Last week Vince Cable was asserting that the 'biggest act of economic vandalism' in recent years was the destruction of the Building Societies. I would also add the forced privatisation of the TSB.
I am not here talking about 'investment banking', I am more than happy if Vince gets his way and the so called investment banking is completely split from High St banks. I think it is fair to conclude that the idea that 'chinese walls' could be put in place between the two functions in the same bank always stretched credulity, it is now not an option and amendments have to be made to the proposals in parliament. Those who want to invest in casino banks take the risk and cannot expect the government to bail them out. Our chief concern should be the retail banks where people put their pay cheques and their savings. It is in this area that we need to champion the cause of mutually owned institutions.
The government owns retail banks. Instead of selling them back to shareholders whose single interest is to build shareholder value and who -by and large- are disinterested in the ethics and governernance of the banks we should be handing them over to their customers and allowing them to pay a fair purchase price over time as suggested in the Oxford University report 'Promoting corporate diversity in the financial services sector'
Liberals have for generations challenged the dominance of the owners of capital in all enterprises. From J S Mill on through Keynes and Grimond we have argued that other stakeholders-in most cases employees- should have a share of the decision making. Shareholders have one interest , namely that the dividend and the value of their share grows. They are very promiscuous, they buy and sell at a moments notice.Often they don't even know they own the shares. Modern digital trading means shares are bought and sold in the twinkling of an eye. Significantly they are held or managed by other financial institutions that are only concerned with shareholder value. All this means that there is little long term planning and everything is a bout short term gains and hence risk taking.
The model that is better suited to retail banking is the mutual model where the bank/building society/credit union is owned by the savers. Those who manage such bodies are focused on the needs of their members. I am convinced that if we had maintained our mutual sector they would have developed products that would have helped pay for their members long term care for example. They certainly would have taken less risks and paid their CEO's a realistic salary.
The government has made some welcome steps in this area last week it was reported that Credit Unions will receive up to £38million from the Government to expand and modernise, it has been announced, with the target of putting the infrastructure in place to be able to support one million extra people.
But frankly this is 'nano-fry' compared to the scale of the problem. The mutual sector used to be a major part of the financial scene. The democratic ownership it promoted is very much part of the Liberal ideal. It spread wealth. Gereation after generation that wealth grew but Thatcher and that most selfish of generations cashed in the asset and squadered it in a moment. We have to rebuild that model of thrift and common ownership and turn our backs on the crude market capitalism embodied in the present dominant model of ownership the PLC. We need our financial institution to look to the long term and to put the interest of their savers first.
According to figures from the Department of Work and Pensions (DWP), just two per cent of people in the
I was listening to a Radio 4 programme on banks and the desire for safe, ethical institutions came across very clearly from the listeners feedback. We need to champion this cause and bring back locally owned retail banking