Public promotional banks are used in many countries to provide cheaper credit to infrastructure projects and businesses. Given that investment in these areas has been endangered by austerity, setting up a national investment bank seems like a sensible move to help shield capital investment from opportunistic government cuts.

But let’s not just set up a bog-standard promotional bank. As I discussed recently, the results of these initiatives tend to be underwhelming. We should be more ambitious. We should set up a decentralised and locally accountable “National Investment Bank Network” with branches at the municipal level; a network of Regional Investment Banks. These would be public services working closely with municipalities and county councils, local companies and local initiatives. They would help to identify and develop investment opportunities and provide tailored finance to support the economic revitalisation of communities across the UK. They should:

Support small businesses directly: The usual practice of lending to other banks “for on-lending to Small and Medium-sized Enterprises” is just a cheap way to hit targets – there’s no way to know how much SMEs really benefit. A public service investment bank should invest in municipal-level branches and local client relationships to support small businesses directly.

Package funding with technical support: This would unlock investment opportunities, local municipalities, businesses and social enterprises need advice and support. Matching funding with technical support can have a larger macroeconomic impact than just trying to lower costs and maximise volumes.

Support the cooperative economy: We need not just investment in businesses, but a different way of doing business. Corbyn’s Digital Democracy Manifesto proposes that the national investment bank will be used to support platform cooperatives. Indeed, all kinds of cooperatives and social enterprises such as housing associations should be prioritised, helping to bridge the funding gap for coops and providing backing such as guarantees for cooperative P2P financing. 

Be radically democratic: We need to explore and develop a new public service model that moves away from top-down command management and fosters accountability to workers and the communities they serve. This model would be based around four principles of organisation (1) Run the local branches like cooperatives, so that managers are selected and accountable to the whole workforce and not the other way round. This already helps to reflect the public interest and keep managers honest. (2) Vest branch ownership in local authorities and make them accountable to those authorities, if not directly to citizens. Branch workers should decide operational matters (e.g. which projects are worth funding) and local communities should set the policy priorities (coops or housing or renewables…?). (3) Confederate these branches to create each Regional Investment Bank, like a coop of coops, each with a with a regional HQ to provide services to the network and support pan-regional operations. (4) Coordinate the actions of these regional banks at a national level. This way the whole system becomes radically democratically accountable, and very hard for the national elite to capture.

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