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Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
The Prime Minister’s commitment to bringing Post Office banking into the heart of communities, and to giving the Post Office a much greater role in the economy, is a brilliant and simple declaration that this government will protect the public realm, that community matters, that localism matters and that it wants to offer diversity within our astonishingly monolithic retail banking system.
It was also the commitment that got one of the biggest cheers of the Prime Minister’s speech.
If we can now, fast, build up the people’s bank at the Post Office, now that it has effectively been given the wholehearted stamp of approval by the government, it will safeguard the Post Office network – no more dreadful and unnecessary closures – and will offer a real banking alternative to people who think banks should be about more than slicing consumers and then gambling with their money.
So Gordon Brown has done the right thing with his one-line announcement. It’s great. nef has been campaigning all year, with the Post Bank Coalition, for a Post Bank).
The idea is that the Post Office can also have a Post Bank, such as those that have been set up so successfully in other countries (France, Italy, New Zealand). It is a simple and practical way into a future where community, key information points and financial diversity will be needed more than ever.
A Post Bank will revive and protect the Post Office network, support local economies and small and medium-sized businesses, combat social exclusion and financial inequalities and introduce banking diversity.
Really there is hardly anyone who doesn’t warm to the idea of a great increase in Post Office banking services. (Apart from the British Banking Association, which thinks banks are doing a fine job without the need for another model. Where to start on this peculiar view?) The key now is to make it work.
Sources close to the prime minister are apparently saying we could see increased and improved Post Office services by the end of the year – we need to keep Whitehall to that.
But we also need, in comradely fashion, to ensure that what we get is a true, independent, proper Post Bank and that it keeps its radical roots. The UK has an amazing history of non-shareholder driven banking models – mutuals, trustee savings banks, co-operatives – and Post Banks must be set up using these.
There are all sorts of nifty technical innovations a Post Bank could use to bring in younger clients such as versions of mobile phone banking. And the Post Bank provides the reach to give practical financial advice and help to the poor and the debt-laden. There are very interesting systems available now that can offer planned financial systems to individuals at either no or low cost. Antony Elliott’s Fair Banking scheme is one.
And we don’t need to start from scratch in making the Post Bank a full banking alternative. As an initial step, building a Post Bank around an existing 100% publicly owned bank, Northern Rock, is a logical and brave step. Don’t sell it off to Tesco or whoever – will they provide a true People’s Bank? – keep it working for the public who own it .
In the worst of the crisis last year people flocked to put their money into the Post Office. It’s trusted, even loved. Today’s news is just what we need to keep it like that.
Eilís Lawlor is the acting head of the Valuing What Matters team at nef.
Yesterday saw the launch of the new Social Return on Investment guide, co-authored by nef staff and backed by the Cabinet Office. This is good news for organisations and institutions that wish to account for their performance across the triple bottom line. It is also timely in the current economic environment when the pressure is on to cut costs and make immediate savings. Taking an SROI approach involves thinking about value in a different way – beyond costs and financial savings and over the longer-term. This is in sharp contrast with the recent budget proposals to claw back funds through efficiency savings; these are essentially cuts which will ultimately jeopardise frontline services. Where these services are delivering value, cutting back will lead to poorer outcomes and greater long-term costs.
SROI promotes the idea of ‘social value’, a concept that is gaining increasing currency across the political spectrum. In some ways its legitimacy is indisputable; few people would argue that things that are bought and sold and have an ‘economic value’ are the things that matter most, yet in our daily lives we generally unwittingly accept that to be the case. What people have resisted is the notion that this type of value is measurable and quantifiable. While concerns about this are understandable they are misguided and ultimately unhelpful. Somehow we have convinced ourselves that what we pay for goods and services equates with some intrinsic value. Instead, what the market does – in fact what is effectively for – is to bring together people whose valuations happen to coincide. This ‘coincidence’ is called ‘price discovery’ but it is not uncovering any ‘true’ or ‘fundamental’ value, rather it is matching people who agree on what something is worth. Calculating social value is the same as this in virtually every way. The difference is that goods are not traded in the market and so there is no process of ‘price discovery’. This does not mean, however, that these social goods do not have a value to people.
Why does this matter? It matters because it is about more than the logic of an abstract philosophical debate. By ignoring value that is created and destroyed outside the market we have given far greater significance to things that are bought and sold than they perhaps merit. This has grave, practical implications that have helped to lead us down the shaky and unsustainable path we are now on.
The debate that has raged about the efficiency of the Post Office network encapsulates this well – people feel that there was a value to it beyond what can be measured financially, and yet decisions about its future are made largely on a financial basis. Measuring and quantifying social value will never be an exact science; the subjectivity of value makes that impossible. This did not prevent us creating markets and developing accounting practices to enable us to carry on the business of everyday life. Neither should it prevent us seeking to reduce inequalities and improve the health of the planet by bringing onto the balance sheet the real and costs and benefits of the decisions and trades that we make. SROI is the most developed and robust methodology available for doing this. It is now being mainstreamed in the third sector, which has led the way on innovative measurement but its potential is much greater than that. We need to get to a stage where our actions and behaviours are judged and rewarded by the extent to which we create or destroy value in its broadest sense, if we are to find an equitable and sustainable way through the many problems we currently face.
Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
The Chancellor rightly talked about his careful preparations for the future and about the need for increased regulation of our failed cowboy banks.
He should also have offered a tangible reform in both areas in the form of a Post Office Bank which would simultaneously help small local businesses- the underpinning of our economic future- and increase people’s trust in the banking system. It’s not too late. As a practical and popular measure, he can still announce the setting up of a Post Bank in the wake of the Budget.
Read more about our campaign to establish a Post Bank and sign the petition to make it a reality.
Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
The business secretary's plans for privatising the Post Office are in tatters – after his select committee put the boot in
The words choke and cornflakes suggest themselves when thinking of how Lord Mandelson responded to a report released (pdf) by the business, enterprise and regulatory reform select committee yesterday.
The committee, chaired by the highly respected Tory MP Peter Luff, is doing a forensic job on the various options for the Post Office network. It seems from the public sessions (where key witnesses are invited to give their views on how the Post Office is and should be run) that it’s a motivated, informed and tough body, intent on finding the right solutions for a great national institution – and applying its keen intelligence to the postal services bill (prop: Lord Mandelson) and its proposal that the Royal Mail be broken up through a 30% sell-off.
The latest report on the bill is an astonishing attack on the business secretary’s plan. Though couched in the silky language of parliamentary discourse – “it is surprising”, “worrying”, “the government is coyly refusing …” – the report, to use a technical term, tears the government plan to bits. It also rips apart the key recommendations of the Hooper report, which Lord Mandelson accepted in its entirety on the day of publication and then used as a basis for his sell-off bill.
The report is a rattling good read. Its main conclusions are unambiguous. It agrees with Hooper and the government that the Royal Mail pension deficit should be taken over by the government. And it agrees that Royal Mail should be differently regulated and governed – taking away the malign political interference (or negligence) that has dogged it over the years. Nobody could disagree.
Then it gets down to business, shredding all the arguments made for the 30% sell-off.
“We do not consider either the independent review or the government has properly made the case that these two reforms, about which there is a broad consensus, can only be made as part of a package that includes the third reform – the involvement of a private sector equity partner in Royal Mail.”
The report points out that the government has not put out the figure it hopes to get from the sell-off – or explained why a much-needed cash injection has to come from a sell-off.
“We are left with the conclusion that either the government has not fully thought through its position about future share sales, or that it has done so and is refusing to reveal its hand. Either case is worrying.
“It is entirely unacceptable for parliament to be asked to approve such fundamental changes to Royal Mail Group when there is no indication of how much money Royal Mail Group needs for investment; while the government appears to have no business plan and has not indicated the use to which any private sector capital would be put.”
After such a slating, it’s hard to see what will be left of the rationale for Lord Mandelson’s plan to break up Royal Mail, given that there is no certainty that there will be a cash injection from a private-sector partnership. There are several questions about the proposed partnership that must be addressed:
The figure cited by Lord Mandelson at the second reading was 30%, but why?
How much openness will there be about the partner’s rights and any arrangements between the parties about sale of the partner’s stake? As the bill is currently drafted, parliament will not have any right to see any agreement before the government enters into it (or afterwards). Is the government prepared to make such details public before a partnership is agreed?
What is the detailed rationale for dividing the Post Office from Royal Mail Group?
What will be the effect on competition if, as is very likely, the chosen partner is already active in the UK mail market?
What will happen if Royal Mail needs further capital injections? The natural assumption is that investors would fund this in proportion to their stake in the company. But such an injection from the Treasury would expose the company to all the state-aid rules that we are told this scheme is intended to avoid.
It’s hard to see how Lord Mandelson can now persevere with his wretched, destructive bill. Nobody – including now this august select committee – wants anything to do with it. Can’t someone throw the noble lord a lifeline out of this sinking ship?
Veronika Thiel is a researcher and project manager on nef’s Access to Finance team.
The ClubCard creates a huge database about customer spending habits. Tesco's new current account will only add to the supermarket's knowledge about the way we shop.
Yesterday, Tesco has announced plans to provide current accounts in thirty of its stores. If this pilot scheme is successful, then the supermarket giant will roll-out banking services nationwide.
In principle, this isn’t a bad move. Britain’s banking sector isn’t really a competitive one anymore. According to an Office of Fair Trading report written before the Lloyds TSB-HBOS merger, 79 per cent of current accounts held by four high street banks. Any injection of competition into the market is, therefore, a welcome thing. And with 2,115 stores across the country, Tesco outstrips the network reach of any single bank.
But those 2,115 are also turning our high streets into Clone Towns, robbing the UK of its retail diversity. And although Tesco has successfully monopolised the nation’s grocery shopping, it shows no signs of slowing down. Tesco is quickly becoming a cradle-to-grave company. You can buy your baby food, school uniform, kitchen appliances, computers, books, internet access and telephone (both mobile and landline), fill up your car and get it insured, get a health check and prescription and, yes, even plan your funeral at Tesco. In many communities, the only pharmacy is in Tesco. It’s becoming the one-stop-shop for your entire life.
In this light, Tesco’s banking plans hardly look like a diversification of the market or the creation of some healthy competition.
Tesco also has one of the biggest databases storing customer information. If you use your Tesco ClubCard regularly, then you can be sure that the supermarket has a wonderfully clear map of your spending habits: what you buy, where you buy it, when, and how often.
Now that they’re throw banking services into the mix, they’ll have another database at their fingertips. My bank can quite easily tell what I do from my transactions: whenever I pay with a card, they know what I bought. That’s why I quite often use cash. I don’t have loyalty cards: they save you very little money, but they do make you a perfectly observable consumer.
Now, I’m not suggesting that Tesco will breach customer confidentiality or abuse the data that they collect. Due to banking rules, they will be unlikely to be able to match a bank account with the data collected on a Tesco ClubCard.
Nevertheless, the information that Tesco will hold about a person with a ClubCard and a current account would reach frightening proportions. This concentration of information is worrying. If you think that the Government holds way too much data about your person, then think again. Tesco is likely to know more about you than your local council or your GP. And if you are lured by their offer of a current account, they will soon know even more.
Whilst Tesco’s move into banking is, on the face of things, a welcome addition of diversity to the retail banking market, it also is the opposite: concentration. Concentration of the provision of goods and services in one company, and concentration of data collection.
Let’s make sure that Tesco isn’t the only new bank on the block. Support our campaign to offer banking services at the Post Office. Write to your MP and tell them to support Early Day Motion 1082. Chose to bank at a place that you trust and that will also support your local community: the Post Bank.
UPDATE: You can now sign a petition supporting the Post Bank.
Andy Wimbush is nef’s Communications Assistant and blogmaster. He also draws cartoons for nef’s newspaper.
Pat McFadden, a neoliberal nostalgic | Photograph: Sharon Wallace
It’s been over a week now since we launched our proposal for a People’s Bank based at the Post Office. In a packed committee room in the Houses of Parliament we heard politicians of all stripes voice their support for this new kind of bank, one that would put communities, small businessses and the financial excluded first.
The only speaker to mince his words and to temper his enthusiasm with caveats was, of course, the Minister for Postal Affairs, Pat McFadden. There is a danger, McFadden warned us, of becoming so ‘nostalgic’ about the Post Office that it blinds us to its current problems and the need to modernise. And then he said: ‘We can’t simply go back to the way things were’.
We can’t simply go back to the way things were.
But isn’t it McFadden and the rest of this Government – rather than the Post Bank Coalition – who are the real nostalgics here? After all, they’re the ones who are desperate for us to go back to the way things were before Lehman Brothers declared its insolvency, before the failure of HBOS and RBS. They continue to pump seemingly endless amounts of public money into banks which, as nef argued in our banking report I.O.U.K., are no longer able to perform the most basic functions of a bank.
The Post Office, by contrast, remains a vital and much-needed element of the UK economy. nef’s research shows that each post office saves neighbouring small businesses around £270,000 each year. And small businesses employ the majority of the private sector workforce, around about 58%. Nor is the Post Bank simply a means of saving the Post Office network: we also believe it would offer something markedly different to what the current high street banks are doing, even taking into account the fact that these banks are now effectively in public ownership. As Liberal Democrat Treasury Spokesperson Vince Cable said of the Post Bank proposal:
This is an attempt to clean up banking. The co-option of the system has spread right through into the branches. There was aggressive cross-selling, commission-based branch managers were drawing people into transactions they should never have done. This is a cleaner principle based on sound banking ideas, but driven by public interest rather than narrow short-term profits.
What’s more, the proposal could easily be put into action. A recent poll by PoliticsHome.com revealed that 74% of the electorate think that a Post Bank would be a good idea, even at this early stage. And brand experts have agreed that the Post Office is uniquely situated – both geographically and within the public consciousness – to be able to provide trusted, reliable financial services amid so much economic turmoil.
The only thing stopping McFadden, Brown, Mandelson and their ilk is their neoliberal nostalgia. They are desperate to get back to business-as-usual without apology because it is too uncomfortable to admit that the Thatcherite economics with which they dramatically transformed their party has failed. While they wish that we could all just go back to the way things were, others are forging ahead with a new economy.
To mark the publication of I.O.U.K.: banking failure and how to build a fit financial sector – nef’s new report on banking – the nef triple crunch blog is staging a debate. Sargon Nissan, one of the authors of the report, kicks things off. Replies from our special guest bloggers will be posted below.
Banking unfit for purpose
Sargon Nissan is a researcher in nef’s Access to Finance team.
When Lord Mandelson said, last November, ‘It’s completely unacceptable to the Government and to business in this country for banks indefinitely to stop functioning as banks.’, he inadvertently revealed policy makers’ confusion over what to do amidst this unprecedented crisis of banks and the financial system.
They’ve recog
nised banks have stopped functioning (who hasn’t?) but not that they’ve become unfit for purpose.
Our banks have become far removed from their roots as lenders and investors in communities and businesses, as we reveal in our new report, I.O.U.K.: banking failure and how to build a fit financial sector. Decades of banking sector consolidation have been encouraged by lax regulation. There are now fewer bank branches than post offices in this country – and the number is set to drop still further. Meanwhile, Community Development Finance Institutions (CDFIs) have been starved of support while attempting to address this failure directly.
Increasingly desperate Government bailouts – witness Monday’s £260 billion underwriting of Lloyds and Barclays now reportedly ‘mulling’ the Treasury’s offer to underwrite its toxic assets - are having little effect bar robbing the taxpayer.
The Government is throwing good money after bad. Read the rest of this entry »
Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
FR Leavis famously said of some transgressing text that he “would not condone it by reading it”.
If you disagree with the Hooper report (pdf) into the future of postal services, with its unpopular and lordly conclusion that the only hope for Royal Mail is a sell off, you may feel the same. But it needs reading for two reasons.
First, it is the sole justification being used by the government for the proposed privatisation of Royal Mail. The Hooper report will be quoted ad nauseam in coming weeks by government ministers trying to force MPs to vote for this dreadful sell-off. Hooper is thus achieving an unlikely status as the last word on Royal Mail, and is being set up as wholly objective besides.
Second, its arguments seem quickly to have made their way into the body politic – that’s us. Hooper goes as follows:
- Fewer and fewer of us write letters any more. That market is going the way of the horse and cart so Royal Mail is going to lose more and more money.
- Royal Mail is losing loads of money anyway.
- Royal Mail is way less efficient that smart European companies that have modernised (aka made job cuts) and it has far too many staff and mail centres. Hooper says Royal Mail is 40% less efficient than its European counterparts.
- The pension deficit is huge and is going to cripple Royal Mail.
- Management of Royal Mail is so awful that it can’t be trusted to take it into the future.
- Labour relations are terrible.
- The only solution is to sell off a big chunk to a private company because they know best how to be efficient, make money and save institutions for the future. (Hooper suffers a bit from not mentioning the current economic crisis at all)
But all of these conclusions can be easily challenged. Some of them are plain wrong.
This week Adam Crozier, group chief executive of Royal Mail, gave evidence to the BERR select committee looking at the future of the Post Office.
He pointed out:
Although letters are obviously decreasing in volume in every country, parcels (via internet ordering) are shooting up. 75% of postal profits are now from parcels. In fact next year Royal Mail will double its profits on this financial year – in which all four of its sectors made a profit.
On the 40% less efficient argument, Crozier told the committee that every state-owned postal service was less “efficient” than the new operators. He didn’t spell it out but it’s clear why – new operators pick their markets, they don’t deliver everywhere, they can mechanise more easily. They often pay low wages.
So Hooper did not compare like with like. And even if you compare like with unlike Royal Mail actually looks good. It costs Royal Mail less to deliver, per item, than TNT and Deutsche Post, and the customers pay very much less.
The Royal Mail pension deficit is huge. (Royal Mail has employed millions of people over the years). But the government is taking it over and thereby freeing up £280m a year of Royal Mail charges. Why hand that to a private operator?
And on management efficiencies and union relations – well, Royal Mail has shed 50,000 jobs in the past six years and they will cut £1.5bn out of the service in the next five years. With union agreement. “Our people have been through a hell of a lot in the past few years.” Crozier told the committee.
The management has reached all its service agreements. It has shed jobs. It is modernising. The unions agree with these targets and have produced their own modernising ideas. Royal Mail is efficient and 85% of its users are well satisfied with it.
What on earth is the government thinking? And why is it using the flawed Hooper report as its justification?
Dr Stephen Spratt is Director of nef’s Centre for the Future Economy.
Before our eyes the financial crisis is accelerating into a downward spiral of nightmarish proportions. Today it was confirmed for the first time that the UK is officially in recession, as the effects begin to hit the real economy in earnest. Nobody expects things to get better before they get a lot, lot worse.
‘Decisive action’, we are told, is being taken to deal with the banks. The latest £50 billion guarantee package comes hard on the heels of the untold billions to ‘recapitalize’, or to provide ‘liquidity’, or just to keep the lights on a little longer in the hope that something turns up.
The government resembles a grimly optimistic hot air balloonist, spat out of a storm and crashing to earth while frantically pumping more and more hot air into the balloon, only to see it flow out of huge holes rent in the fabric of his craft. The pilot, lets call him Darling, will certainly delay the crash a little bit, but only at the cost of using up all of his gas. Once the basket hits the ground – in whatever battered shape – it will surely stay there.
Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
Today there begins another investigation into the future of the Post Office network. The BERR (Business, Enterprise and Regulatory Reform) select committee will be taking oral evidence about what should constitute the future of our unique and fiercely valued postal organisation.
It follows hot on the heels of the Hooper review (pdf) into the impact of liberalisation (read: deregulation, competition and sell-offs) on postal services. This review (with its recommendation that up to a third of Royal Mail be put for sale to other organisations) plaintively said that the future of post offices was outside its remit.
But as BERR begins its investigation, which will be speedy, it’s extremely important to put an alternative view not only to the Hooper recommendations, damaging though some of them are, but as importantly to the assumptions underlying the whole report. These assumptions could too easily be made the basis for decisions about the future of the Post Office network too.
The first thing to say about Hooper is that it already reads like a historical document. No mention of the disasterous failure of the whole debt-laden apparatus of private equity companies (one of which was reported yesterday to be sniffing round Royal Mail), no examination of the crashing of markets, no examination of the consequences for decent companies of endless takeovers and buyouts.
Planet Hooper is one where assumptions of public inefficiency/private competence still reign unchallenged. “We recommend a strategic partnership between Royal Mail and one or more private sector companies, with demonstrable experience of transforming a major business.”
But we know that public sector sell-offs and mergers to the fabled expertise of the private sector, often driven ruthlessly by either shareholder value or the insensate greed of partners and top executives, have awful results for customers – higher prices, no consideration of public good, and savage job cutting.
Hooper falls for this too. “Since the 1990s Royal Mail’s national distribution network is virtually unchanged, where modern European companies have reduced the number of mail centres by around 50% to optimise their operations. At Royal Mail postal workers sequence their letters by hand before setting off on their rounds. By comparison European operators sequence 85% of their letters by machine.”
To put it another way, job cutting is the way to go.
The Hooper review had an interim report last May in which it said honestly that liberalisation had only benefited a few big companies. This conclusion is lacking from the final report but it should be in there. And as the select committee examines the future of our remaining 12,000 Post Offices it should base its deliberations on the assumption that our postal service is a public good, that it is a complex network rooted in community, national cohesion, public utility, and that parliament’s job is to devise a future rooted in those values and not in the now derided beliefs that the public sector can only improve by being sold off.
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