receipts and explanations for all transactions.

Pre-pay cards offer an alternative for service users

and reduces administration and costs.



4. banking for social value

Whilst moving your money to an alternative

provider is an effective way to align council values

with investments, the current lack of diversity

in british banking ensures that the big five will

continue to be significant players in the local

government banking market for some time. not

being able to move everything does not stop you

from ensuring value for council and citizens.

adding social clauses to extract value from financial servicesWhether you move your money or not, you

can harness your council’s customer power to

maximise the value of your banking and investment

contracts. social clauses can be used to help drive

transparency, encourage sharing of local bank

lending data and boost the positive social impact of

your banking contract and investments.

the Parliamentary commission’s report states:

“The Commission welcomes the FCA’s interest

in pursuing transparency of information…

Informed consumers are better placed to exert

market discipline on banking standards”.40

conditions you could require from your banks and

investments:

• Provide localised data on personal and sMe

lending, deposits and environmental impact.

• serve the community (or a particular part of

it) – by providing banking services to financially

excluded people and lending to sMes, actively

contributing to the council’s priorities, tackling

financial exclusion and supporting local

community projects and groups.

• support jobs and growth – by supporting local

job creation programmes and apprenticeship

schemes, reinvesting funds in local projects and

organisations, paying the local living wage.

• behave responsibly – by reducing the

pay ratio between the highest and lowest

paid employees, making commitments to

environmental improvement, divestment in

financial service providers that are found to be

acting illegally or in ways that adversely impact

on local priorities.

local economic Partnership growth strategies,

community and neighbourhood plans and the

council’s own priorities are all likely to contain

aspirations that banks could have a role in delivering.

What role are your local banks playing in delivering

local benefit? Are you using your banking and

investments to deliver change locally?

some examples where banks could support local

authority priorities include:

• Promoting productivity, enterprise and business

growth by developing innovation and exploiting

research and development capabilities.

• determining the areas of activity and

opportunity that will deliver a real return on

investment, as well as understanding the key

long-standing barriers to development.

• through the partnership, providing the

economic and business intelligence needed

(including trend analysis and projections) to help

inform constructive decision-making and sharing

this with prospective investors.

• be a green city, proud of its rapidly improving

local and global environmental performance and

the contribution of the environmental sector.

• create a ‘can do’ enterprise culture.

• help overcome the barriers that hold back

business growth.

this list is taken from headline priorities of lePs

across the country from lepnetwork.org.uk/



councils, lePs and others have considerable potential

to use their power as customers and business leaders

to encourage banks to set measurable targets to help

deliver these local priorities. in the usA, something

similar has been done by a number of cities. the

responsible banking ordinances41 (rbos)

promoted by the national community reinvestment

coalition were first enacted in cleveland in 1991 and

are now in place, or are being adopted, by more than

a dozen major cities in the usA, including boston and

new york.

cleveland introduced the rbo model to get investment into their neighbourhoods and tackle financial exclusion. speaking to metroFocus,42 daryl rush, director of cleveland’s department of community development, explained: “The principal vehicle for doing that is a

goal-setting process that is reflected in

an agreement between the city and the

institution. It covers the annual and aggregate

goals over a four-year period […] “We try to

keep our eye on the goal of access to lending.

And that only works if it is beneficial. The

business or the resident has to benefit and the

institution has to benefit.”

the greater london authority group, including the mayor’s policing, fire and transport departments, includes the living wage as a ‘requirement‘, when contracts are let or renewed. mayor boris Johnson said:

“By building motivated, dedicated workforces,

the Living Wage helps businesses to boost the

bottom line and ensures that hard-working

people who contribute to London’s success can

enjoy a decent standard of living.”43

40. http://www.parliament.uk/documents/banking-commission/banking-

final-report-volume-i.pdf see para [70]

41. http://www.ncrc.org/get-involved/hot-issues-take-action/item/754-

responsible-banking-ordinances

42. http://www.thirteen.org/metrofocus/2012/05/qa-with-cleveland-on-

responsible-banking-law-new-in-nyc/

43. http://www.telegraph.co.uk/news/politics/9656627/downing-street-

says-boris-Johnsons-living-wage-may-be-illegal.html

44. http://www.ft.com/cms/s/0/3d043760-c221-11e2-8992-

00144feab7de.html

45. http://www.local.gov.uk/web/guest/productivity/-/journal_

content/56/10171/3111681/Article-teMPlAte


The Responsible Banking Ordinances

(RBOs) promoted by the National

Community Reinvestment Coalition were

first enacted in Cleveland in 1991 and are

now in place, or are being adopted, by

more than a dozen major cities in the USA.


Local authorities are free to share their expertise,

skills and best practice across the procurement of

financial services and investment activities. More

sharing between local authorities could lead to

significant cost and efficiency savings around

banking, treasury and pension fund management.

A feature in the Financial Times (27 May 2013)

reported that a lack of benchmarking across

local government pension fund schemes found

some councils paying up to four times as much

in annual management fees for the same sized

funds and returns. For Staffordshire council, this

meant paying £3.9 million more each year in

pension fund management fees than Devon.44

Local authorities can group together to set up

or join procurement hubs to share information,

to further best practice, set baselines, use

economies of scale to reduce fees and charges

for financial services, compare their investment

performance and measure social outcomes.

Procurement hubs in Dorset and the West

Midlands are two such examples.45

informAtion shAring And benchmArking:


nine questions you should Ask

1. Who does your council bank with?

how much does your council pay in contract fees

and add-on charges for banking? does the council

receive good quality service? does the bank’s

corporate ethos and practices match those of the

council?

2. When is the council banking contract

next up for review?

you’ll need to review your bank procurement

criteria at least 12 months in advance.

3. What are the procurement criteria your

council uses to assess its banking provider?

Modify the procurement criteria from a focus on

lowest price to a focus on quality of service

4. What benefit do the council and residents

receive from the banking provider?

What social clauses are included in the contract?

What is the corporate tax profile of the bank(s)

your council procures from? does the bank pay a

living wage to local branch staff?

5. Who advises the council where to

invest its money?

What advice does your council receive? is treasury

advice implemented in full or in part? is advice

weighed against in-house investment expertise and

other council policy goals for economic growth?

6. Where are council funds invested in

banks and money market funds?

scrutinise the council’s treasury management

strategy to see where your money is invested.

look for the approved ‘counterparty list’ and see

how much is deposited with each institution.

7. Could your council add social value

clauses to its banking contract, and

investment frameworks?

councils should engage with the banks they

conduct business with and ask them to agree

actions and targets to help deliver the leP and

community plans.

8. Has the council considered developing

and promoting alternative funding

intermediaries for business and social

enterprise – such as CDFIs and P2P?

Alternative lenders such as credit unions, peer-

to-peer lenders such as funding circle, Zopa and

community development finance institutions

(cdfis) could be vehicles to invest in.

9. Does the council benchmark its

financial services contracts and fees

against other councils?

does your council openly share data on fees,

charges and investment performance with

surrounding authorities? A May 2013 study featured

in the financial times found that staffordshire

council was paying £3.9 million in pension fund

management fees. this was three times the rate

paid by devon for a similar sized fund. consider

joining a financial procurement hub to drive best

practice and efficiency savings at scale.


next steps...

1. Where you can go for further

information and resources

We hope that you have found this toolkit useful

in reviewing council banking arrangements,

but more importantly, we hope to see council

moving its money and supporting those banks

delivering positive change and social value in our

communities.

you will find a list of alternatives as appendix b.

At Move your Money, we recognise we are just

one of a large number of campaign groups doing

some amazing work on financial reform on cutting

edge issues across the sector.

in appendix a – you will find a series of further

actions council can take, including information on

the complimentary work of financial campaigns

such as shareAction.

2. Sharing your good examples

local authorities across the country are already

doing great things with their money. do you have

an example you can share? We are collecting

case studies and good practice to develop this

work further.

3. How Move Your Money can help

We are happy to talk with you and your council

about this document and your future financial

actions. you can contact us on:

Move Your Money

Phone: 03003214324

Email: [email protected]

www.moveyourmoney.org.uk

4. What Move Your Money will be doing next

the process of researching and writing this

document has raised a number of issues about

financial procurement and investment that merit

further discussion and investigation. We will be

working with a number of interested members

and officers to take these issues forward. if you

would like to be part of this process, email us at

the address above.


with thAnks to

move your money would like to thank the following individuals for giving freely of their time, advice and expertise in developing this toolkit. we would also like to thank the centre for local economic strategies (cles) and ccla for their support and assistance in managing the local government banking round tables.

sheena Abirdir – co-operative bank

Jo bearsdmore – shareAction

christine berry – shareAction

Matthew bland – Abcul

toby blume

cllr gurdial bhamra – london borough of

redbridge

fiona brownsell – tusmor

karen carter – cclA

frances coppola

Mark davies – cclA

david dunn – co-operative bank

Jane earl – (former ceo Wokingham council)

naomi fowler – tax Justice network

cllr Jack hopkins – london borough of lambeth

tim hunt – ethical consumer

cllr gerald Vernon Jackson – Portsmouth city council

Matthew Jackson – cles

Jim Jepps

Jenny Jones AM – greater london Authority

cllr richard kemp cbe – liverpool city council

Jason kitcat – leader brighton and hove council

Adam leaver – Manchester business school

chris locke – london borough of hackney

sam Markey – open Public services

cllr Paul Mcglone – london borough of lambeth

neil Mcinroy – cles

chris Mills – co-operative bank

Jeremy Palmer – building societies Association

lydia Prieg – new economics foundation

Andrew robinson – cclA

steve rushton

brett scott

cllr Alan sitkin – london borough of enfield

cllr Maya desouza – london borough of camden

cllr terry stacy Mbe JP – london borough of

islington

cllr simon Wales – london borough of sutton

mym is funded by grants from the Joseph rowntree charitable trust and the barrow cadbury trust and the new economics foundation. this research and booklet were supported with a donation from ccla.


Appendix Acouncil bAnking: A list of potentiAl Actions

proposal

actions to improve banking services

review council investments (treasury management strategy)

invest in local and smaller providers

why should we do this?

• to focus on quality of procurement service & reduce add-on costs.

• shorter contracts – frequent review, scrutiny & costs benchmarking.

• review bank investment policies to ensure social value.

• data reporting to monitor & manage the impact of bank lending/non-lending on local economy & society.

• A balanced treasury management strategy includes building societies, local, mutual & responsible banks, as well as ethical money market funds.

• Ask banks to report lending activity so as to monitor sMe lending to small business, mortgage lending & financial exclusion – and adjust investment priorities to meet strategic goals.

• to consider approach to risk rating and its impact on smaller banks.

• by investing in financial institutions that continue to support your local economy, you increase their capacity to do more.

• some banks and building societies also have ethical policies that may help deliver council priorities or policies.


• confirm which bank council uses, contract expiry date & optional extension timeframe.

• Question: does the banking provider reflect council’s values?

• obtain a copy of the current banking procurement tender criteria from finance, to scrutinise and review.

• for up-to-date investment strategy for your council, see room151.co.uk/investment-strategies – search by local authority.

• Question: do these banks and investments reflect council’s values and policy objectives?

• speak with finance to confirm current treasury management advisor.

• check when the existing treasury management contract expires.

• do you know which local financial institutions support your economy or share your council’s values?

• can you meet with alternative providers to investigate how they may help deliver council priorities?

timing

• bank contracts typically last four to seven years, often with a one-to-two-year optional extension. contract tender dates vary. the majority are tendered July-october and awarded January-february, starting at the end of the financial year in April.

• Procurement criteria to be reviewed six to 12 months in advance of contract tender – to allow council officers time to implement changes.

• treasury management contracts typically renewed every three years.

• council investments (risk ratings) are reviewed (and can be modified) on a daily basis to manage evolving market and/or reputational risk.

• council investments (risk ratings) are reviewed (and can be modified) on a daily basis to manage evolving market and/or reputational risk.

suggested actions

• reduce price criterion to 40% (no more than 50%). set quality of service at 50% (not below 40%).

• introduce 10% weighting for social impact.

• limit term of banking contract to five years.

• optional one-to-two-year contract extension allows market checking of fees & charges, cost benchmarking with other councils.

• request voluntary annual bank lending data.

• compare the uk corporation tax profile of tender banks.

• Weigh risk management against social, economic & environmental factors. reflect in strategies.

• review treasury management strategy to consider socially responsible investment.

• benchmark treasury advisor’s fees with other councils.

• get banks voluntarily to report bank lending data.

• treasury management advice is opinion. develop in-house skills & resources. still ensure fiduciary duty.

• support diverse finance sector. When you can, put funds with a range of smaller banks and building societies.

• compare uk bank corporation tax profiles.• consider cclA’s uk Public sector

deposit fund instead of offshore funds.

• Weigh risk management against social, economic & environmental factors. reflect in strategies.

• discuss/set investment priorities with bank (reflect leP).

• get banks voluntarily to report bank lending data, including sMe lending rates and mortgage lending.

• compare uk bank corporation tax profiles.

measurable benefits

• data-sharing culture & more bank transparency. gain information re social return on investment.

• benchmark against nearby local authorities (procurement hubs) for value for money.

• increase financial support for local business, create jobs & growth, retain business rates.

• support banks delivering local investment, jobs & growth to reduce demand for council services & increase business rates retention.

• council money can steer millions of pounds of taxpayer funds into the productive economy if placed well.

• increased transparency of investments will assist council to align investment with strategic plan.


• local banks, lacking complex offshore tax structures, will not be offshoring profits.



proposal

support your local credit union or community development fund initiative (cdFi)

support local business via peer-to-peer lending & local angel investor networks

create a micro-lending/financescheme.

provide pre-pay cards for universal credit and direct payments


• council deposits and/or payroll deductions aid credit union liquidity, lead by example, give staff benefit.

• cdfis lend money to businesses, social enterprises & individuals struggling with high street banks & traditional loan companies.

• Peer-to-peer (P2P) lending is a new direct form of finance, which matches people & businesses seeking loans, with a marketplace of hundreds of small investors. investing in business without banks.

• small loans for start-ups. sometimes individuals do not need a lot and small loans can help.

• Pre-pay cards help those on low income and un-banked. can be used to pay for services as well as general expenditure. can cut down admin costs for direct payments.


• check if local authority deposits money in credit union(s).

• see http://www.findyourcreditunion.co.uk/home.

• Ask if payroll deduction to credit unions is available for staff.

• see www.cdfa.org.uk.

• uk P2P market is led by Zopa & funding circle. first uk lA to invest via P2P was lancashire county council.

• government eis scheme offers tax incentives to business angels investing up to £150k in new businesses.

• do you offer loans or grants to small businesses or social enterprises?

• do local providers already offer small loans?

• 25% of authorities use prepay cards. several providers.

• Ask if your council offers a pre-pay card or has any plans.

timing n/A n/A n/A n/A

suggested actions

• lAs can deposit up to £10,000, or 1.5% of total funds held, with a local credit union. can also support them by establishing payroll deduction for staff.

• Payroll deduction set-up is simple – it works just like any other payroll deductions scheme you currently run.

• see scotcash in glasgow for a working example of a cdfi developed with a council to tackle financial exclusion.

• council could consider small investments via peer-to-peer as an alternative platform for investing in local business that avoids the banks.

• develop an angel investors network in your area to encourage use of the government eis scheme.

• offer loans as a local authority. A small pot of funding will go a long way (see peer-to-peer examples)

• talk to external agency (eg grameen, unltd) to see if they would work with you to extend their work into your area, or allow you to boost an existing fund.

• offer pre-pay cards for those on universal credit and direct payments.

measurable benefits

• Money is lent directly to the local community, delivering financial inclusion via low-cost credit option for residents.

• cdfis target specific social problems such as financial exclusion and deprivation.


• council money can steer millions of pounds of taxpayer funds into the productive economy if placed well.

• increased transparency of investments will assist council to align investment with strategic plan.

• small grants or loans can help get good initiatives off the ground, providing services and jobs.

• helps universal credit claimants receive benefits & pay for services without banks.

• can reduce admin costs.



proposal

support crowdfunding for businesses & local not-for-profit bodies

contact shareaction – and scrutinise council pension fund investments

apply ethical screening of pensions and investments

consider adoption of ethical consumer/tax Justice network corporate tax evasion policy


• introduce businesses/organisations to new ways to raise funding to resource their work.

• engage the community in funding local projects.

• council pension funds are powerful investors, with c£190bn in funds.

• councillors can influence where this money is invested and managed.

• Pension funds can be innovators. cambridge and counties bank specialises in sMe lending – set up by cambridge council pension fund, with trinity hall.

• ethical funds deliver social return on investment (sroi), by trying to quantify fund impact in social and environmental terms, as well as financial.

• to consider the impact of corporate tax evasion & its role in draining funding during austerity.

• 2011 Action Aid research confirms big four banks in the top 10 of ftse 100 are using offshore subsidiaries in tax havens.


• do you provide information about crowdfunding?

• do you offer in-kind support to charities developing crowdfunding campaigns?

• start discussing pension fund and whether investments are socially responsible & meet policy objectives.

• Ask for a list of fund investments by company and sector.

• contact shareAction for advice, and training. see www.shareaction.org.

• eiris provides a basic screening tool for ethical investments that tracks how specific investments shape society. see www.yourethicalmoney.org/ investments.

• check whether council financial services contracts (banking, pension fund, treasury management) top £100k.

• When procuring, research the uk corporation tax profile of firms the council is supporting with major contracts.

timing

n/A • check the council’s agenda for the next meeting of the investment/scrutiny committee where council pension fund investments can be raised and scrutinised.

n/A • Most contracts tendered July-october, awarded January-february, begin end of financial year.

• review the existing criteria and set up a meeting six to 12 months prior to contract tendering, to discuss council position.

suggested actions

• see uk crowdfunding Association – www.ukcfa.org.uk.

• showcase & promote local examples and share sources of information on web pages.

• run peer-to-peer training to develop knowledge.

• encourage council’s investment committee to adopt a responsible investment policy.

• Promote transparency of investments & publish pension fund investment information on the council’s website.

• consider benchmarking fees, charges & fund performance against local authority peer group.

• shareAction’s responsible investment guide for Pension fund trustees and Managers can be found at http://shareaction.org/riguide.

• council could adopt social return on investment (sroi) policy to benchmark & track investment performance against council policy goals.

• consider adopting the ethical consumer procurement policy designed to assist local authorities tackle tax avoidance: http://www.ethicalconsumer.org/ethicalcampaigns/taxjusticecampaign/taxcampaigninformationfor localauthorities.aspx.

• the current list of tax havens is a public document at www.financialsecrecyindex.com.

measurable benefits

• engages the community in funding popular projects or new businesses with small sums of money. helps the community invest locally.

• More transparency of pension fund investments will assist council to align fund with stated social, economic and environmental policies.

• for the business case for adopting a responsible investment policy go to www.shareaction.org.

• sroi assists council to align social policies with investment activity to meet multiple objectives that are not purely financial.

• supporting uk-based companies that pay a fair rate of corporation tax and do not use elaborate tax evasion structures brings sustainable funding to the exchequer and funds public services.


Appendix b where cAn i move to?

the following section provides a reference list of

alternative banking and financial providers, and

comparison sites, to get you started. it is not

exhaustive.

Note: Move your Money is not in a position to

offer financial advice. this information should be

treated as a reference only, allowing council’s

to conduct their own further research and seek

tailored financial advice where necessary.

1. Transactional banking providers

transactional or day-to-day banking is associated

with the daily clearing of payments such as

wages, council tax, fees and charges.

co-operative bank (including unity trust):

http://www.co-operativebank.co.uk/corporate/

specialistteams/public-sector-services

danske (note: northern ireland only): http://

www.danskebank.co.uk/en-gb/business/large-

business/Pages/large-business.aspx

Metrobank: https://www.metrobankonline.co.uk/

commercial/not-for-Profit-banking/

handelsbanken: http://www.handelsbanken.co.uk

2. Investments

councils have powers of competence to

undertake a wide range of investment decisions.

they are encouraged to pursue a diversified

investment strategy that supports a range of

local, mutual, and ethical institutions.

investments/money market funds

eiris and your ethical Money, for fund screening

for social return on investment (sroi): http://

www.yourethicalmoney.org/investments/

carbon tracker is a tool aimed at improving the

transparency of carbon embedded within equity

markets http://www.carbontracker.org/

uksif is the membership network for sustainable

and responsible financial services. http://uksif.org/

environmental investment organisation (eio) for

investment tracking: http://www.eio.org.uk/

Also, building societies: http://www.bsa.org.uk/

aboutus/buildsocmember.htm

cclA Public sector deposit fund – a uk

domiciled money market fund managed by cclA

(a mutual) that offers the substantial benefits of

co-operation between public sector bodies. it is

a cash management solution designed by the

sector, for the sector: http://www.psdf.co.uk/

3. Community development finance

initiatives/alternative providers

community development finance institutions

(cdfis) lend money to businesses, social

enterprises and individuals who struggle to

get finance from high street banks and loan

companies. they help deprived communities by

offering loans and support at an affordable rate to

people who cannot access credit elsewhere.

cdfis: http://www.cdfa.org.uk/membership/our-

members/

credit unions: http://www.which.co.uk/money/

credit-cards-and-loans/guides/credit-unions/ http://

www.findyourcreditunion.co.uk/aboutsearch

Peer-to-peer: http://www.which.co.uk/money/

credit-cards-and-loans/reviews-ns/peer-to-peer-

lending-websites/

Please check the www.moveyourmoney.org.uk

website for updates and additional content

regarding local government banking sector options.


cdFi A community development finance institution

provides credit and financial services to under-

banked markets and populations, primarily in the

USA but also in the UK.

demutualisation is the process by which

a customer-owned mutual or co-operative

organisation changes its legal form to a joint stock

company. Sometimes called privatisation.

icelandic crisis The 2008-2011 Icelandic financial

crisis was a major economic and political

crisis in Iceland involving the collapse of all

three of the country’s major, privately owned,

commercial banks, following difficulties in

refinancing their short-term debt, and a run on

deposits in the Netherlands and the UK. Councils

were exposed to Iceland due to treasury advice

from Butlers and Sector.

Fiduciary duty The legal duty of a fiduciary to act in

the best interests of the beneficiary.

Funding for lending scheme The Bank of England

and HM Treasury launched the Funding for Lending

Scheme on 13 July 2012. The scheme is designed

to incentivise banks and building societies to boost

their lending to the UK real economy. It does this by

providing funding to banks and building societies

for an extended period, with both the price and the

quantity of funding provided linked to their lending

performance.

localism supports local production and

consumption of goods, local control of government,

and promotion of local history, local culture and

local identity. Localism can be contrasted with

regionalism and centralised government, with its

opposite being found in the unitary state.

project merlin an agreement between the

Government and Barclays, Lloyds, RBS and HSBC.

The agreement covers aspects of banking activity

– notably lending, pay and bonuses – with the

intention of promoting lending to (particularly

small) businesses, curbing the size of bankers’

bonuses and promoting transparency with regards

to executive pay. The agreement was finalised on 9

February 2011.

libor scandal involved the fraudulent manipulation

of the London Interbank Offered Rate, which

underpins global financial markets. Libor is

an average interest rate calculated through

submissions of interest rates by major banks in

London. The scandal arose when it was discovered

that banks were falsely inflating or deflating their

rates, so as to profit from trades, or to give the

impression that they were healthier than they were.

Libor underpins returns on council investments and

pension funds.

responsible banking ordinance a local law passed

by councils in the USA to hold banks to account for

lending practices and to promote local reinvestment

– especially targeting deprived boroughs.

glossAry of terms


Move Your Money has researched and produced

this toolkit over the past 9 months with the aid

of significant input from the local government

community. You will find the names and

organisations of those who have contributed within

section. 9 – with thanks. We are extremely grateful

for their valuable contribution.

To develop this local government banking toolkit -

Move Your Money has:

• SubmittedFOIrequesttoallUKcouncils

requesting banking, procurement, and

investment data – seeking feedback as to how

councils apply social value/ best value guidance

to finance.

• Undertakeninterviewswithindividual

councillors and officers.

• Establishedadatabaseofbankingand

investment patterns for a majority of local

authorities.

• Heldtworoundtableswiththosedirectly

involved in local government finance.

• Researchedgoodpracticeandfinancial

procedures, both in the UK, and abroad.

Move Your Money will be further analysing and

publishing the findings of our research into local

government banking and investment patterns. We

hope this research sparks a serious conversation

within sector as to how local government can

become a catalyst for progressive change within

British banking.

We look forward to working with the local

government sector to actively pursue a more

diversified financial ecosystem that delivers social

value to residents and financial secuity to council.

methodology

Move Your Money

Phone: 03003214324

Email: [email protected]

www.moveyourmoney.org.uk

This report was produced by Matter&Co and made possible by the generous support of CCLA on behalf of Move Your Money

Senator House

85 Queen Victoria Street

London, EC4V 4ET

www.ccla.co.uk

a local authority guide to banking for social...

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