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.

Getty Images.
Show Hide image

Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.