Newspaper article The Journal (Newcastle, England)

Bank of North East 'Could Free Up Credit' THE RECESSION

Newspaper article The Journal (Newcastle, England)

Bank of North East 'Could Free Up Credit' THE RECESSION

Article excerpt

A BANK of the North East should be set up using cash from council reserves and investments thought to be worth at least pounds 500m, experts have claimed.

Councils across the region have stockpiled huge financial reserves, normally used to underpin city improvements.

Newcastle Council alone has pounds 288m invested with various banks, as well as its general reserves, and, like others, has lost millions because of low interest rates.

Pressure is now mounting on city leaders to follow the examples of Essex and Birmingham councils which decided this year that their cash would be better spent loaned to local businesses who risk going under during the credit crunch.

Last night the New Local Government Network think tank said it had spoken to several North East councils about the benefits of setting up a regional bank.

Its director, Chris Leslie, said since councils were no longer making big profits on their reserves, it was common sense to look at other approaches.

He said: "A fresh look at how councils deal with these reserves is long over due.

We need to see the local public sector be much cleverer and smarter in how they deals with these reserves.

"Councils need to have money there to use as and when, but that should not mean they can not come together to pool some resources and create in effect a mutual bank.

"I know in the North East there are a lot of big infrastructure projects for which private businesses need access to credit to help speed up. So if there was a combined bank, then as well as being able to feed back profit from loans to local authorities it could also speed up some very important projects."

Many North East companies have been told by high street lenders that they will either have to pay much more to borrow funds or have been refused new loans.

This tightening of credit threatens to add thousands more to regional unemployment queues, a risk which some say could be reduced if council bosses freed up funds. …

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