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Bookmark and Sharelindsay-mackie2Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.

Let’s hope, as the chancellor prepares his Mansion House speech on Wednesday evening, that he has already included brave words about the banks along the lines of “I know that the cuts I am announcing are in part the result of banking folly and greed. And so I am entirely with my colleague Vince Cable, who is even now preparing root-and-branch banking reform. We cannot have a public service cuts programme without the banks being equally painfully reformed.”

To help him in this decision, let’s also hope that some brave Treasury official slides across to him the following info from Britain’s small businesses.

Around a quarter of them are deeply fed up with the banks’ lack of business support, particularly credit availability. Nearly half of them don’t even have a local bank manager. Thousands of them have had to deal with not one, two or even three business managers at their bank in the past two years, but four or more.

Since the height of the crisis last year, the 213,000-strong Federation of Small Businesses has been polling its members monthly and collecting this kind of information. These are the people on whom local economies, and the national economy, depend. And the banking system treats them appallingly.

They are joined of course by the poor and the unbanked – its reckoned that 2 million people have no access to a bank account. The numbers of people falling into the hands of loan sharks (1,800% interest, threats thrown in for free) are already increasing.

Now, as George Osborne prepares to throw raw meat to the deficit hawks at the Mansion House, he cannot ignore the banks’ failure. He should not be contemplating cuts that will hurt the economy and individuals without announcing banking reform at the same time. Does he, or does he not, agree with his colleague Cable, who said in his first public speech in government two weeks ago that we have “a seriously dysfunctional banking system”?

Taking on the banks is absolutely crucial and there is a movement growing around it. The Future of Banking Commission yesterday called for regulation and separation of functions and – most importantly – transparency, so that we can see where and to whom banks lend. The Better Banking Coalition is powerfully arguing for real and fair help from banks – who will have to be forced to do it – for the unbanked and the less well off. The Post Bank Coalition, of which the new economics foundation is a member, wants a publicly owned local banking network based on the Post Office. It’s a popular and ingenious idea and bedrock small businesses want it.

The chancellor will be surrounded by the City, literally and metaphorically, at Mansion House tonight. That food on those exquisite plates will be hard to swallow if he does not announce painful banking and reform along with the cuts for the rest of us.

Bookmark and Sharelindsay-mackie2Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.

I’ve always been keen on scanning the skies for new forms of avian life. And as I twitch with other bird watchers, I’ve registered the dark and looming shape of the deficit hawk.

This creature  seems to be a bit picky about what it will devour. It swoops hungrily on some prey and whimsically leaves other, fleshy and well padded beasts well alone. It seems to be concentrating its attentions on our publicly owned pastures, leaving the private estates well alone.

Enough with the metaphor. What is happening is that the response to the financial crisis is being dictated by those, in Government and outside it, who believe that the words ‘bloated’ and ‘public sector’ belong together and that the crisis cannot be resolved without first cutting back – 20 % is being mooted – on our public sector. The deficit hawks are currently in control of the skies.

Since the banking crisis began nef has been clear that we cannot resolve our economic crisis without first reforming the banking system. We know that the banking system has decoupled over the past decade from the productive economy. That linkage has to be restored but with a banking system radically re-formed.

The Government seems to agree: Vince Cable said last week that ‘ we have a seriously dysfunctional banking system’.  And in case anyone forgets that our crisis came about through banking failure  these figures will remind them:

  • UK government support package for banks totalled £1.3 trillion
  • Combined losses of ten major international stock markets reached $9.5 trillion between the start of 2007 and 2009 , or over 10 per cent of global GDP

We now urgently need another linkage between the programme of public service cuts and the demands we must make of the banking system. These principally refer to availability of credit but also to the establishment of a Universal Banking Obligation which means that the banks offer a service to the millions of people who currently have either no bank account or who cannot get  even small amounts of credit for the kinds of economic activity that will help our economy to grow (money for training, for education, for  house maintenance, for energy saving).

Only radical reform of the UK banking and financial sector can deliver institutions capable of investment and lending that is economically and socially productive. And a concentration on cutting public spending without this reform will be disasterous for our country.

Image by The Original Ki via Flickr

Bookmark and Sharelindsay-mackie2Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.

When nef began to put together the Post Bank Coalition 15 months ago it was because we knew that this vital local economic and community network was being neglected and run down to the point where it might crumble to a few thousand post offices.

Successive governments have treated the Post Office as a series of problems which they hoped would go away- rather than as a trusted and flexible organisation which props up- and more- thousands of communities both rural and urban.

Today’s announcement then , that the Post Office is to get a dollop of  £180 million Government (our) money  to provide new financial services and to improve financial inclusion through credit unions and weekly budget plans is thoroughly welcome. The big banks have been made to offer up their current accounts for access in Post Offices and the poor will now be able to pay utility bills by direct debit instead of through the disgracefully over priced meters. The Government is talking about how it can levy retail banks to pay for credit unions to access accounts wherever they are in the country.

This announcement does show that the Government has entirely changed direction by recognising, and saying strongly, that the Post Office network is important, is highly valued by the people, and needs to be sustained .

The Post Bank Coalition – nef, the Communication Workers Union, the Federation of Small Businesses, the National Pensioners Convention, Unite the Union, the Public Interest research Centre – would go much further though, than the Government has today. Our proposal is that a Post Bank- of the sort which flourishes in Italy, France, New Zealand and elsewhere (South Africa is about to start one)- is the answer both to the business future of the Post Office and to our need for diversity in the banking system.

Our economy depends on local economies. At present they are badly served by the retail banks and could be must best served by their local post offices. At present the financial services offered by the Post Office- which it does do very successfully, being, for instance, the number one provider of foreign currency in the UK- are run by the Bank of Ireland so that 50 percent of all profits go back to Ireland. But worse than that, the Bank of Ireland is in a very shaky position and its capacity so far has not even included offering a current account to PO customers, nor children’s savings accounts. We on the Coalition think its probably not capable even of offering the new range of products adequately. It may have been the right partner at the time when the PO went into financial products but it isn’t now.

So we would have liked the Government to grasp that nettle. The other problem about the welcome first steps announced today is that they don’t do anything substantial for the big Post Office problem of the falling revenues of a third of all post offices. Only a publicly owned Post Bank, with all the revenues going back into the Post Office, with all the innovation and increased footfall it would bring, can do that.

But the Post Bank Coalition is pleased with a good first step to keeping and protecting this astounding and far reaching underpinning  of the public realm.

Bookmark and Sharelindsay-mackie2Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.

They have not been earth shattering, but two recent developments around the Post Office are a cause for modest cheer.

One is the Post Office consultation set up by the Department for Business Innovation and Skills, Prop: Lord Mandelson.

Now this a foolish exercise in long grass exploration in one way- any decent Government would be taking firm steps itself to safeguard the Post Office network, give more Government business to Post Offices , make imaginative use of this national network– and indeed go the whole hog and set up a Post Bank. But this one isn’t and when a gift horse comes along its best to do more than a dental examination. BIS is consulting us on suggested financial services that the Post Office should provide and we should all be sending in our ideas and responses to or to Post Office Banking Consultation, Shareholder Executive, BISA, 1,Victoria St. London.

BIS wants to know what we like about the PO existing financial services , what we think might also be offered which exists elsewhere in the world, what new financial services we’d like at our local Post Office, and how best could the Post Office support poor people and people who are financially excluded.

Loud and clear we must tell BIS that we want current accounts, much more help for small local businesses, budgeting assistance schemes, attention to the queuing problem and an underlying shift of Government opinion about the Post Office-from thinking that it is a drain on the public purse, to realising that it is a trusted national asset capable of expanding to fit the 21 st century. The consultation must end by the end of February.

And lets raise a cheer for Consumer Focus which this week in a crisp little report, which actually talked to hundreds of people, recommended an immediate current account which the financially excluded would actually use, thus lifting up to a million people from their currently state (brought about mainly because banks aren’t interested in engaging with people on low incomes and the feeling is therefore reciprocated).

The Government would do well to read Consumer Focus’s report – and then implement it.

Bookmark and Sharelindsay-mackie2Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.

The Post Office consultation announced today is a most baffling affair. It’s billed by Lord Mandelson and his department as containing “exciting proposals” on which he wants our views. He wants to see the Post Office at the forefront of mortgage provision and he says it is “ideally placed to bring banking services to the heart of people’s communities”.

The consultation will ask us if we want the Post Office to have its own current account, a children’s savings account, business accounts, the ability to manage our money on a weekly budgeting account, and links between the Post Office and credit unions.

The department for business, innovation and skills (BIS) also wants the banks that don’t allow their current accounts to be accessed at the Post Office – hang your heads RBS and HSBC – to do so. (They could just tell them to do it – why consult us?)

The thing is though, these proposals are good. The Post Office should adopt all of them, and has indeed in the past announced that it will, for instance, offer current accounts. The big criticism is they don’t go nearly far enough. A Post Bank – where all the profits go back into the Post Office and are not halved with the Bank of Ireland as at present – would be a really practical and visionary step. It would introduce diversity into the banking system too.

So why have a consultation? These are mainly business proposals that would extend the Post Office’s thriving and well-run financial services. It’s hard to see the populace rising up in indignation at the idea of Post Office children’s savings accounts. (“How outrageous. I am so against this!”). It’s not like that. Why are we having a three-month consultation on financial developments?

If BIS was serious about quickly expanding and strengthening the Post Office it would say to Alan Cook, its head, that he should just get on with providing these sensible and desirable new services. Whether people want them or not will show up in the market. At nef and in the Post Bank Coalition we think that people love and trust the Post Office and will use these new offers and thus make these extended financial services popular.

The consultation is really worrying on two counts. The main one is that these mouse-like developments – in fact any self-respecting mouse would have a bolder vision than this – don’t tackle the neglect and the lack of government support from which the Post Office has suffered for decades. A third of sub-postmasters and sub-postmistresses have seen their revenues decline in the last year. This is just not sustainable. The government has recognised today that the Post Office is a great British institution but it needs to treat it like one.

That means that it doesn’t need this consultation (reporting cunningly just before the election, when the long grass will be even longer) but it does need to follow the excellent advice of the BIS select committee report last July – on, yes, the future of the Post Office. Having massively consulted, it concluded that financial services should be expanded and that, crucially, the government must put its business through post offices and recognise the Post Office’s potential as an unparalleled social, community and economic network.

Mandelson’s department needs to be more radical, more profoundly committed to strengthening the Post Office, more committed to helping small businesses have the financial advice and help they need, than is allowed for by these virtuous proposals. Consulting us on a Post Bank, on using Northern Rock, on making the Post Office the public alternative to our present dreadful banking system – now that would be worth consulting on.

Bookmark and Sharelindsay-mackie2Lindsay 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.

Bookmark and Sharelindsay-mackie2Lindsay 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.

Bookmark and Sharelindsay-mackie2Lindsay 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 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?

Bookmark and Sharelindsay-mackie2Lindsay 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?

Bookmark and Sharelindsay-mackie2Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.

We all loved the snow. Well, mostly. We loved the time off work, the snowball fights between boys and police officers, the artistic and obsessively moulded snowmen, the smiling between strangers.

All of it good. All of it heart warming and affirming. But there was something else which lightened up last week, something less obvious but even more subtantial than enjoying each others company.

People started relying on the local.

They couldn’t do anything else. It was most pronounced in the rural areas but it happened in the towns too. The snow brought with it the mantras of new economics – sharing of skills, time banking, local reliance, small scale acts of collaboration – to make the whole continue to function.

In a village I know the snow economics of localism were measurable. The village shop, put together when the post office closed, and run as a community enterprise, is the fairly new and successful centre of the community. It takes around £10,000 a week (there’s a popular café attached). But on the day the snow started to fall, and no one could get to the supermarkets four and six miles away, the takings shot up to £2,000 a day.

It was fantastic. That was the true value of people’s spending on food and essentials and all the money stayed in the village. People, in spending locally, re-discovered gossip, mutual reliance and environmental sanity.

Now there were no Kenyan green beans to be had, but plenty of local veg, delivered manfully by the woodman in his Jeep. Our week of snow was a trail run of the near future, when peak oil and carbon caps will have limited some of our more exotic choices.

What it showed too was that in time of emergency there had better be the bones of a community structure and the outline of what is recognisably a neighbourhood or locality. This is why nef is so keen on diversity in all things: it is nature’s (and our own)  insurance policy.


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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.