Q&A with Bernard Hayes

Bernard Hayes is deputy chief executive and section 151 officer at Preston Borough Council. He tells us about a new loan fund for charities, as well as the challenges he faces in his job.

Room 151: Tell us about your loan fund…

Bernard Hayes: The council is moving £500,000 of its cash reserves into a fund to provide loans to community interest companies and charities in the city. We are aiming to get a better return on investment than the money currently makes in bank. It came about from an approach from a local charity. It was putting a plan together for more central premises that were easier to access and expand their facilities. They came to us wondering if we could help them in any way? As a local authority whose bucket for grants is now empty we looked at if we could help them by providing a loan. We would either use some of our investments which we are current not getting much (return) on or borrow some PWLB money to loan-on. That was the genesis of the idea.

R151: Who qualifies for loans?

BH: We have restricted it to community and charity organisations – the local enterprise partnership offers loans to businesses so we didn’t think it was appropriate for us to.

R151: What interest rate will you charge?

BH: It will be on a case by case basis. At the moment we funded it through revenue on a revolving fund basis. I am looking for the loans to mirror around what the PWLB rate is. The closer it aligns to the council’s priorities and the lower the risk then the more we would be prepared to consider a lower return.

R151: What other measures are you taking?

BH: We are doing a package of things around the fairness agenda. We have just established a credit union for the area in partnership with an existing credit union provider. We have put £100,000 of capital into the credit union in return for deferred shares to that amount. We have also trained our debt advice staff in financial inclusion. It is about helping people without financial skills manage their own affairs.

R151: The council has also stridently supported the “Move Your Money” campaign…

BH: We certainly want to move down a path to ethical banking and more accessible banking. We would like to see more institutions able to deal with our banking affairs. We basically haven’t got very far  – our treasury management rules mean that the challenger banks don’t offer us enough security of investment. Also, they don’t have a physical presence in Preston, and that would be a pre-requisite for us. But we are constantly monitoring the position.

R151: What are the main challenges facing the council financially?

BH: We have been battered by the reductions in revenue support grant from central government. We are in the bottom 30 losers in the past couple of years. Our net budget has dropped from £30m to £19m. With a lot of good management we prepared well for the first round of cuts and managed to absorb a lot through back office efficiency. However, we are predicting that our grant is going to halve again by 2017-18.
Our biggest problem is we are, if you will, a sub-regional centre so we have all the sub-regional facilities. We effectively have things that the suburbs wouldn’t have – a guildhall, market, biggest bus station in Europe. We have all the issues in terms of urban deprivation that the likes of Manchester and Liverpool have. We have all the problems of a city but none of the benefits of being a unitary authority.

R151: Are you a potential customer for Lancashire County Council’s mooted bond?

BH: We would have to see how it fitted with our treasury management strategy. They haven’t approached us yet. We have looked at the Local Government Association’s proposed municipal bond agency. I don’t want to be at the bleeding edge but we may consider it down the line.

R151: Are you involved in any other innovative forms of raising finance?

BH: We have had a test mast up for a wind farm for the past four months. The business plan we looked at required efficiency of 12% on the windmills and the early results indicate that we could exceed that. We need a full 12 months results, but if positive we could develop more on former dockyards. We have a couple of options – we can either build it ourselves and sell the electricity generated back into the grid or we could get to a point where we get planning permission and sell it and take the capital receipt.

R151: What about property disposals?

BH: We sold the bus station to the county council for a nominal fee. The original plan was to demolish it but it was then listed and we did not have the funds to repair it. Similarly, we are in the process of selling Preston Guildhall to a local entrepreneur. This will relieve us of annual running costs of £1.1m. It needs renovation and we don’t have the funds to do it.

R151: Are you one of the authorities which says it will lose out under plans by the county council to change its funding regime for waste collection?

BH: The county’s position on the waste contract is a concern – we would lose a million pounds a year and on a budget of £20m that is a significant amount. We want to have further discussions with them.