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A council has been praised for setting up its own bank to help cash-strapped businesses survive.
Essex county council and Spanish bank Santander, owner of the Abbey and Alliance & Leicester, each invested £50million in Banking on Essex, the first municipal bank for almost a century.
Now the council has been praised in a report by the Audit Commission for its efforts to help small firms.
Since its launch in April, Banking on Essex has paid out £250,000 in loans, with more due.
It offers up to £100,000 to firms unable to access credit from high street banks. Requests are scrutinised by experts with knowledge of the area, which the council believes means they are more likely to be accepted.
To qualify, firms have to be based in the county, have fewer than 250 employees, a turnover of less than £25million and have been trading for at least one year.
The report's author Diane Ridley said: "Councils have wide-ranging powers to do this kind of thing. While they are doing things that are slightly more unusual, they need to be aware of risks."
The report criticised central government schemes to tackle the recession as "complex, inflexible, and hard to track". It also warned of a worsening social impact as unemployment rises.
Reader views (7)
i believe that if anyone is sufering the banks should cut them away and leave them to fry.
- Lewis Hardcastle, danbury england, 27/11/2009 11:10
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Great for Essex county but would fall face flat in either a more densely populated county and the ink would of been laughed off the drawing board in any major like London or Birmingham where small enterprise is the main form of business with off licenses, newsagents, fast-food out lets and internet cafes comprising the majority of business, 50 mill won't be enough out here, but if it'll save Essex i'd be behind that notion.
- Frank, London, 27/11/2009 10:10
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'Requests are scrutinised by experts with knowledge of the area, which the council believes means they are more likely to be accepted.'
So if your corner shop's on the slide, and you've got a cousin on the Council, give it a go.
- Mdj E10, london uk, 27/11/2009 10:10
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Mdj rather cynical outlook, will destroy your life.
In Madrid one of the Banks has decided that if you get into arrears on your mortgage then you pay a proper rent till you are back on your feet then back onto the mortgage.
- Ayliff Mcnab, Spain, 27/11/2009 10:10
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Praise by the Audit Commission.
The Audit Commission are an unelected quango costing the taxpayers of this country in excess of £200,000,000 per annum (£2 billion a decade).
I think that the excellent Essex CC, don't need the Audit Commission to tell them they are doing a good job. The people of Essex will decide that when it comes to the next local elections.
The Audit Commission are like the armed wing of the government as they enforce the targets and standards regime that has damaged learning and improvement and caused so much carnage in the public sector.
- Wyndham Lewis, London, 27/11/2009 10:10
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Hope it works OK and helps business's, and Santander are a very good bank.
But I hate to say this, most councils are highly incompetent, so who would trust them near a banking operation?
They lost fortunes in the Icelandic Bank fiasco, so what makes them think they are qualified again this time?
I would personally be furious if I were a council tax payer in Essex.
- P Staker, London, 27/11/2009 10:10
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Well Santander are taking a calculated risk with their 50m capital, how about the council? Who do the experts work for? Who takes 1st loss? If it goes down the tubes the taxpayers of Essex will not be cheering and remember these are firms that commercial banks deemed bad risks.
- Mark, London, 27/11/2009 10:10
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