If you want to live ethically, start with your bank account

Moving your money is an opportunity to make the banking system as a whole better, writes Co-operatives UK's Ed Mayo.

Do you have a bank account? If so, congratulations. You have a vote in what kind of economy the UK has moving forward.

This week is National Ethical Investment Week, an event which over recent years has become a great way to celebrate the mix of green and ethical funds open to those with the money to invest.

A bank account isn't usually considered as a classic investment product. But if we are going to improve the ethics of the world of finance, it is a good place to start.

To begin with, any money you have in your account is invested by your bank. It is not an investment that you see, but for every pound on deposit, your bank can lend a multiple of this in the wider economy. Taken together, as UK consumers, our bank accounts have money in credit at the end of a typical day of around £100bn.

A number of current accounts do now pay direct interest for the money you hold, even if it is still only a small proportion of conventional accounts that pay more than 0.5 per cent interest.

But there is another reason to consider where you hold your bank account, because it is the building block for the wider financial services sector. We can't complain that banks are less than fully ethical if we don't ourselves consider ethics when we choose who to bank with.

Current accounts are a cash cow for the big banks. One way or another, they make £152 out of every bank account they have. This is more than they earn from savings and credit cards put together. 

Current accounts are also something that most people have a choice over. There are 64 million bank accounts in the UK. So, where only around 15% of people are investors in the sense of putting money into stocks, shares and pooled funds, 90 per cent of us have a bank account and can have a say through our money.

The Move Your Money campaign has emerged this year as a cause célèbre. Launched in February 2012, the campaign calls on people to switch their account, current or savings, away from shareholder banks that helped to cause the economic crisis, and towards co-operative and mutual banks, such as credit unions and building societies.

Because they are not owned by external shareholders, they can put the interests of their customers first. Worldwide, customer-owned banks have been far safer than shareholder and state-owned banks over the last five years. No less importantly, your money is reinvested locally rather than going into the global carousel of bonuses and high finance. If you switch banks to an ethical bank, your money is being used for good – so it is not just fair to you but fair to others.

Since the campaign launched, around half a million people have switched accounts. The UK had long been the country with the lowest switching rate in Europe. More than the actions of any regulator, the Move Your Money campaign, in tune with the times, has changed that. And it is still early days.

Madeleine is one I know of many that have switched to the Co-operative Bank in recent months. "The online banking is different, but it all meets my needs and the switching was pretty simple." The switching process is far smoother than people may fear. You ask your new bank to set it in train and within 10 days of the application being approved, all your standing orders and arrangements should be transferred and up and running. 

Sandra has switched to Nationwide, one of fifty building societies still operating in the UK. She found that "banks are only interested if you have a lot of money and, as pensioners we don’t have a lot. But Nationwide was different. I know they want your money, I’m not saying they don’t, but they have more time for you, to explain the ins and outs."

Credit unions, which are financial co-operatives for savings and loans, are also among the providers that have benefited from switching as the larger credit unions now offer current accounts or debit cards that give access to ATM networks.

Ethical Investment should not just be about feeling good or having something to talk about at a dinner party but changing the way the financial system works. The call to move your money is a genuine and positive opportunity to make the banking system as a whole better.

Make it the one thing that you do this week.

Ed Mayo is Secretary General of Co-operatives UK

The Move Your Money campaign outside a Barclays. Photograph: Getty Images

Ed Mayo is Secretary General of Co-operatives UK

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.