REPORTS that Warrington Borough Council is to purchase a 33 per cent share in a new bank is somewhat interesting.

As a public body the council can borrow money at historically low interest rates at present so the temptation to take advantage must be great.

The council can technically borrow money at a low rate then through the new bank lend it at a much higher rate, producing a long term benefit and a steady income stream.

In addition if the money goes into developing small firms within the borough there will be benefits in terms of jobs and income from rates paid by these businesses.

Of course if the firms are outside the borough (the press reports state that the bank will be providing services throughout the north) this will not be the case.

That’s the good news but there is a flip side.

As Sir Humphrey from Yes Minister would say this is a bold and novel decision. The council is putting in £30 million to get one third of the bank.

That means the total value will be around £90 million making it a very small bank indeed by banking standards.

A small bank is also much more vulnerable to default on loans – this is why many failed in the banking crisis of 2008.

It is reported that the Redwood Bank which the council is involved with does not currently have a licence to operate, this is expected later in the year.

The council will need to closely monitor this endeavour to protect the ratepayers investment. It will be interesting to see if the council has representatives on the management board and if they are to be remunerated in any way.

CHRISTOPER LEE PENKETH