The case for a people’s bank

Bank staff are on the march:

Finance workers pressed the Government to make sure the multi-billion pound bail out of banks protected their wages and jobs rather than executive bonuses.

Around 100 workers from banks including Lloyds TSB and HBOS lobbied MPs in Parliament and were meeting Chief Secretary to the Treasury Yvette Cooper calling for jobs and conditions to be protected.

The demonstration was organised by Unite which fears banking jobs will be lost as a result of the financial crisis.

The union published a so-called Social Contract, including ideas on how the finance sector should be reformed and an overhaul of regulations.

The workers wore T-shirts bearing the slogan Stop Bankers’ Greed and held up banners outside Parliament.

Derek Simpson, joint leader of Unite, said workers were facing insecurity through no fault of their own.

“We are launching this charter to raise concerns about the future job prospects of ordinary bank workers who are not well paid and who are not to blame for the current financial crisis.

“We don’t think these workers should pay the price for the bail out.

“One of the problems has been the lack of regulation which has allowed this crisis to develop.

“There is a huge disparity between the wages and bonuses of chief executives and the pay of an average bank worker which is just £15,000.”

Simpson also pointed out that with the decades of deindustrialisation, many communities were dependent upon the financial sector for employment:

“Workers in the financial services industry are not the culprits of the credit crunch and we are not prepared to allow them to become the victims. The taxpayer must now get firm assurances that the financial lifeline extended to these large organisations will be used to protect jobs and the public. It is not acceptable for the government to socialise the risk without allowing the wider society to capitalise on the rewards in the finance industry.”

The Unite Social Contract states:

1. Recognition of Unite as a key stakeholder in the future of the financial services industry.
2. To ensure the employment security of employees in the finance sector.
3. To protect and improve the terms and conditions of employees, including pension arrangements
4. End the remuneration packages of senior executives which reward short-termism and irresponsible risk taking.
5. Overhaul of the regulatory structures of the financial services sector to include trade union involvement in order to enhance the accountability of finance institutions.

The general secretary of the Communications Workers Union writes in Tribune:

Billy Hayes says the failure of private finance is a compelling argument to recreate Girobank and boost the Post Office network

“GREED is good” seems distinctly perverse now. Financial crisis and recession are tearing up the received wisdom. The policies of Thatcherism and Reaganism have brought about the greatest economic crash since 1929. Yesterday’s victors are today’s culprits.

The new debate for Labour has to be how to restart the economy and protect those most threatened by the recession. This is the only route to re-election now.

The collapse of the private banking sector ought to alert Government to the viability of a publicly-owned banking industry. The last publicly-owned bank, Girobank, was privatised by the Tories. It was subsequently taken over by Alliance and Leicester, which in turn has been swallowed by Abbey/Santander.

So the success of Thatcher-ism in this field has seen a publicly-owned bank end up as the property of a private Spanish one. Meanwhile, Britain’s private banks have received £37 billion of public money to recapitalise their failure.

We have witnessed a retreat and consolidation of private banking services offered to citizens. According to figures from Community Banking Partnership, Britain has 180 bank branches per one million inhabitants. In France, this figure is 435; in Italy 560; Germany 540; and Spain 940. The likely retrenchment among British banks following the crisis will make the issue of access even more pronounced.

This horror story should stand as a cautionary tale.

In these circumstances, the remaining network of more than 11,500 post office branches comes into focus. Here is a large retail network, of a publicly-owned company, which could be used to address both problems of financial exclusion and universal access.

This week marks the 40th anniversary of Girobank and it is time for Government to look at it again. And the Government should consider what future is there for the Post Office network.

In 2006, the House of Commons Treasury Select Committee heard evidence from the New Economic Foundation (NEF), the Campaign for Community Banking Services, Help the Aged and the National Housing Federation in support of establishing a universal service obligation in banking. While not dismissing this entirely, the committee was not persuaded of the need for legislation.

In its recent publication, Keeping Britain Posted, the nef found that there is still a problem of financial exclusion. The Post Office Card Account (POCA) provides a basic bank account for five million people. In comparison, private banks have provided a total of 1.97 million basic bank accounts. There are further two million adults in this country without any bank account.

Yet the Post Office’s provision of POCA is under serious threat. A Government announcement on the renewal of the POCA contract is due by the end of the year. If Royal Mail loses this in the tendering process, the impact will be dramatic. A further 3,000 post office branches would face closure.

There is some talk in management circles that the POCA contract may be split between Royal Mail and another provider. This would still result in closures, as any loss of work will cut deep into the narrow margins within which the Post Office operates.

Given that the Government is providing a subsidy to keep branches open, it is breathtaking that another department is considering removing work from these branches.

The Government needs to decide on a positive future for the Post Office network. Awarding the POCA replacement to the Post Office is an essential first step.

With a little imagination, the Government could establish, through the Post Office, a universal banking obligation and a peoples’ bank. Building on the POCA, the Government could ensure basic service charges that the poor pay are reduced directly by allowing service debits.

Energy and telecommunication companies charge customers money for not using direct debits. A publication by the Save the Children/Family Welfare Association estimated that financially excluded families pay an additional £1,000 a year as a result. An enhanced Post Office banking service could be a tool to overcome this. The people’s’ bank could also become a vehicle for promoting micro-credits and seed capital for the disadvantaged.

Private banks have no obligation to disclose their lending patterns. As a consequence, they cannot be a vehicle for the Government dispersal of small-scale capital start-ups.

Experience in countries such as Bangladesh and Venezuela shows that the effective deployment of small amounts of accessible credits can work wonders in poor communities. Whether it is used for retraining or small business development, small amounts of seed capital can make a huge difference in reducing poverty.

There are many such options for using a people’s bank in a progressive manner. The alternative is stark. The problem of financial exclusion and poverty are deepened by post office closures. The NEF’s report, The Last Post, shows how closures have had a negative impact on the local economy. Its study of Manchester indicated that a local post office added £310,546 a year to the area served.

So the Government must change its approach. A report published as far back as June 2000 by the Government’s own Performance and Innovation Unit outlined some good ideas. These included the promotion of local post offices as front offices for local and national government services.

In addition, the centralised model of Post Office governance is in conflict with the devolved character of recent Government policy. It is ridiculous that a central management board of the Post Office decides that 2,500 branches must close for no other reason than this number accords to the level of subvention offered by the Government.

That being the case, it is of no account to the board that local communities have no say in what postal services they are to be offered. In Scotland and Wales, for example, the devolved governments can only complain about decisions taken in London which dramatically affect the economic development of these nations.

The postal service is a unique combination of commercial and social necessities. It can best register the service required if it is genuinely demand-led. Local communities, including the large communities covered by devolved government, must be able to register their needs with Post Office management and the Government at Westminster.

Of course, there are forces pressing the Government against a progressive policy for Royal Mail and the Post Office network. The Hooper Report on the future of Royal Mail is due to be published soon. Although Richard Hooper’s team has not looked at the Post Office network in any detail, he has received submissions to break up Royal Mail and privatise all or part of it.

Such moves would be a breach of the commitment made by Labour to the electorate in its 2005 general election manifesto. There is no need for this. A people’s bank offers a comprehensive future for the Post Office network.


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