Billy Hayes -My article for The Tribune - re A People's Bank

[TrueBlueTerrier]

http://www.billyhayes.co.uk/permalink.p ... 17_0_1_0_M

“Greed is good” seems distinctly perverse now. Financial crisis and recession are tearing up the received wisdom of recent decades. The policies of “Thatcherism” and “Reaganism” have brought about the greatest 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 recently been swallowed by Abbey/Santander.

So the success of “Thatcherism” in this field has seen the publicly owned bank end up as the property of a private Spanish bank. Meanwhile Britain’s private banks have received £37 billion of public money to recapitalize their failure.

This short horror story could stand as a cautionary tale. Alternatively, the Government should consider what future is there for Royal Mail and its Post Offices network. This week marks the fourtieth anniversary of Girobank, time for government to look at it again.

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

In these circumstances, the remaining network of over 11,500 Post Office branches comes into sharp 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.

In 2006, the House of Commons Treasury 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. The magazine Which? also submitted material pointing to legislation in France and Canada. Whilst not dismissing it entirely, the committee was not persuaded of the need for legislation.

In their 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 5 million people. In comparison, private banks have provided a total of 1.97 million basic bank accounts. There is a further 2 million adults 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 3000 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 will still result in closures, as any loss of work will cut deep into the narrow margins which Post Office branches operate on.

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 upon 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 upon the POCA , 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/The Family Welfare Association, estimated that financially excluded and low income families pay an additional £1000 a year as a result. An enhanced Post Office banking service could be a tool to overcome this.

The Peoples’ Bank could also become a vehicle for promoting micro-credits and small scale seed capital for the disadvantaged.

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

Experience in countries like 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 Peoples’ Bank in a progressive manner. The alternative is very stark. The problem of financial exclusion and poverty are deepened by Post Office closures. The nef’s report “The Last Post” shows how closures had a negative impact on the local economy. Their study of Manchester indicated that a local Post Office added £310,546 a year to the area served.

So the Government must shake up its views. A report published by the Government’s own Performance and Innovation Unit, as far back as June 2000, outlined some good ideas. These included the promotion of local Post Office as front offices for local and national Government services. Post Office counter staff would have to be trained with new skills. But such an approach would reduce the gap between Government and citizen.

In addition, the highly 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 Post Offices must close, for no other reason than this number accords to the level of subvention offered by 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 Government.

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 his 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 a breach. A Peoples’ Bank offers a comprehensive future for the Post Office network.

Posted by Billy Hayes | @ Wed, 22 Oct 2008 15:49:43 +0100

[Big Daz]

Well said Billy!


Lets hope the government can see this,although I have my doubts that they will.

[andy2007]

Well said Billy!


Lets hope the government can see this,although I have my doubts that they will.

They will have done, by now. But I seriously doubt that they will pay any attention to it.