The People's Post Office yes. But a People's Bank?
Thursday, November 13, 2008
Today, in its decision to allow the Post Office to continue the post office card account service, the Government recognised the role of local post offices in local economies, financial inclusion and community life. While this particular service may not be being provided on the most economically efficient basis (debatable), it is certainly the case that villages and high streets will be the more functional, competitive and efficient for this decision.
But it seems that along with this decision, there are moves towards a formal state-run bank provided through post offices. Lord Mandelson's letter earlier this week suggests that the Post Office expand its services, as a point of contact for government and providing financial services. It follows the suggestion by Jon Cruddas and also the New Economics Foundation of a nationalised banking service, a 'People's Bank' no less.
Whilst there's a case for looking to the existing network to see how essential services can be provided, it doesn't strike me as being efficient or necessary to create a whole new financial institution of dubious viability to prop up the Post Office. Millions fewer customers are visiting post offices every week as it is, moving to the internet and elsewhere for the many small transactions we used to go to post offices for.
But, you say, with the state now owning much of Northern Rock and Bradford and Bingley, there's already a state bank which can be better promoted through the post office network. The fact is that these facilities may be state-owned, but they're not run as public services. As Simon Jenkins pointed out in the Guardian last month, their workers are not civil servants and they remain players in the commercial competitive world. Pay to some top executives has gone up in nationalised Northern Rock.
And who do these banks now answer to? Shareholder-run businesses may be discredited but they're not dead. At least they answer to a collective of sorts. Now Northern Rock is operating to pay back its debts to the taxpayer and put the business on a sound footing. Fine. But that doesn't bring a more sympathetic service to the poorest or financially-excluded. On the contrary, in the newly nationalised system, it's more important to serve the Treasury's needs, avoid political embarrassment and recoup losses. Consumers are at the bottom of the pile. Since being taken into state ownership, Northern Rock's repossession rate has doubled, 50% over the industry average. Ministers say it's not their responsibility - they don't run the bank they say. Meanwhile the Co-operative Bank, owned by consumers - not the state, not shareholders - has repossessed just 11 properties so far in 2008.
And there's the rub. There are a whole series of 'People's Banks': building societies, the Co-op Bank and credit unions, owned by the people who put their savings in them, who borrow from them, who have the most stake in how they are run. They are answerable to their consumers, responsive to their concerns. Most importantly at this time, they're safe. No building society has gone under since World War II and the movement is looking after the most vulnerable without exposing savers and borrowers. And credit unions are there, often in remote, needy and financially excluded communities. Credit unions rely on bonds of community or workplace, which research detailed on today's You and Yours on Radio 4 suggesting that people feel greater pressure to pay back loans to mutuals than to anonymous City firms. Worryingly, a subsidised People's Bank might well take businesses away from the very people doing most to fight financial exclusion - the friendly societies offering child trust funds or small local credit unions.
A resurrected NS&I or Girobank taking on only the most risky customers or subsidised to compete with the high street isn't the answer here. The Post Office can help though. Improving access to all financial providers through local post offices would give communities access to the widest range of services, boosting competition. How about offering credit union members services such as deposits and withdrawals over the counter?
Tying local mutuals with local shops will boost community cohesion better than any bank run out of Whitehall. Time to back the existing People's Banks, not try and replace them.
But it seems that along with this decision, there are moves towards a formal state-run bank provided through post offices. Lord Mandelson's letter earlier this week suggests that the Post Office expand its services, as a point of contact for government and providing financial services. It follows the suggestion by Jon Cruddas and also the New Economics Foundation of a nationalised banking service, a 'People's Bank' no less.
Whilst there's a case for looking to the existing network to see how essential services can be provided, it doesn't strike me as being efficient or necessary to create a whole new financial institution of dubious viability to prop up the Post Office. Millions fewer customers are visiting post offices every week as it is, moving to the internet and elsewhere for the many small transactions we used to go to post offices for.
But, you say, with the state now owning much of Northern Rock and Bradford and Bingley, there's already a state bank which can be better promoted through the post office network. The fact is that these facilities may be state-owned, but they're not run as public services. As Simon Jenkins pointed out in the Guardian last month, their workers are not civil servants and they remain players in the commercial competitive world. Pay to some top executives has gone up in nationalised Northern Rock.
And who do these banks now answer to? Shareholder-run businesses may be discredited but they're not dead. At least they answer to a collective of sorts. Now Northern Rock is operating to pay back its debts to the taxpayer and put the business on a sound footing. Fine. But that doesn't bring a more sympathetic service to the poorest or financially-excluded. On the contrary, in the newly nationalised system, it's more important to serve the Treasury's needs, avoid political embarrassment and recoup losses. Consumers are at the bottom of the pile. Since being taken into state ownership, Northern Rock's repossession rate has doubled, 50% over the industry average. Ministers say it's not their responsibility - they don't run the bank they say. Meanwhile the Co-operative Bank, owned by consumers - not the state, not shareholders - has repossessed just 11 properties so far in 2008.
And there's the rub. There are a whole series of 'People's Banks': building societies, the Co-op Bank and credit unions, owned by the people who put their savings in them, who borrow from them, who have the most stake in how they are run. They are answerable to their consumers, responsive to their concerns. Most importantly at this time, they're safe. No building society has gone under since World War II and the movement is looking after the most vulnerable without exposing savers and borrowers. And credit unions are there, often in remote, needy and financially excluded communities. Credit unions rely on bonds of community or workplace, which research detailed on today's You and Yours on Radio 4 suggesting that people feel greater pressure to pay back loans to mutuals than to anonymous City firms. Worryingly, a subsidised People's Bank might well take businesses away from the very people doing most to fight financial exclusion - the friendly societies offering child trust funds or small local credit unions.
A resurrected NS&I or Girobank taking on only the most risky customers or subsidised to compete with the high street isn't the answer here. The Post Office can help though. Improving access to all financial providers through local post offices would give communities access to the widest range of services, boosting competition. How about offering credit union members services such as deposits and withdrawals over the counter?
Tying local mutuals with local shops will boost community cohesion better than any bank run out of Whitehall. Time to back the existing People's Banks, not try and replace them.
Labels: banking, Jon Cruddas, local shops, post offices
