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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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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