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Vince Cable speaking at the parliamentary launch of the Post Bank campaign in 2009
It looks likely that while George Osbourne will take the job of Chancellor of the Exchequer, Vince Cable is being assigned a role looking after business and banks, although details are understandably sketchy at this stage.
From nef‘s perspective, Cable could be an excellent choice for this kind of role, as he appears to be dedicated to at least some structural reform of the banking sector. During the election campaign, Cable spoke out against the cartel of big banks in control of the financial sector, calling for them to be broken up. He also seems to be in favour of a levy on the banks – possibly a financial transaction tax.
Perhaps most encouragingly, Cable wants to encourage the local financial sector, including local enterprise funds and regional stock exchanges, which will help reconnect banking with the high street economy and small businesses. He’s also in favour of our plans to create a People’s Bank at the Post Office. Speaking in at the parliamentary launch of the Post Bank campaign, Cable said, “The Post Bank is an attempt to clean up banking. This is a cleaner principle based on sound banking ideas, but driven by public interest rather than narrow short-term profits.”
Obviously, in a coalition compromises may come, but let’s hope he holds true to principle and pushes for the kind of far-reaching reordering of the financial system that will kickstart the economy and tackle financial exclusion.
UPDATE: More on Cable’s likely moves are outlined by the Guardian, including what looks like taxes, curbs on bonuses and moves towards breaking up some of the banks. There’s a rather revealing comment as well from David Buik, City commentator at BGC Partners:
“Lovely bloke he may be, but the thought of Vince Cable, as Treasury Secretary, bringing influence to bear over the banking system and its constitution fills me with horror. This is nightmare material and I must head to the chemist for some barbiturates! I never voted for this and nor did millions of others.”
Of course, none of us voted to bail out the banking system with no strings attached. We’re going to have some serious moral hazard on our hands if those working in the financial sector think that they can continue to walk the highwire of speculative risk knowing that the safety net of public money is always below them.
Lindsay 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.
Andy Wimbush is nef‘s Communications Officer and blogmaster.
Ed Miliband in the Guardian on Saturday:
“Institutions are the things that define governments. The 1945 government was defined by its relationship with the NHS. The 1997 government was defined by … institutions like Sure Start. I think the idea of the People’s Bank, the network of post offices around the country connected by a new financial institution, is one of those ideas. It speaks to people’s sense of community – and frankly, banks have let down low-income consumers, and others as well. It is part of a new deal for the low paid around the banking industry. […] It is part of a bigger reform I think we need in the relationship between individuals and financial institutions. We have a set of institutions in our post offices that can form the basis of this banking system, but up to now we have not put into practice this idea that it can be a very serious financial institution and, if you like, a competitor to the conventional private sector. At present there are limits to what the Post Office can offer in terms of current accounts – we will expand those services and link them up with credit unions.”
This is really fantastic news, not just for those of us who have led the campaign for a Post Bank here at nef and beyond, but for people living on the front line of financial exclusion. Both the Liberal Democrats and Labour now support the Post Bank, and there have been some positive murmurings in the sidelines of the Conservative Party.
You can help build momentum for the creation of a Post Bank, particularly if you live in a Conservative constituency, by asking your MP to sign Early Day Motion 344.
Lindsay 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 postofficebanking@bis.gsi.gov.uk 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.
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.
David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.
“Future students of history will be shocked and angered by the fact that in 1945 the same monetary system that had driven the world to despair and disaster [in the Great Depression], and had almost destroyed the civilisation it was supposed to stand for, was revived on a much wider scope.”
So wrote the French economist Jacques Rueff in 1964. It feels much the same now: we would be insane to go back to the same disastrous banking pattern we had before the bail-out, but – thanks to the government – we probably will.
Only a miserable 0.6 per cent of the government’s stimulus package is going on green measures, to genuinely shift the way the economy works.
Lord Mandelson has come out as a born again defender of the financial status quo.
But worst of all, the latest Bank of England assessment shows that, despite everything, business lending to small and medium-sized businesses is down again. Differential interest rates and fees are both still rising.
Local bank managers who know their community well are largely a thing of the past.
It has become a lot more expensive to borrow money, even for the lucky few who make it through the approval stage.
One of the many tragedies about the Westminster expenses scandal, as Vince Cable pointed out last week, is that it robs MPs of the moral authority to tackle our dysfunctional banking system.
Ministers daren’t say anything too interesting, or too bold, in case heir colleagues assume they are throwing their hand into the ring for the Labour leadership. It is a miserable prospect, and it may guarantee a swift return to banking business-as-usual.
To start with, it is time we broke the all-party consensus that somehow the government can use their holdings in the big banks to kick-start local lending again. It hasn’t worked, and seems unlikely to work any time soon.
This is not only because banks won’t lend, but because they can’t lend using their current infrastructure and systems.
They have been consolidated to the point where they point towards the speculative economy and have little local lending infrastructure left. Their lending decisions are taken by computerised systems which, because we are in a recession, naturally recommend against.
There are no longer bank managers, or local staff with the authority to pick out the success stories, using their knowledge of their local economy.
Our businesses are now in a far weaker position than American or German competitors, and potential competitors, because we have no equivalent lending infrastructure. There are only 170 branches per million people in the UK, compared to 520 in Germany and 960 in France.
Now that the elections are over, this is what politicians need to do immediately:
- Break up the banks in government ownership, not just by dividing domestic high street banks from risky investment banks, but to rebuild an effective local lending infrastructure to kick-start local enterprise.
- Launch a new bank based in post office branches, along the lines of the successful postbanks on the continent and in New Zealand, using the latest mobile phone technology.
- Invest in a new generation of community financial institutions, funded by the big banks, as they are in the USA, under a British version of the Jimmy Carter’s Community Reinvestment Act.
Why is this still not top of the agenda? I think this is partly because, in this country at least, people don’t understand the money system. Their mental map of it is nearly a century old: safe reliable Captain Mainwaring and vaults full of money.
I was assured some years ago by the Washington correspondent of a national newspaper (admittedly it was the Sun) that all money is based on gold. It hasn’t actually been since 1931.
This is my excuse for writing an accessible guide to the way money works: Money Matters: Putting the Eco into Economics.
I hope (no small ambition this) that it might help dispel some of the bizarre mystique that bankers continue to exercise over the minds of the English. Because what we really need to do is abandon the idea that our current useless system was somehow placed there by God, and demand the new local banking infrastructure we need.
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.
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.
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