£45m Brummie Bond beats PWLB rate
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John Clancy. Photo (cropped). BCC, Flickr
Birmingham City Council is beginning work on launching a “savings account” for local residents to pay for services, after agreeing its first “Brummie Bond” through an institutional investor.
The council this week agreed a deal to borrow £45m from life and insurance firm Phoenix Life, which is based in the city.
Phoenix will lend the money to the council in three tranches of £15m at an average rate of 2.36%. The tranches will have durations of 18, 20 and 24 years, with the council claiming a saving of £1.4m in interest over the life of the bond.
A maturity repayment loan of the same amount from the Public Works Loan Board would, as of today (Wednesday, 26 April) be charged at 2.75%.
Speaking to Room151, Birmingham City Council leader John Clancy said: “I am over the moon. A lot of people told me this couldn’t happen — not just the rate but launching the bond at all.
“My task since I became leader has been to get the city council to sense its economic power and the weight of its presence as a player in bringing investment to the city. This shows that municipal authorities need not wave the white flag of surrender in the face of cuts to central government funding.”
Clancy said that the money raised through the bond would likely end up paying for new housing in the city, but that decisions have yet to be made on this.
Clancy said that attracting an institutional investor would help the city to launch more bonds along with a “savings account” for local residents which would also help pay for services.
He said: “This issue is just the first bite of the cherry. We have a number of innovative ideas on how we can offer local savings accounts which we think will be competitive. There are lots of interesting ways of doing that and I will be working on this in the next few weeks.”
Clancy said that other bonds could, in future, be targeted at specific policy areas such as life sciences, infrastructure and assisting small and medium sized enterprises.
Launching a retail bond could help improve democratic engagement by the public with the council, he added.
“If you have a very specific, targeted, housebuilding bond, you can say to people that we built 300 homes here because of your investment and that means we are tackling homelessness.”
Clancy – who has a background in local government finance and has long championed the idea of a Brummie Bond, said its launch was a “personal vindication”.
“Sometimes, having that technical knowledge means you can have quite a dynamic conversation and be more confident that things that are a bit different can happen,” he said.
Phoenix Life’s chief executive, Andy Moss, said: “Working in partnership with Birmingham City Council has enabled Phoenix to not only meet diversification targets for our annuity portfolio, but to also support the council’s house building programme.”
He said he hopes to see further similar projects.
Jack Dromey, Member of Parliament for Birmingham Erdington, who shaped Labour’s housing policy as shadow housing minister for three years, added: “I want to see every Brummie realise their dreams to buy or rent a home at a price they can afford. The Tories have let Birmingham and Britain down, with housebuilding falling to its lowest level since the 1920s. Building homes for Birmingham will also create thousands of jobs and apprenticeships.”
In 2015, Warrington Borough Council became the first authority outside London in a decade to launch a municipal bond.
The council entered into a £150m CPI (Consumer Price Index) retained bond with an initial drawdown of £50m and an interest rate cap of 3.8%.
[…] doubt Corbyn is approving the approach of Birmingham City Council (especially the new bonds development) and will extend the model if elected. See posts on this site for further information about […]