It has been many years since councils involved themselves in offering financial services to the local populace.

But there are still those in Birmingham who can look back fondly at the former Municipal Bank in Broad Street, which for many years stood as a proud symbol of local government power and stability. Its demise seemed to mark the end of an era but in these extraordinary times it is possible that a new council-run bank may be able to give some hope to the hundreds of firms and businesses struggling to keep their heads above water.

The announcement by council leader Mike Whitby today that the re-tendering of a major banking contract will be used to test the water for establishing a Bank of Birmingham, “dedicated to serving the people of the city”, represents a truly radical approach to tackling the recession.

Coun Whitby has spoken many times about his wish to emulate Joseph Chamberlain, whose programme of Victorian municipalisation saw the council take control of gas, water, electricity, public transport and housing. Until now, however, it appeared highly unlikely that back-door socialism on such a scale would be embraced by a Labour government, let alone Coun Whitby’s Conservative colleagues. Desperate times, however, sometimes demand solutions that in the past would have been deemed impossible. Who, for example, would have imagined a UK government in the first decade of the 21st century resorting to nationalising the banks?

What businesses of Birmingham will want to know, and the hundreds of thousands of people finding it impossible to obtain a loan, is just how likely it is that a municipal bank can be up and running within a reasonable timescale. Having held out the possibility of such a venture, Coun Whitby must now deliver.