Move your money: We need new models of banking, not just new banks

Introducing "competition" to banking won't work if it's just Tesco Bank taking over

Another week, another banking scandal. More tokenistic contrition from bankers, feigned outrage from politicians and protestations of ignorance from regulators. Feel familiar anyone?

But this time its different. The revelation that Barclays, and pretty much every other global bank, has been systematically rigging interest rates to bolster their profits has changed British banking for good.

Most importantly, it has broken the widespread consumer apathy that characterised our retail banking market.

Since the financial crisis there has been a steady flow of consumers out of the big 5 and into mutuals such as building societies, the Cooperative and credit unions – 2.8 million all in all.

But in the wake of the Libor scandal this trend has increased exponentially with Nationwide reporting an 85 per cent week-on-week increase in new account enquiries, the Co-operative 25 per cent and some of the smaller ethical banks and credit unions an increase of over 200 per cent.

Significantly, the other big banks have not reported a similar surge in footfall. In fact, customers are starting to leave not just Barclays but all the big banks in favour of mutual and ethical providers.

A recent YouGov poll found that 83 per cent of respondents thought "the other banks are just as bad as Barclays". People realise the problems in our banking system are systemic and so they are moving to a meaningful alternative.

There are rumours that both RBS and Barclays have been called into the FSA to discuss the number of depositors moving. People are beginning to move their money in significant numbers. That hurts the big banks which are increasingly dependent on deposits for funding as the markets dry up in the shadow of the storm in Europe.

The Libor scandal has also changed the political landscape around banking reform. This banking scandal is swiftly becoming a political crisis as the Bank of England, senior regulators and politicians from both sides of the House become embroiled.

No one should be surprised that greed and self-interest in the City has had a corrosive effect in Westminster. The sheer concentration of wealth and power in such a small number of institutions means that the establishment must do whatever it takes to keep the gravy train going – irrespective of how destructive the banks' behaviour has become. And not least of all because we rely on the banks to keep our speculative housing market inflating and thus home-owning voters feeling wealthy, despite their stagnating real incomes.

The defence mechanism on both sides of the House has been mindless mud slinging and political point scoring. Last week both parties have tried to pull back from these playground spats as it becomes apparent that they are only further eroding any remaining trust the public have in politicians to fix this problem.

This is the background against which Miliband’s speech earlier this week must be judged. In his description of "stewardship banking", Miliband cited "a banking system where no one bank feels either too big to fail or too powerful to be challenged. But where all banks face real competition and customers have proper choices."

His solution? To force banks sell off branches to create more "challenger" banks. Miliband is right to argue that there must be more competition in our retail banking sector as more competition means more choice for consumers – but it must be meaningful choice. Banks continue to close branches in low-income areas because they’re costly to run, their main value being as a sales floor for more complicated and profitable products. The only "challengers" able to buy up branches will be the ilk to Tesco Bank, or more of the same.

The traditional banking model is not working for swathes of our society. Not only small businesses but also entire communities and geographical areas, which are becoming credit deserts.

These can be profitable markets to serve. It is this market opportunity which high cost and payday lenders, which are becoming all too ubiquitous on our high streets, are taking advantage of. But there is another way.

The UK has a thriving sector of local and mutual financial institutions, from the big building societies down to local community finance institutions and credit unions. These institutions have already proved that there is a different way of doing things, and don’t need public subsidies that run into hundreds of billions.

Reforms must be focused on supporting and growing the socially responsible financial institutions already out there and already working. It must also enable consumers to drive change by making it easier to switch and forcing the banks to be fully transparent in terms of both their lending and investments and the way they market their products.

Politicians, local authorities, business and the third sector can all play an active role in this. Leading by example and moving their own accounts in order to strengthen socially responsible financial institutions as well as build trust and confidence in them.

The public have woken up to what a better banking system looks like. It may not be radical but it could be revolutionary Now its time for our politicians to do the same.

Metro Bank, a new bank launched recently. But is it a true competitor? Photograph: Getty Images

Louis Brooke is a spokesperson for Move Your Money UK, a not for profit campaign group, promoting alternatives to the big banks. He is also communications manager for London Rebuilding Society, and co-founder and chairman of educational resource company now>press>play.

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Hannan Fodder: This week, Daniel Hannan gets his excuses in early

I didn't do it. 

Since Daniel Hannan, a formerly obscure MEP, has emerged as the anointed intellectual of the Brexit elite, The Staggers is charting his ascendancy...

When I started this column, there were some nay-sayers talking Britain down by doubting that I was seriously going to write about Daniel Hannan every week. Surely no one could be that obsessed with the activities of one obscure MEP? And surely no politician could say enough ludicrous things to be worthy of such an obsession?

They were wrong, on both counts. Daniel and I are as one on this: Leave and Remain, working hand in glove to deliver on our shared national mission. There’s a lesson there for my fellow Remoaners, I’m sure.

Anyway. It’s week three, and just as I was worrying what I might write this week, Dan has ridden to the rescue by writing not one but two columns making the same argument – using, indeed, many of the exact same phrases (“not a club, but a protection racket”). Like all the most effective political campaigns, Dan has a message of the week.

First up, on Monday, there was this headline, in the conservative American journal, the Washington Examiner:

“Why Brexit should work out for everyone”

And yesterday, there was his column on Conservative Home:

“We will get a good deal – because rational self-interest will overcome the Eurocrats’ fury”

The message of the two columns is straightforward: cooler heads will prevail. Britain wants an amicable separation. The EU needs Britain’s military strength and budget contributions, and both sides want to keep the single market intact.

The Con Home piece makes the further argument that it’s only the Eurocrats who want to be hardline about this. National governments – who have to answer to actual electorates – will be more willing to negotiate.

And so, for all the bluster now, Theresa May and Donald Tusk will be skipping through a meadow, arm in arm, before the year is out.

Before we go any further, I have a confession: I found myself nodding along with some of this. Yes, of course it’s in nobody’s interests to create unnecessary enmity between Britain and the continent. Of course no one will want to crash the economy. Of course.

I’ve been told by friends on the centre-right that Hannan has a compelling, faintly hypnotic quality when he speaks and, in retrospect, this brief moment of finding myself half-agreeing with him scares the living shit out of me. So from this point on, I’d like everyone to keep an eye on me in case I start going weird, and to give me a sharp whack round the back of the head if you ever catch me starting a tweet with the word, “Friends-”.

Anyway. Shortly after reading things, reality began to dawn for me in a way it apparently hasn’t for Daniel Hannan, and I began cataloguing the ways in which his argument is stupid.

Problem number one: Remarkably for a man who’s been in the European Parliament for nearly two decades, he’s misunderstood the EU. He notes that “deeper integration can be more like a religious dogma than a political creed”, but entirely misses the reason for this. For many Europeans, especially those from countries which didn’t have as much fun in the Second World War as Britain did, the EU, for all its myriad flaws, is something to which they feel an emotional attachment: not their country, but not something entirely separate from it either.

Consequently, it’s neither a club, nor a “protection racket”: it’s more akin to a family. A rational and sensible Brexit will be difficult for the exact same reasons that so few divorcing couples rationally agree not to bother wasting money on lawyers: because the very act of leaving feels like a betrayal.

Or, to put it more concisely, courtesy of Buzzfeed’s Marie Le Conte:

Problem number two: even if everyone was to negotiate purely in terms of rational interest, our interests are not the same. The over-riding goal of German policy for decades has been to hold the EU together, even if that creates other problems. (Exhibit A: Greece.) So there’s at least a chance that the German leadership will genuinely see deterring more departures as more important than mutual prosperity or a good relationship with Britain.

And France, whose presidential candidates are lining up to give Britain a kicking, is mysteriously not mentioned anywhere in either of Daniel’s columns, presumably because doing so would undermine his argument.

So – the list of priorities Hannan describes may look rational from a British perspective. Unfortunately, though, the people on the other side of the negotiating table won’t have a British perspective.

Problem number three is this line from the Con Home piece:

“Might it truly be more interested in deterring states from leaving than in promoting the welfare of its peoples? If so, there surely can be no further doubt that we were right to opt out.”

If there any rhetorical technique more skin-crawlingly horrible, than, “Your response to my behaviour justifies my behaviour”?

I could go on, about how there’s no reason to think that Daniel’s relatively gentle vision of Brexit is shared by Nigel Farage, UKIP, or a significant number of those who voted Leave. Or about the polls which show that, far from the EU’s response to the referendum pushing more European nations towards the door, support for the union has actually spiked since the referendum – that Britain has become not a beacon of hope but a cautionary tale.

But I’m running out of words, and there’ll be other chances to explore such things. So instead I’m going to end on this:

Hannan’s argument – that only an irrational Europe would not deliver a good Brexit – is remarkably, parodically self-serving. It allows him to believe that, if Brexit goes horribly wrong, well, it must all be the fault of those inflexible Eurocrats, mustn’t it? It can’t possibly be because Brexit was a bad idea in the first place, or because liberal Leavers used nasty, populist ones to achieve their goals.

Read today, there are elements of Hannan’s columns that are compelling, even persuasive. From the perspective of 2020, I fear, they might simply read like one long explanation of why nothing that has happened since will have been his fault.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.