Bank of Dave: Money to Burnley

What can we learn from one man's attempts to set up a bank of his own?

9pm on Channel 4 tonight sees the first episode in a two-part documentary called Bank of Dave. It follows Burnley businessman David Fishwick as he attempts to open his own bank to serve the people and businesses of his home town.

The programme will undoubtedly provide more than a few salutatory lessons for British banks. I know this, not because I have been fortunate to witness an early screening but because I have read David's book Bank of Dave: How I Took on the Banks, which chronicles his endeavour.

David’s attempt at setting up a bank and turning a profit in 180 days is fascinating, and makes one wonder whether we need more Banks of Dave. I think we do.

The total start-up costs for Dave’s bank, including premises and equipment, were £9,000 and his weekly overheads came to £396. Some will argue that Dave’s costs are not indicative of what is required, and in some respects they are right. Banks probably need more than one laptop and a couple of notebooks. Even then, Dave shines an unforgiving light on the high overheads, including inflated salaries and cumbersome, out-dated IT systems, that burden many British banks.

Dave also shows that nowadays banks no longer have a monopoly on the services they provide. Dave's bank does almost everything a high-street bank does: it makes loans, takes deposits and even makes investments in property, stocks and shares. But because he wasn’t granted a banking licence by the FSA he can't call his bank a "bank" or say that he takes "deposits".

Increasingly people are choosing to avoid banks when accessing financial services. Dave himself gets advice from Giles Andrews, CEO of peer-to-peer lender Zopa. The government and regulators should not stand in the way of innovation and regulators could do more to ensure that people feel confident using new financial services that meet appropriate standards.

Dave’s most important insight, and this comes on page one of the book, is that "all banks are about people". This is something forgotten by many of Britain's large banks. Dave meets the people he lends money to, and he knows the property he invests in. His decisions are based on more than just credit scores or the value of the security. A bank that adopted Dave’s practices would have lower default rates, higher customer satisfaction, and greater ability to cross-sell products to loyal customers. The recent growth of Metrobank and Handselsbanken in Britain is testament to this.

The Bank of Dave not only casts many of Britain’s banks in a dim light but, perhaps inadvertently, it also demonstrates one of the inherent weaknesses in our banking system. Dave promises to guarantee every deposit in his bank with his own money. He also makes it clear that "we wouldn’t be lending what we hadn’t got", not leveraging the assets of his bank.

In these two respects Dave’s bank is relatively unique, and therein lies the dilemma. People want security but many also want leverage with the risk and reward this entails. Regulators would love it if all deposits in every bank were guaranteed by their owners but this would come at a price. Leverage and debt is now a sin under the government’s austerity drive but one of the commonest criticisms of the banks is that they are not lending.

In preparing to set up his bank, Dave meets David Buik, a market analyst, who tells him: "you’re not going to stop the banking system blowing up from time to time". Dave disagrees; his bank would be 100 per cent guaranteed. As Britain looks to reform its banking system it would do well to learn from Dave, but some of the lessons may be harder to swallow than others.

Dave Fishwick, in his bank. Photograph: Channel 4

Selling Circuits Short: Improving the prospects of the British electronics industry by Stephen L. Clarke and Georgia Plank was released yesterday by Civitas. It is available on PDF and Amazon Kindle

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Is Scottish Labour on the way back, or heading for civil war?

There are signs of life, but also recriminations.

The extraordinary rise of the Scottish Tories and the collapse in SNP seat numbers grabbed most of the headlines in the recent general election. Less remarked on was the sudden, unexpected exhalation of air that came from what was thought to be the corpse of Scottish Labour.

In 2015, Labour lost 40 of its 41 Scottish seats as the SNP rocketed from six to 56, was wiped out in its Glaswegian heartlands, and looked to have ceded its place as the choice of centre-left voters – perhaps permanently – to the Nationalists. But while the electorate’s convulsion in June against the SNP’s insistence on a second independence referendum most benefited Ruth Davidson, it also served to reanimate Labour.

The six seats grabbed back (making a total of seven) included three in the West of Scotland, proving that the Nat stranglehold on Labour’s territory was not quite as secure as it had seemed. There is, it appears, life in the old dog yet.

Not only that, but the surprise success of Jeremy Corbyn across the UK has stiffened Labour’s spine when it comes to insisting that it, and not the SNP, is the rightful home of Scotland’s socialists.

Corbyn was largely kept south of the border during the election campaign – Kezia Dugdale, the leader at Holyrood, had supported Owen Smith’s leadership challenge. But in August, Corbyn will embark on a five-day tour of marginal SNP constituencies that Labour could potentially take back at the next election. The party has set a target of reclaiming 18 Scottish seats as part of the 64 it needs across Britain to win a majority at Westminster. The trip will focus on traditional areas such as Glasgow and Lanarkshire, where tiny swings would return seats to the People’s Party. Dugdale is no doubt hoping for some reflected glory.

Corbyn will present himself as the authentically left-wing choice, a leader who will increase public spending and invest in public services compared to the austerity of the Tories and the timidity of the SNP. “Labour remains on an election footing as a government-in-waiting, ready to end failed austerity and ensure that Scotland has the resources it needs to provide the public services its people deserve,” he said. “Unlike the SNP and the Tories, Labour will transform our economy through investment, insisting that the true wealth creators - that means all of us – benefit from it.”

The SNP has benefited in recent years from the feeling among many north of the border that Labour and the Tories were committed to differing shades of a similar economic programme, that was starving public services of cash and that paid little attention to Scottish desires or needs. But as the Nats’ spell in government in Edinburgh has worn on, first under Alex Salmond and now Nicola Sturgeon, with little being done to tackle the nation’s social problems, patience has started to run out.

Dugdale said yesterday that she “looked forward to joining Jeremy in August as we take our message to the people of Scotland”. That’s not a sentiment we would have heard from her before June. But it does raise the future spectacle of Davidson’s Tories battling for the centre and centre-right vote and Labour gunning for the left. The SNP, which has tried to be all things to all people, will have to make a choice – boasting that it is “Scotland’s Party” is unlikely to be enough.

The 20th anniversary of the referendum that delivered the Scottish Parliament is almost upon us. Then, Scottish Labour provided the UK and the Westminster government with figures of the stature of Gordon Brown, Robin Cook, Donald Dewar and George Robertson. That was a long time ago, and the decline in quality of Labour’s representatives both in London and Edinburgh since has been marked. The SNP’s decade of success has attracted much of the brightest new talent through its doors. Young Scots still seem to be set on the idea of independence. Labour has a credibility problem that won’t be easily shaken off.

But still, the body has twitched – perhaps it’s even sitting up. Is Scottish Labour on the way back? If so, is that down to the SNP’s declining popularity or to Corbyn’s appeal? And could Dugdale be a convincing frontwoman for a genuinely left-wing agenda?

There may be trouble ahead. Yesterday, the Scottish Labour Campaign for Socialism – whose convener, Neil Findlay MSP, ran Corbyn’s leadership campaign in Scotland – accused Dugdale of “holding Corbyn back” in June. A spokesperson for the group said: “While it’s great we won some seats back, it’s clear that the campaign here failed to deliver. While elsewhere we've seen people being enthused by ‘for the many, not the few’ we concentrated on the dispiriting visionless ‘send Nicola a message’ – and paid a price for that, coming third in votes and seats for the first time in a century. In Scotland we looked more like [former Scottish leader] Jim Murphy’s Labour Party than Jeremy Corbyn’s – and that isn’t a good look.”

While the group insists this isn’t intended as a challenge to Dugdale, that might change if Corbyn receives a rapturous reception in August. We’ll learn then whether Scotland is falling for the high-tax, high-spending pitch that seems to be working so well elsewhere, and whether Scottish Labour has jerked back to life only to find itself staring down the barrel of a civil war.

Chris Deerin is the New Statesman's contributing editor (Scotland).