Investing in the future

All of Warrington Borough Council ‘s commercial investments to date have been successful. APSE Direct caught up with Danny Mather, Head of the Council’s Corporate Finance team, to learn more about how the authority’s enterprising culture has opened up a number of exciting opportunities. 

Warrington Borough Council is no stranger to being innovative and showing initiative in response to local need. It is particularly important in these times when Local Authorities are facing shrinking budgets, coupled with rising costs and demand, which impact on local services and local communities. If we want to create sustainable solutions, being enterprising is now more important than ever.

Over the last few years the Council has led on the creation of the Local Authority Mortgage Scheme, given loans to Housing Associations, taken a 33% share in a Challenger Bank (Redwood Bank), issued a £150m Bond, invested in the green agenda, formed a Housing Company and, like a lot of Councils, invested in property.

Whilst Warrington has invested heavily over the last few years, the primary driving force has been policy objectives: the Local Authority Mortgage Scheme was developed to get first-time buyers on the housing ladder; loans to Housing Associations provide much needed finance to build new houses; Redwood Bank was formed to give loans to Small Medium Sized Enterprises; the green energy programme was developed to help address fuel poverty issues and the Housing Company to increase the supply of affordable housing in the borough.

All of Warrington’s investments to date have been successful. The Local Authority Mortgage Scheme resulted in 200 local people being able to get a mortgage and get on the housing ladder, and loans given to Housing Associations to date have financed in the region of 1,000 new homes. 

Our green energy programme has reduced fuel poverty in the borough and the returns from our property investments are reinvested in front line services.  Warrington’s Invest to Save Programme is generating in the region of £20.5m to the Council each year.  

Warrington adopts a very strategic approach to its investment programme.  This is covered in its corporate strategies, all of which are integrated and linked.  Engagement with members, staff and stakeholders is at its core. Strong project management and governance, due diligence and risk management underpin the strategies. This is evident by the fact that the Council was one of the first Councils to publish a Capital Strategy in 2018/19 and one of its large property purchases in 2017/18 was covered in a good practice case study by CIPFA.  The Council has worked hard over recent years through training and communication to promote a strong commercial culture throughout.

Warrington also promotes good practice across the local government sector.  The Council has shared good practice of its commercial schemes with other local authorities, has written guides and articles and its officers are regular speakers at conferences.

But like all good social entrepreneurs, the Council has one eye on the future. Warrington has just announced a £62m investment to develop two solar farms in York and Hull, with York incorporating battery storage. All the power from the Hull Solar Farm will be used to power the Council, with the Council becoming the first fully green energy supplied Council in the UK.  The farms, once complete, will save 25,000 tonnes of carbon per year and will supply enough power to power 18,000 houses.  

Power from the York solar farm will also be sold to another Local Authority and considerable interest has been generated in this area. Local authorities have a huge part to play in delivering 
the carbon reduction targets of the Paris Accord. Our primary objective in developing these solar farms is carbon reduction. But we have also developed a model that generates an excellent commercial return to the Council. We hope we have been pathfinders in developing a model that can be copied by other Local Authorities in the future which will lead to the rejuvenation of solar investment in the UK.’

If this was not enough, the Council is putting finishes touches to the Public Sector Social Impact Fund. This is an ethical investment fund that will invest in secured social impact assets.  It is aimed at treasury balances and it is intended that all Councils throughout the UK and across the public sector will have access to it.  

Not a week goes by when we do not get several phone calls from other Councils seeking our advice on how they can invest their treasury balances in more secure, ethical, social investments. One of the blockages for Councils following our approach is the cost of due diligence and a lack of capacity and expertise across the sector.  By creating a centralised fund, the due diligence and investments can be done by expert fund managers enabling Councils to gain higher returns on their balances that are more secure but more importantly are delivering social impact.’

The Chinese have a saying ‘’you are fortunate to live in interesting times.’’  The last 20 years have witnessed off-balance sheet financing and outsourcing of Council services.  We are now witnessing a renaissance of Councils bringing manageable risk back on to their balance sheets to mitigate the Government funding cuts since 2010 and to provide real social impact investing to its residents.

Danny will be discussing Warrington's energy investments in greater detail at APSE's Big Energy Summit in Warwick on 14 March. To book your place at the event click here.